Walking down Main Street this week, I was overcome by an unusual redolence. The scent, extremely pleasing to my olfactory senses and bearing hints of citric and floral notes, permeated the air throughout the day. This is Kew Garden Hills, I unfortunately had to remind myself, not the Caribbean. Looking at my calendar, I immediately knew that what I smelled was the etrog, an exotic fruit that plays an important role in the Jewish holiday of Succot. That a single product is capable of shaping and creating such a sprawling market for such a temporary time speaks to the unique nature of this product, and ultimately makes for a fascinating macroeconomic case study on a microcosmic level.

Though nowhere to be found in your local produce market, the etrog has indeed been around for thousands of years. Jews use it for a ritual during this holiday, as dictated by a Biblical commandment. Interestingly enough, there is no other instance in Jewish law when this item is required. Consequently, demand spikes right before the holiday and plummets once it ends.

 

 

The market for the etrog, though ephemeral, returns every year in full force. While the product itself has not changed, the way in which business is conducted has dramatically evolved. In the past, the marketplace was a public space filled with booths of merchants selling their wares. Nowadays, we are used to seeing businesses in the form of brick and mortar. And yet even this perception is changing as commerce becomes increasingly digitalized in our age of technology, and shifts to the virtual world of the Internet.

For the general American economy, the latter two types are ubiquitous; for the etrog market, I noticed that the former option dominates. Boys and young adults set up tables all along the sidewalk on Main Street, filling every inch of the surface. This temporary business structure is ideal for this industry, as its short-lived nature does necessitate having a permanent space.

 

 

I did note, though, that some merchants, obviously veterans in the etrog industry, chose to distinguish themselves by renting out space in stores that had remained vacant for years. As a friend of mine noted, this is clearly a win-win situation: the merchants get to protect their goods from the natural elements, while renters get a stream of cash for space that would otherwise not generate any money. Overall, the entire etrog industry benefits the locals. Rather than going to large corporations, the cash flow occurs and stays within the local economy, a boon for the community as a whole.

Where does the money come from? One would think that with a limited edition style product, there is a tremendous opportunity for inflated prices. And yet, I would argue that the etrog economy demonstrates nearly perfect competition. The market is saturated with the same product that, to the untrained eye, all look virtually identical. The merchants are therefore price takers who accept the going market price. They cannot change it, for equilibrium in the market has been achieved. Charge a different price, and the buyer will simply go to another seller. Case in point: Multiple boys yelled “$25 for an etrog!” but another later yelled “$35 for an etrog!” I gave the latter A Look, and he immediately called out, in a more subdued voice, “How about $25 for you?”

Of course, an economy of perfect equilibrium is not feasible. The merchants on Main Street did not wish to settle for the going rate. In order to have the authority to determine prices, rather than be at the receiving end of the going rates, they attempted to differentiate their products from their competitors. For example, when I asked one merchant who appeared to be an etrog connoisseur what makes one worth more than another, he fervently replied, “the shape.” There is a specific curvature to the fruit that indicates higher quality. In Jewish law, something of top quality is called Mehadrin, and Mehadrin Min Hamehadrin means “the best of the best.” While the idea that people are willing to pay more for better quality exists in all markets, this is especially true in the etrog market, given its religiously charged nature.

Moreover, just like products are priced differently based on brand names, etrog prices vary based on its Rabbinic authority seal. If the etrog complies with the regulations of a certain rabbi, it has that rabbis’ stamp of approval. By passing this litmus test, the price for the etrog instantly appreciates. Suddenly, an etrog that would normally fetch $25 can now go for over $100. In economics, we discuss brand loyalty as one of the reasons why buyers pay more. Here, etrog aficionados often remain loyal to etrog’s that are approved by a specific rabbi.

 

The fact that such a thriving market can appear and disappear in such a short time frame, in my own neighborhood, is extremely exciting. I loved the fact that all these etrog shops were temporary, for this allowed the core of business, the buyer-seller dynamic, to shine through. There were no externalities that adulterated this economy, such as advertising, which ultimately reduce profits, or taxes, which create a deadweight loss. While I loved to see visible evidence of a labor market growing as the US economy still struggles with a sluggish employment rates, I had to wonder: why weren’t the boys trying to sell me the etrog in school? Did the profit they made on their sales outweigh the opportunity cost of missing the education for that day? Or were the business skills they learned far more valuable?