“The Fable of the Bees: An Economic Investigation”, 1973-04 ():
[cf. lighthouses] J. E. Meade proposed a hypothetical example of a market failure: an apple farmer who rented bees from professional beekeepers to fertilize his trees would be under-rewarded because the bees might spend some time fertilizing other plants, such as neighboring farmers’ crops; and conversely, the bees will be fed by crops which the farmers cannot charge for.
Cheung investigates the reality of this hypothetical in the Pacific Northwest, famed for apple-growing.
He finds no evidence for market failure & little use of the honey program intended to fix it: fruit trees offer little nectar for bees to make honey with, and hives are typically placed efficiently to maximize fertilization within a farm. The market for renting hives is large & liquid, with granular prices reflecting the value of the nectar from every crop, based on volume and quality of the produced honey. (Fruit trees offer little & farmers must pay a premium; mint crops produce much honey but with a nasty taste which sells for little etc.)
Additional possible market failures like insecticide spraying turn out to be adequately dealt with by the bee market: beekeepers remove their hives before scheduled spraying, doing so collectively when the exact date of spraying is unpredictable, and charging a premium when at risk of unknown insecticide use in an area. These practices are typically informal and enforced by norms & peer pressure; farmers or beekeepers who break the rules will find their reputations ruined & their neighbors unhelpful in the future.
Seung concludes:
Whether Keynes was correct in his claim that policy-makers are “distilling their frenzy” from economists, it appears evident that some economists have been distilling their policy implications from fables. In a desire to promote government intervention, they have been prone to advance, without the support of careful investigation, the notion of “market failure.
Note: unrelated to Mandeville’s The Fable of the Bees on the virtue of vice.