What Is a Commodity?
Tuesday, May 1, 2018
There's one word that appears over and over on my blog: commodity. I always thought its definition was clear, but now I'm not so sure. Let's take a look at some of the ways that it is both used and misused.
Like most economists, when I use the word commodity, I'm referring to a product that is so indistinct and plain that one vendor's offering is pretty much the same as any other. Think about products like thumbtacks, staples, and paper clips. When's the last time you looked for a particular brand of thumbtacks? Probably never. Very few people in this world have a favorite thumbtack manufacturer, and those who do should certainly be avoided for obvious reasons. Commodity markets lack premium offerings, and are chockfull of shoppers whose primary consideration is price.
Those in the field of finance use the term a little differently. Investors use the word commodity when referring to items that possess substantial value and can be traded in liquid markets. Whether they're dealing with pork bellies or orange juice is irrelevant. To investors, these products are just commodities.
Some people use the phrase hot commodity. It denotes a product that enjoys significant demand. This term flips the definition of commodity upon its head and serves as a source of confusion for those of us familiar with commodity's proper definition. An individual offering can never, ever, be hot when compared to other items within its category, because, if it were, it would no longer be a commodity. It would be a premium offering.
Others use even more bizarre definitions for the word. I recently found myself browsing through the Connecticut's general statutes. This was bizarre for two reasons: I'm not a lawyer, and I don't live in Connecticut. Nevertheless, I found myself shocked by the text in question. Between giveaways to corporate interests and legal mumbo jumbo of dubious value, I came across this bizarre definition of consumer commodity:
"Consumer commodity" means any food, including, but not limited to, any food that is weighed for retail sale at the point of purchase, or any drug, device, cosmetic or other article, product, or commodity of any other kind or class, except drugs sold only by prescription, which is customarily produced for sale to retail sales agencies or instrumentalities for consumption by individuals, or use by individuals for purposes of personal care or in the performance of services ordinarily rendered in or around the household, and which usually is consumed or expended in the course of such consumption or use;
Setting aside my distaste for the fact that the statute used the word in its own definition, I find myself bewildered by the passage.
Now, I'm no lawyer, but it seems to me that the elected representatives in the Connecticut legislature have some explaining to do. They have, quite literally, codified an incorrect meaning for the word commodity that no rational human being would ever think to use. What they describe is not a commodity, so much as a consumable.
Although some may think it silly to place so much importance on the meaning of a single word, I disagree. Grammatical nitpicking is quickly becoming the central focus of our entire legal system. Lawsuits abound, with highly-paid firms arguing about everything from the meaning of the word "milk," to the proper use of commas, and even the appropriate length of pauses between words.
While I have neither the time, nor the inclination, to address every mistake made by speakers of the English language, I am drawing a line in the sand. I'm choosing to defend the word "commodity." I'm deciding to teach people to use it correctly. To do any less would be uncivilized.