LeeCoppock.com

Driving across southern Spain recently I was caught off guard by the sheer number of olive groves all over the Spanish mountains. It is much like driving through cornfields in midwestern USA. But these olive trees are built different: they grow all over the sides of rocky mountains and in arid conditions. If you visit Spain, you will be similarly impressed because about 5% of all the land in Spain is used for olive production.

My wife suggested that we take a tour of an olive farm/factory and this did not disappoint!

As it turns out, Spain produces about half of all the olives in the world. Pretty impressive. Some of these are eaten as table olives, but more than 90% are used for olive oil. These Spaniards take their olive oil seriously and we are the beneficiaries of this in the USA.

What is the opportunity cost of olives in Spain? Well Spain is actually a very diverse economy, with total 2024 GDP of almost $2 trillion, which ranks 12th in the world. However, grapes are another land-intensive crop in Spain, occupying about 2% of all Spanish land. Side note: there is at least one student in my macro class this spring whose family owns a vineyard in Spain!

Thus, in Spain, wine is an opportunity cost of olive production, and olives are an opportunity cost of wine. For simplicity, picture a production possibilities frontier (PPF) with olives on the x-axis and wine on the y-axis. The PPF has its normal downward-sloping shape indicating that more olive production means less wine production (and vice versa).

I did not expect to be so excited about visiting an olive farm, but here we are. Below are two photos I took during my visit. the first shows me happily invading the personal space of some olive trees. The second shows some older Spanish gentlemen at the end of the production line with their fresh olive oil. They look very serious in the photo, but don’t let that fool you – they were even happier than I was.