My dad grew up in rural Bangladesh. He once told me that when he was young, lobster was a common food in villages. Overseas demand hadn't yet picked up, so the plentiful catch was food for the locals. Today of course, all that lobster gets shipped overseas, and the locals can't afford to eat it. At least they can take solace in the fact that the market is allocating scarce lobsters to those who value them the most.
During the middle ages the salmon was so plentiful in the Dutch rivers that maids stipulated in their contracts they would be served salmon only so many times a week.
"Lobsters were so abundant in the early days—residents in the Massachusetts Bay Colony found they washed up on the beach in two-foot-high piles—that people thought of them as trash food. It was fit only for the poor and served to servants or prisoners. In 1622, the governor of Plymouth Plantation, William Bradford, was embarrassed to admit to newly arrived colonists that the only food they “could presente their friends with was a lobster … without bread or anyhting else but a cupp of fair water” (original spelling preserved). Later, rumor has it, some in Massachusetts revolted and the colony was forced to sign contracts promising that indentured servants wouldn’t be fed lobster more than three times a week."
Based on these examples, I believe the proper way to draw up the contract would be to write "exactly" instead of "no more than". "I will be fed lobster exactly 3 times a week". It safeguards against those farfetched price increases but also limits the number to a tolerable level.
tl;dw westward expansion in North America meant people were increasingly living in areas without plentiful lobster -> refrigeration and canning made shipping lobster west possible -> lobster was fished heavily to meet demand -> lobster populations declined -> rare lobster means expensive lobster
Haha. When I visited Cambodia, I ate spider in a restaurant in Phnom Penh. I cannot say it was tasty or delicious, but made for an interesting evening. Just adding that here as proof that we live in a universe where people occasionally eat spiders.
According to this post [1], a "low-class" meal in the Philippines would be "grilled tilapia, homemade chicken soup, rice, salad with homemade dressing, sticky rice cooked in coconut, and a homemade sauce", while a high class meal would be pizza from Domino's.
I think lobster qualifies as a Veblen good. When lobster was plentiful, it was fed to prisoners. The only reason people pay a lot for a lobster dinner is because -- lobster is expensive!
Our cooking techniques have improved a lot. I read somewhere that when lobster was fed to prisoners it wasn't boiled live and served like we do today, it was old and salted. I would bet that today's fresh-cooked lobster with drawn butter tastes a lot better than what the prisoners were eating. It's not only expensive, it's delicious.
>I would bet that today's fresh-cooked lobster with drawn butter tastes a lot better than what the prisoners were eating.
There is still bad lobster in existence today. I grew up in Maine and at once point worked in the lobster-fishing industry. Later on, to my dismay, the Army used to feed us lobster that had been boiled until it was water flavored meat. Such a waste.
I was visiting an eco-resort in the early 90s in panama in the san blas islands, and the locals were told the americans would only eat lobster (caught there fresh) if it was boiled, vs their own grilling/fire cooking it. So these natives proceeded to boil the life out of the poor lobsters and served the most rubbery tasteless lobster I've ever had. All because that's what they thought we liked.
I work with a guy that used to be a submariner and he talks about how the best thing about being in a submarine was the food, including lobster. Maybe being in submarine they couldn't spend too long cooking it? As someone who just tried lobster for the first time this weekend I don't think anything can make it taste good.
I think the difference might be that the guy on the submarine cares whether or not its cooked properly, because he's going to be eating it too. The Army uses contractors for the most part these days.
As broken down above, most of the money from that lobster ultimately goes somewhere else. But that's the reality of the market. Bengali villagers don't have the capital to get lobsters from water to the table where someone will pay $60 for it. The companies that do have all the leverage, and extract most of the value. Are they better off in some sense? Sure. But unless you're an economist, you have to posit that the enjoyment from a lobster dinner is the same whether you're a Bengali villager or a yuppie in San Francisco. In a sense they're giving up $60 of enjoyment to get a couple of dollars of cash.
>As broken down above, most of the money from that lobster ultimately goes somewhere else.
You can't have it both ways. The only affect that the market has on the local market for lobsters in Bangladesh, is via the price in Bangladesh, i.e. the price the fishermen pay.
So to the extent that they are affecting the market in Bangladesh, they must be paying higher prices, and therefore the parent comment applies.
>But unless you're an economist, you have to posit that the enjoyment from a lobster dinner is the same whether you're a Bengali villager or a yuppie in San Francisco. In a sense they're giving up $60 of enjoyment to get a couple of dollars of cash.
The economists are in fact correct. You cannot measure enjoyment in dollars, because $60 will buy a lot more additional enjoyment for a Bengali villager than a San Francisco yuppie. So the villager would be willing to give up the enjoyment of a lobster dinner for much less than $60, which is precisely what they are doing.
>"In a sense they're giving up $60 of enjoyment to get a couple of dollars of cash."
You could also make the argument that the villagers have the opportunity to have $60 of enjoyment at a bargain price, whereas the San Francisco yuppies must pay a high price.
> But unless you're an economist, you have to posit that the enjoyment from a lobster dinner is the same whether you're a Bengali villager or a yuppie in San Francisco.
Huh? I could take a friend to a restaurant and order two of the same dish. Odds are sky-high that enjoyment from eating the same dish, prepared in the same restaurant, against the same cultural background, would be rather different.
The value of that lobster dinner is $60 to someone in SF. If the locals choose to sell them for the few dollars they get for them, either: 1) the locals are irrational; 2) or the value of the dinner to them is less than a few dollars.
In neoclassical economics, we assume rational actors. So it must be 2. But why would a Bengali villager get much less utility out of a lobster dinner than a San Francisco yuppie? Sesfood is a staple in Bangladesh, and lobster is a delicacy. [1] The answer is because they're poor: measured by the market, they, ostensibly, ascribe less value to everything than the San Francisco yuppie.
That's an interesting result. The San Francisco yuppie derives far more utility from that lobster than the Bengali villager does. Why? Because he's richer. By the measure of the market, the rich derive far more utility from everything, and the market allocates scarce resources to those who value them the most.
[1] This is not an example out of an economics textbook, where country A sells something it doesn't value to country B who does value it.
There's an important part of utility theory that answers this question: utility is not comparable between people, only between options available to a single person. So Yolanda-Yuppie gets more Yolanda-utility out of a lobster than she would out of keeping her $60. Vikram Villager gets more Vikram-utility out of a few more dollars of income than he would out of keeping his lobster. No mainstream utility theorist would claim to quantitively compare Yolanda-utility to Vikram-utility.
Edit/Clarification: the essence of social welfare economics is in trying to do interpersonal utility comparisons that yield a social utility function that behaves as much as possible like a personal utility function. Arrow's theorem tells us that this is not possible to do perfectly; any attempt to do so will result in one of several significant deviations from what we consider "utility" for a single person.
You're correct, but that's the boring way of saying it. The Bengali villager doesn't sell the lobster because he gets less pleasure out of eating the lobster than the San Francisco yuppie. Obviously, he forgoes the delicacy, one with a rich culinary tradition in his country, because he has to. Because he has limited choices while the San Francisco yuppie has many choices. The market works to allocate him a couple of dollars worth of necessities at the cost of forgoing a pleasure for which the San Francisco yuppie is willing to pay $60. I think this situation is a great illustration of the human implication of the economics you just recited.
At the risk of continuing to be boring, I think it's important not to mix technical concepts with social welfare concepts; they serve different goals and it is easy to get a misleading impression of one when trying to apply it in the other domain. Economics is plagued with these problems (cue half-informed people raging about how "Economics assumes people are perfectly rational, but Ariely told me they weren't [0]! Take that establishment!")
Utility is a very specific tool devised to model choice behavior. It is a basic idea of utility theory that "Vikram gets much less utility from the lobster than Yolanda" is not a meaningful statement within the framework. There's no wrangling or wiggle-room with this point; interpersonal utility is formally incomparable.
Similarly, it is well-trodden that markets tend to allocate scarce goods to those with the greatest willingness and ability to exchange other scarce goods for them; market theory doesn't presume to say anything about who enjoys the scarce goods the most. This is why, beyond choice and market theory, we need something that addresses social value systems. Utility does not pretend to do this, except to the extent that an individual may value social justice in their personal utility function.
So, while I take your point that my post was technical and, yes, dry, them's the ropes when it comes to utility theory. Correct statements tend to be boring ones that don't evoke human interest. If one wants to evoke human interest (a perfectly reasonable goal) I think it's best not to mix in half-appropriate technical concepts when there is substantial potential for confusion.
[0] For anyone who is curious, I estimate 80% of Ariely's "irrational" examples are easily explained by understanding that making optimal choices with imperfect information has a cost in time and effort; when you price in this cost in time and effort, making suboptimal-but-easy-to-make or even random choices is actually perfectly rational within the framework.
Why does he have to? He lived before the yuppie offered to pay for it, so he could refuse and eat the damn lobster. All the market has done is given him an extra option.
I don't know about you, but I wouldn't derive nearly the same utility from having a a live lobster in a bucket as I would from eating one prepared by a chef in an SF restaurant. The premise that they're both the same "lobster dinner" is broken.
I didn't get it, the pricing was pretty much what I would have guessed. The markup isn't that high, especially considering they're hard to store and ship. Other things have much higher markup (drinks, fashion, any goods manufactured in china). Where is the voodoo economics?
I think that was the point. I don't know what the author's motivations were for writing this piece but I would speculate that someone, sitting in their comfy chair reading a story about how Maine lobsterman are complaining about getting only $4/lb for lobster, and seeing it as the $60/plate special at the restaurant complained "Gee someone is making bank here at our expense!" And the author deconstructs that notion by putting names and faces on all the people in the path of harvest to production.
But given the title, he will get people who think they are being ripped off to read it, and then they will perhaps find they aren't really being ripped off, there are just a lot of hands between them and the lobster's origin.
I think an interesting and nontrivial thing explained by the article is why raw lobster prices are going down but restaurant prices aren't: the largest percentage markup is added by the restaurant, but most of the price the restaurant pays is added by the middlemen and does not vary with the price of the raw product.
Agreed. There is no voodoo economics, just regular economics.
I was disappointed that the article's title promised something really interesting or counterintuitive -- instead, it's just a pretty normal cost breakdown.
One part that didn't mathematically make sense is the fisherman price varied over more than 2 to 1 ratio, yet it doesn't seem to cost very much money to store a lobster. So the fishermen are giving up a large profit by letting someone else store the lobster for them.
The voodoo nature is probably around almost all the value being constructed by multiple layers of profit taking middlemen in a supposedly blue collar occupation. This is seen as the norm for the FIRE economic sector, seems odd in a blue collar sector.
I'm mystified why no one vertically integrates. If "Red Lobster" owned their own fleet of boats and hired men, they would cut out a lot of profit currently going to multiple stages of middlemen.
Or if not big business, one dude could fish during the season, fill his personal warehouse, then go food truck it or whatever for the rest of they year and haul down an immense profit.
> I'm mystified why no one vertically integrates. If "Red Lobster" owned their own fleet of boats and hired men, they would cut out a lot of profit currently going to multiple stages of middlemen.
It would appear that they're trying to do that. Not via fishing, but farming:
I live in Belize and you can literally pick them up off the reef with a mask and a snorkel (as long as they're in season!). Anyone who has ever tried will know that's easier said than done, however.
Hey, since this is HN, I should point out how nice it was to page through that article and NOT have to deal with any fancy CSS / JavaScript scrolling tricks. Very nice, Globe and Mail.
I guess the moral of the story is that if we want affordable food, we should eat local. It seems like half of the costs to the restaurant are associated with shipping the lobster alive.
What I found interesting was that the economics are affected by both spatial and temporal locality. The part about holding tanks that could keep lobsters alive for months to sell them out of season when prices were higher is a good reminder that eating seasonally can be as import for affordability as eating locally.
It really depends, for example out-of-season local tomatoes grown in a greenhouse in norther Europe are much more energy-unefficient than shipping them from Morocco.
On the other hand, I remember buying live lobsters between $5 and $8 a pound in a Boston grocery store. According to this article that would be a very small markup (and maybe sometimes lobsters were a loss leader).
Try to eat local in eastern Montana in January. Wheat stores well, and beef doesn't store terribly badly, but... well, that's about it, and that is kind of a problem for humans, who need a more diverse diet than wheat and beef. We can grow small amounts of other food, but not enough to make much of a difference.
(Edit my math was a little off since the article was talking about expenses per pound for the middle men, but total cost at the restaurant)
Anyway, I think the markup at the restaurant is the highest. Maybe on the coast you can get a 2 lb lobster for $30, but that would be a ridiculously low price elsewhere. A steakhouse I went to last week in Nashville was charging $160 for a one pound lobster!
I actually found the middle-men involved to have a reasonable markup on the product. The price really gets jacked up at the restaurant where they have all of the overhead to cover.
Would there then be a market for canned/frozen/otherwise preserved lobster? So one could set up a factory right on the shore, buy lobster at 2-4$/pound, then immediately cook it and have it ready to ship in inexpensive ways?
I was honestly sort of surprised people didn't know. The collapse of the fishery was so completely devastating to the east coast (where I was born) economy that it's just sort of a given back home that lobster prices are awful, your potatoes are going to rot and your kids are going to move (like I did).
The article also points out that after paying the chef, wait staff, etc, the restaurant makes about $4 on that lobster dinner. I think the reason it seems weird is that we implicitly assign the same effort-value to each of these stages, but in fact the restaurant has more work to do per lobster than any of the previous stops in the chain.
Except even then there is no voodoo: the restaurant has costs far and away above the cost of good sold: labor, rent, furniture, dishwashing, etc. etc. etc. The actual profit margin even at retail is razor thin.
An excellent lobster dinner for $30 is good value. I now knew, however, that the actual cost of Larry was barely $10 a pound. But that’s the formula in the restaurant business. “On the industry standard theory,” Chris said, “a third of what you sell it for is food cost.”
I read an interviewer with a restauranteur who stated the recieved wisdom was that the revenues from running a restaurant should be split around 30% ingredients, 30% overheads, 30% staff and 10% profit.
Linen is the number-one evil, because it is expensive and no one pays for it. Same with bread and butter. ... paying a dollar and a quarter for a tablecloth and thirty-five cents for each napkin that someone gets dirty before they even have their first drink is a drag.
The reason for the disbelief is an often repeated on HN in all cooking related articles, that it is impossible to cook a meal cheaper than buying at a restaurant. Because restaurants get their food so cheaply in bulk and few of them make much of a profit.
Pretty much. A $30 steak in a restaurant is probably either something like an 8oz filet or a 12oz strip steak. You can cook either of those at home for around $10 (plus the cost of seasonings and sides).
Crabbing is much the same--some friends of mine down in the Gulf used to make a living that way. Some of the hardest-working most resourceful people you'll ever meet.
The amount of effort put into these industries boggles the mind.
Berries are similar. Costco charges several dollars a pint. My wife refuses to buy any. Where she's from (Oregon), they're an invasive weed, and you can pick so much off the branches you can't give them away.
Principle of the thing. I don't buy scallops unless I'm down home because the markup on it seem ridiculous (especially since they're usually less fresh and of lesser quality).
That's how I feel about figs. I like them, and will eat lots of them when I'm in Greece or California, but I'm not paying €1 ea. to buy them in Denmark. (Apparently they don't ship well, so are very expensive outside of the areas where they're cultivated.)
My Dad was a first mate on a lobster boat in his retirement. He told me that they had to sell their lobsters to the same guy they bought their bait from.
Also,"The Secret Life of Lobsters" is a great book. It was a best seller so it must have had wider appeal than youd think.
