Shrimponomics

A few days back I posed the question “Why are we eating so much shrimp?” Between 1980 and 2005, the amount of shrimp consumed per person in the U.S. has nearly tripled.

I didn’t expect more than 1,000 responses!

I asked the question because Shane Frederick, a marketing professor at MIT’s Sloan School, had contacted me with an intriguing hypothesis. He wrote about a striking regularity in the responses he got when he asked different people why we are eating so much shrimp:

Psychologists (indeed, probably all non-economists) give explanations that focus on changes in the position of the demand curve — changes in preferences or information etc., like:

1) People are becoming more health conscious and shrimp are healthier than red meat;

2) Red Lobster switched ad agencies, and their ads are now working;

and so on.

Economists, by contrast, tend to give explanations that focus on “supply,” like:

1) People have designed better nets for catching shrimp;

2) Weather conditions in the Gulf have been favorable for shrimp eggs;

and so on.

I found Shane’s hypothesis compelling. When I teach intermediate microeconomics, the students seem to understand demand a lot more easily than supply, even though (1) they see demand first, and (2) the graphs and the equations are almost identical for supply and demand, except that the labels on the variables change. Most of us have a lot more experience being consumers than producers, so we tend to view things through the lens of demand rather than supply. We need to have an appreciation of supply factors trained into us by economists.

My colleagues generated some confirmatory evidence regarding Shane’s hypothesis. All eight of the University of Chicago economists to whom I posed the shrimp question thought the answer had something to do with producing shrimp more efficiently, i.e. supply-based explanations. (It turns out that a supply story does seem to be the right one; more on that at the end of the blog.)

Which led me to open up the question to blog readers to see what their responses would look like. With the help of Pam Freed (a Harvard undergrad who plans to be an economics major and first gave a “demand” explanation, but quickly switched to a “supply” story in response to my withering stare), we cataloged the first 500 blog comments we received. My apologies to commenters 501 and up; if you want to tally the rest of the data yourself, I will be glad to publish it on the blog.

Well, Shane, I am sorry to report that your hypothesis only did so-so in the data.

There were 393 usable observations (107 of you didn’t follow the directions).

First, the good news for the hypothesis. As Shane conjectured, non-economists (i.e., anyone who didn’t major in economics) mostly thought that we are eating more shrimp because of demand-based reasons (e.g. the movie Forrest Gump, a rise in the number of vegetarians who will eat shrimp, etc). Fifty-seven percent of non-econ majors gave only demand stories, versus 24 percent who gave only supply stories. The rest had a mix of supply and demand explanations.

Where the theory didn’t do so well, however, is that the 20 percent of the respondents who were economics majors didn’t look all that different from everyone else. Roughly 47 percent of the econ majors exclusively gave demand stories, and 27 percent only supply. (Economics majors were more likely to give both supply and demand stories.)

In fairness to Shane, there is a big difference between being an economics professor and having an undergraduate major in economics. Indeed, the similarity between economics majors and everyone else is, perhaps, an indication that our current curriculum for teaching economics doesn’t do a great job of instilling students with good economic intuition — or at least whatever economic intuition that my colleagues have.

Who thinks least like the academic economists? That prize goes (no surprise) to English majors and (more of a surprise) engineering majors, who together combined to give 49 responses that overwhelmingly touted demand explanations.

Interestingly, women in general were only half as likely to give supply explanations as were men. I will leave you to ponder the causes and implications of that result.

So why did shrimp consumption rise so much?

I’m not exactly sure, but here is what I can glean from the Internet. A key factor is that prices have dropped sharply. According to this academic article, the real price of shrimp fell by about 50 percent between 1980 and 2002. When quantity rises and prices are falling, that has to mean that producers have figured out cheaper and better ways to produce shrimp. This article in Slate argues that there has been a revolution in shrimp farming. Demand factors may also be at work, but they don’t seem to be at the heart of the story.

So, for the diligent few who have actually read all the way to the end of this long blog post, here is another question for you: in stark contrast to shrimp consumption, the amount of canned tuna eaten has been steadily falling; is that due to changes in supply or demand?