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?


Andrew

Although I'm sure its a mixture of both supply and demand reasons (as everything is), it may also have something to do with tuna being seen as an inferior good. As real income has been rising for the last 20 years, people have been able to exercise their options of food choice more diligently and in turn choose to eat other fish products; trout, salmon, halibut, etc.

Davey

Changes in demand, on my part. The quality of tuna we get now is pretty low, at least for the canned stuff. Instead of getting nice chunks in the cans, you get loose particles. Kinda nasty. And then there's the whole mercury thing.

Panem et Circanses

Has to be demand - canned tuna is cheap and supply sure seems to be steady. Maybe since fewer lunches are being prepared at home, of which "tunafish sandwiches" have long been a staple?

Jeff

One word: Mercury. Fear of a product lowers the demand for that product, and thus the quantity sold.

Jim N

canned tuna hasn't changed since I was a kid 25+ years ago. If producers have made inroads in reducing the cost to the consumer it isn't enough to offset the changes in caused by 2 things.

first people read that tuna isn't heathly to eat that often since it contains mercury, so the heath conscience revolution has had some effect.

second the alternatives available are more appealing in convenience and style than your mom's casserole. Canned meat is out.

BSEE and MBA
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Larry DeBlois

Tuna consumption has dropped because it now smells like cat food. The brands that I have bought from my local supermarket all have this smell and I won't eat it or will I buy it. I don't know what happened to the solid white chunks I used to eat; the new stuff is darker, greasier, and loose.

Bryan

Changes in the demand. There are many more high(er) quality substitutes that people are now choosing over canned tuna. Frozen shrimp, fish, and other seafood are more readily available and IMO are much higher quality. I doubt the cost of canning has gone up and I haven't heard of any shortage in tuna supplies.

David

It could be the fact that shrimp and canned tuna are substitutes in demand. Since there is a fall in price of shrimp, consumers would naturally choose shrimp over canned tuna. There could also be the possibility of a change in tastes and preferences since people are now exposed to a variety of cuisines.

odinseye2k

Shrimp are also pretty low on the food chain. There's a possibility that the supply is up due to the fact our pollution and overfishing has killed most everything else.

That includes nice, big tuna. Supply there, definitely down. If you check out the 30-year update on Limits to Growth, you'll see a nice steady course of working our way down the food chain in terms of quality fish.

PS - Engineers probably look at demand because that is what we are out to satisfy. Dumping cheap crap on people with slashed prices is usually considered poor work in our field.

Alexis

Personally I still buy canned tuna b/c I need a simple, healthy lunch to bring to work. But I know that Im one of the few, and truth be told I feel a bit self conscious opening my can at my (office) kitchen.
Cost isnt an issue, since tuna is $1.30/can--must be there are more options now that smell better! Health is also an issue--even though tuna is a good source of protein Ive heard many a time about the mercury levels...

Julia

Tuna is becoming over-fished. With less of a population (though when does that stop tenacious fishermen?) and modest public awareness campaign, I'd say it's a bit of both. (PBS's Nature has a great website on this topic: http://www.pbs.org/wnet/nature/oceansinglass/seafood.html)

Dave

Didn't I read that supplies of tuna were falling due to overfishing. Lower supply equals higher prices, higher prices means less tuna eaten, unless their is a national craving for tuna fish sandwiches...

Noto

Demand could be at the heart of the story of increases in demand INDUCED firms to innovate and adopt more efficient technology.

KM

As a late comer to this experiment and a holder of a degree in international studies, i bring a different perspective. My mind is trained to believe that one factor rarely if ever tells the whole story. I am automatically suspicious of any question which is constructed such that there can only be one answer, especially when the actions of humans are at issue.

Admittedly not having researched this, I would posit you could find many examples of products which have become much cheaper, but no less popular over the last 20 some odd years. If one makes the assumption that there was an existing and previously unmet demand for shrimp, then i take your point that a drop in price due to greater efficiency of prodution is the major factor to be considered. However it would seem to me that without the convergence of those two equal factors one would not see such a marked rise in consumption. Would it not seem odd for producers to spend all that time and money developing more efficient methods in the abscense of an unmet demand? One could certainly make an argument that supply or demand is an important factor, however to me that just bolsters the argument that both sides deserve an equal share of the blame...

In the case of the tuna, however, i would have to argue for a third factor - the surging popularity of fresh tuna. Sorry to not conform to the four corners of your questions, but this is the way i am trained to see a problem.

And by the way, i didn't thing it was such a long post :)

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TWstroud

Perhaps the primary driver is the price decline brought on by increased refrigerated container capacity from SE and West Asia to the USA.

Thomas

Despite the apparent trend of the American populous to ignore legitimate health concerns and adhere to patently bogus diet and health fads, the situation with mercury may have something to do with a decline in tuna consumption. I'm not even so sure what the situation is, but after all, humanity fears what it doesn't understand. Additionally, the idea of canned fish in general seems generally unhygenic and rather paltry (not to mention that spine-bending odor), and in a world where packaging may have something like 50% to do with a product's appeal, it is no surprise that fish a la metal is slowly falling out of public favor.

Ron F

Supply - because you said so :)

Brad

People just don't know what to do with tuna outside of tunafish sandwiches or tuna melts. Its become boring. There are countless ways to prepare shrimp (as stated by Bubba in Forest Gump).

My suggestion? Go the route cheese did a few years ago and include new ways to prepare it right on the packaging.

EK

Very interesting - you should do these informal studies once a week! (but since you probably have other things going on - i'd settle on once a month).

Tuna is indeed over-fished, but I haven't seen a major spike in prices - and I worked at a major retailer for 7 years in high school and college.

I would say this is both demand (and supply!) based. Tuna was probably the main form of seafood eaten by Americans at one point in the past, but because commercial fishing for other sea fare has become easier and cheaper, people have more options. Instead of one easy and cheap option (canned tuna/fish sticks), we now have a plethora of fairly inexpensive seafood delights, like the aforementioned shrimp, but also things like salmon and crab.

(non econ major)

Jeff

Tuna: Rising relative prices due to scarcity from overfishing.

Econ grad