Economics is a social science rather than a science-science. That's because it really studies human behavior and thus hypotheses and theories are unpredictable. I don't care how many formulae are in academic papers, economists are not scientists. For example, one of the basic tenets of economics is the law of supply and demand. Kinda touted around like the law of gravity. Yet, there is that old bugaboo of human behavior that screws up the law.
Take the lowly lobster for example. We learn from James Surowiecki in the August, 2013 New Yorker, that the wholesale price of lobster has dropped from $6.00/lb. to $2.20/lb since 2005. Still the price at restaurants has not decreased. Many experts attribute [I like that phrase] the abundance of lobsters to global warming, others probably blame President Obama. Nonetheless this oversupply is reeking havoc among the Maine lobstermen. This is not the first time lobsters have been aplenty. Back in the day (Colonial New England), Mr. Surowiecki tells us that, "servants, as a condition of their employment, insisted on not being fed lobster more than three times a week."
So what is breaking the law of supply and demand in restaurants? Surowiecki believes that lobster is not a commodity but a luxury item and thus price is associated with enjoyment. Past studies have shown that low prices of previously expensive luxury items creates suspicion among retail consumers. Restaurants are not a commodity business per se. Sure it is a tough competitive venture but quality perceived or real is the factor for success, and price is associated with quality.
"Commodity producer, by contrast, can make lots of money if the conditions are right, but their fate ultimately depends on the broader economy. Restaurants are trying to insulate themselves from the market; lobstermen are at the mercy of it."
I thought that if I ever had a band I would call it LIVE! MAINE LOBSTER!
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