The Story of Isaac and Joe

On the morning of August 21^st of this year, I stumbled out of bed at the Marriott Key Largo Resort and went out on the balcony to drink my morning coffee. (Tough life, I know) I called back in to my niece, who accompanied me on this particular adventure, and told her that a storm must be coming. The wind in the Keys usually blows from the west, but on that particular morning, it was blowing from the south. Later that day we learned that the National Hurricane Center was predicting that Tropical Storm Isaac would strengthen to hurricane force as it crossed the Straits of Florida and would then hit somewhere in the Keys in 5 days. Fortunately, we flew home from Miami on the 23^rd and didn’t have to cross “hurricane” off the bucket list.

The euphoria was short lived as the economic impact was felt back home. Not the minor damage in the Keys, or the more substantial damage in Plaquemines Parish LA, but the devastating damage to the Louisiana crabbing fleet. Crab is one of my favourite foods, and I have been known to drive the 275 miles (440 kms) just to get a steamer pot from the closest Joe’s Crab Shack. In Louisiana, they catch mainly Blue crab, and my particular favourite is Dungeness so why, might you ask, will the hurricane have any effect on me.

The supply of Blue crab is down as a result of the hurricane. Boats, docks, coolers and traps have been lost and flooded roads make it impossible to get to those that were not destroyed or damaged. According to a New Orleans Times-Picayune, the current daily catch is 6,000, down from 18,000. This reduction in supply is sure to raise the price of Blue crab. (Sounds like something straight out of Forrest Gump – but that was shrimp, not crab – and I digress.)

Dungeness crab, which is found in the North-Eastern Pacific Ocean off the coast from Northern California to Alaska, is a substitute for Blue crab. As the price of Blue rises, the demand for Dungeness increases. As the demand for Dungeness increases, so does its price. When the price of Dungeness increases, the marginal cost of producing steampots at Joe’s will increase. Joe’s supply curve is dependent on their marginal costs. As Joe’s supply curve shifts left, they may be forced to increase their prices.

That’s where I get hurt. An increase in prices at Joe’s will not stop me from eating at Joe’s, but it will reduce the consumers’ surplus I receive – the difference between the value that I receive and the price that I pay. Consumers’ surplus is what generates my happiness. Higher prices means lower consumers’ surplus which means less happiness. Blame it on Isaac.