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.

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.

Well he could but unless everybody does then the lobster still gets fished out of his means.

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.