Because I Can

Bryan Caplan posed interesting questions regarding takeout food from restaraunts, namely

Almost every restaurant does take-out these days. Funny thing is, they usually charge as much for take-out as they do for dine-in. How is that possible? Dine-in requires servers and a lot more real estate. Shouldn't it be cheaper? As it stands, the only thing you save by doing take-out is the tip.

The comments section on his and Arnold Kling's reply are good. Kling had this to say:

I'll make my guess. In restaurants, the analogy with "follow the money" is "follow the beverages." For example, if you eliminated sodas at fast food restaurants, my guess is that the profits would disappear.

My guess is that high-end restaurants make most of their money on wine. If they could get you to take out wine at the same price that they charge for dine-in, they would do take-out. In reality, they can't force you to take out wine with your meal, but they can discourage you from bringing your own bottle. So they prefer dine-in to take-out.

Caplan later adds his original hypothesis with Cowen, relating to advertising. I wanted to mention everything, but I need to make my own blog post for that, just to be fair.

First off, I'll remind my reader that I'm a college student, and therefore do not eat out a whole lot, but I did a bit at home. The main reason we would eat out or get takeout would be that we didn't have time to and/or didn't feel like cooking, which seems logical enough. Occasionally, we'd also do this to celebrate something, but mostly it was for convenience. When someone was too tired or we wanted to stay home, we'd just get some takeout, usually Chinese or Vietnamese. Typically, we'd got to the kind of restaraunt where we would get free refills on soft drinks, although if we went for Chinese food, we'd just go with water. The exception of course would be Cracker Barrell, but we'd never get a second pint of Stewart's Root Beer or Orange & Cream with our meal.

Of course, nobody in my immediate family drank anything alcoholic, so that would affect prices quite a bit. Shortly after turning 21 I discovered how pricey some of that stuff was; some places it's $3 for a beer at a restaraunt, and it's $4.50 for a Foster's at Outback. Even the soft drinks add up if you don't get free refills, yet you behave as though you do. Wine certainly seems to be something to lose money on as well. The same could be said for mixed drinks; although there is some cost in holding the liquor, the fact is that they have quite a markup. The realization to make with these drinks, though, is that this is different from normal beverage consumption patterns. Typically, if at home, I would drink water or milk with meals, not sodas, and certainly not 4 rounds of sodas, or anything alcoholic. So that is one cost there.

Another cost is the cost of service. Restaraunts have a low fixed cost here; waitstaff typically make a very small hourly wage and make most of their money off tips. This tip is an additional 15-20% added onto the bill, typically, and can add up to a good bit.

I would hypothesize that there are a couple of social pressures with restaraunts. First, there is the pressure for everyone to order an entree, even though they might be big enough that you would split it if you just ate at home. Additionally, there is a sense that proper table manners, etc, must be employed in a restaraunt, and it is more comfortable and relaxed at home (I will concede weakness in this argument, particularly since people don't really dress up all that much). The biggest performance, if you will, would be if you have children. People with children in restaraunts cannot be left alone. If they are very young other people will want to say hi and wave and smile and in general not leave you alone. If they are poorly behaved, people will talk about you behind your back or perhaps even directly to you. If they are well behaved, then people will come to you in amazement and talk to you if the kids are young. Also, the nicer the restaraunt, generally, the less the kids will like the food.

Why aren't there high-end takeout restaraunts? Well there's not just signaling for the restaraunt, but for the customer too. The customer at the high-end restaraunt has to consider what eating at these high-end restaraunts signals about him. When other people are involved is where this has the greatest signaling power, probably. When it comes to taking someone to a high-end restaraunt, typically this is not done for the food, so it falls under a similar category to giving gifts.

Well, that's some food for thought.

Labels: Economic Stuff

Bryan Caplan writes

Arnold writes:

I carry around an entrepreneurial idea of an American equivalent of the "gap year," which would be a year of education in between high school and college. This year would involve finding a part-time job, living in and
cleaning an apartment, learning to cook one's own meals (and pick out fresh ingredients to go into that cooking), learning personal finance, learning something about household wiring and plumbing, and taking courses in philosophy and mathematics. I have not found a single person who doubts that this would be better for young people than the typical college freshman experience.

Maybe Arnold's "gap year" would be better for the young person's soul. But
would it actually be a prudent unilateral course of action? I very much doubt
it. After your gap year, you'd still have to do a regular four-year degree to
signal that you've got the Right Stuff. Unless the world changes a lot,
employers are going to treat the gap year like a gap in your resume, nothing
more. And are household management skills so difficult that people can't learn
them by doing once they get their first real job and their own apartment?

Point by point, Arnold's gap year.

finding a part-time job,
Many people do this in high school. Some people get summer jobs. Some people do this in college. If it's a way to make money, worthwhile, and accessible, then you'll see it happen.

living in and cleaning an apartment,
Living in an apartment is like living in a house except it's not as big. To clean it, you still use a vacuum cleaner, a toilet brush, a mop, some cleaning chemicals, etc. You should know something about how to clean a house if you ever lived in one, even if you were a kid. Parents who aren't worthless as human beings have their kids do chores at some point. If your parents get a maid when you're young, they're doing you a disservice, and wasting money too.

learning to cook one's own meals (and pick out fresh ingredients to go into that cooking),
You can learn this young too, and it's best with parental supervision anyway. But honestly, give the kid a damn cookbook. It's not that hard, really.

learning personal finance,
Very simple lesson. YOU ARE NOT THE GODDAMN FEDERAL GOVERNMENT. YOU CAN ONLY SPEND MONEY YOU HAVE. This involves such advanced skills as COUNTING YOUR DAMN MONEY and KEEPING TRACK OF HOW MUCH YOU SPEND. Then it gets harder when it gets to PAYING YOUR BILLS ON TIME, which of course involves such skills as WRITING NUMBERS and READING A CALENDAR. But ultimately, YOU ARE NOT THE FEDERAL GOVERNMENT sums the whole thing up. As for investing and that sort of thing, a lot of it is common sense, but you can read up on that on the internet. But nobody does that before graduating college anyway.

learning something about household wiring and plumbing,
Household wiring? I guess you mean how to handle a bad fuse, or as is more often the case, how to flip the switch on a circuit breaker. Or maybe DON'T PLUG IN 80 THINGS IN ONE OUTLET. Every college student should know stereo wiring by buying a stereo. As for plumbing, there's flushing a toilet, jiggling the handle, and knowing the back of the toilet. Stuff to pick up when you live at home in MIDDLE SCHOOL.

and taking courses in philosophy and mathematics.
People need to learn more math. But where do you take courses? Oh, I don't know . . . IN SCHOOL?! Maybe instead of taking a year off, you should try learning math in school. Philosophy, as we all know, is useful in trying to impress people while talking to them, but is ultimately worthelss, particularly as a job skill.

Caplan's desire to be polite is sickening. Maybe it's good for the young person's soul? (Well, what's an atheist gonna know about the soul anyway :-p ) Forget the signaling. How worthless is one if he has to take a year off because he had adolescence and never grew up? That's not good for the soul; it's good for making you pathetic, disgraceful, a loser, and aware of it. It's about as good for the soul as constantly referring to the driver's manual every single time you come to a 4 way stop. The only people who would need this would be the ones who were Billy Madison, in such a case it would be better for their soul than mooching of their parents the rest of their lives. But otherwise, it's pretty damn worthless.

If Kling were genuinely entrepreneural, he'd institutionalize this and create a rigorous program. But as an idea to try on your own, no way.

Addendum: I can understand this if you've had some problems you need to straighten out, or if you're going to do something like pay your own way through college. But for a more typical case, where the student goes to school and is at least partially(and more often fully) supported by parents, my case stands.

Labels: Economic Stuff, Losers