Compelled Disclosure of Food Characteristics--Posner

Last week New York City began enforcing an ordinance that requires fast-food chains to post on menus and menu boards the number of calories in each menu item, in the same type size as the item itself. (The ordinance is rather complicated, see www.nyc.gov/html/doh/downloads/pdf/cdp/calorie_compliance_guide.pdf, visited July 24, 2008; my summary is a simplification.) The stated purpose of the ordinance is to reduce obesity. The ordinance will be criticized as being at once unnecessary, because information about calorie content can be conveyed without requiring that it be printed in large type on the menu (an alternative would be publication on the chain’s website, or the posting of a separate notice in the restaurant), and paternalistic, because people concerned about their weight have the incentive and ability to inform themselves about the number of calories that they consume. The ordinance may also be ineffectual, because most people eat most of their food at home rather than in fast-food outlets; anticompetitive, because small chains will incur the same costs as large ones to certify the caloric content of their offerings; blind to the effect of competition in forcing retail firms, including restaurants, to disclose whatever information will give them an advantage in competing for calorie-conscious consumers; unhelpful, because it will contribute to information overload on consumers bombarded with all sorts of warnings; and not based on a responsible cost-benefit analysis. These are legitimate criticisms, but they may not be conclusive. A law aimed at reducing obesity would be paternalistic if obesity did not produce external costs, but it does, because obese people consume a disproportionate amount of medical resources, and there is extensive public and private subsidization of medical expenses (private through insurance pools that are unable or forbidden to identify and reject high-risk insureds). However, the size of the externality is in question, because obese people die on average at a younger age than thin people, and so consume medical resources for fewer years on average than thin people do. While some obesity has strictly physical causes, most is due to poor eating habits and lack of exercise and is therefore treatable by changes in behavior. If the necessary changes can be induced by low-cost informational warnings, the result is likely to be a reduction in the external costs of obesity. However, government programs designed to educate consumers in the causes and consequences of obesity have not been effective. Fast food is one of the factors that is responsible for the obesity "epidemic" in the United States and other wealthy countries. Economic studies find that weight rises with lower relative prices of fast-food and full-service restaurants and the wider availability of such restaurants and hence the lower full price of eating at them. Partly because some of the costs of obesity are external, competition among restaurants or other food providers cannot be counted upon to optimize caloric intake. An obese person will not eat less in order to reduce the social costs of medical subsidies. It is not even clear that competition will produce the caloric intake desired by consumers for purely selfish reasons of health, medical expense, and appearance. Firms are reluctant to advertise relative safety, because it alerts the consumer to the existence of danger. Cigarette and auto companies were traditionally reluctant to advertise safer cigarettes and safer cars, as that might get consumers thinking and as a result induce substitution away from the product. Prominent display of calorie numbers might persuade consumers to avoid fast-food chains rather than to look for the chain with the lowest calorie numbers. This is especially likely because the high-calorie items on the menu tend to be the tastiest. Inexpensive food rich in butter, cream, sugar, and egg yolk generally tastes better than inexpensive food low in those ingredients; low-calorie foods that taste good tend to use expensive ingredients. For people who want to be thin, there is an abundance of information that enables them to adopt a healthful diet. Neither ignorance nor externalities seem to be the important forces in the growth of obesity. More important may be exploitation by food sellers of people's addictive tendencies, which have biological roots. In the "ancestral environment," to which human beings are biologically adapted, a taste for high-calorie foods had great survival value. As Becker has emphasized in academic work, the choice of an addictive life style may be freely chosen and the life style itself may be socially productive and personally satisfying; Becker and I, for example, are addicted to work. But many obese persons became addicted to high-calorie foods as children, and a child's choice of an addictive life style is not an authentic choice, to which society need defer. Nor can parents be assumed to be the perfect agents of their children, protecting them from unwise choices; it takes a lot of parental work to keep children physically active in the era of the video game, and away from rich foods. So there is a case to be made for public efforts to reduce obesity. The significance of the New York City ordinance lies in its requiring that calorie numbers be printed next to the food items on menus and menu boards and in large type. The purpose is less to inform than to frighten. Psychologists have shown (what is anyway pretty obvious) that people respond more to information that is presented to them in a dramatic, memorable form than to information that is presented as an abstraction or is merely remembered rather than being pushed in one's face; that is the theory beyond requiring reckless drivers to watch videotapes of accidents and requiring cigarette ads to contain fearsome threats. It is one thing to know that a Big Mac has a lot of calories, and another thing to have the number emblazoned on the menu board, next to a mouth-watering picture. The warnings--for that is what the display of high calorie numbers amounts to--may create fear of high-calorie foods, not only in fast-food chains but generally. If so, and if as a result there is less obesity, there will be a reduction in medical expense and possibly a gain in happiness if, as one suspects, thin people are on average happier than fat people. No one can know in advance the net effects of the ordinance. Its effect on obesity may be small, and it will impose costs of compliance on the fast-food chains subject to them and as a result cause the price of fast food to rise, though perhaps by a trivial amount--and the increase in price will contribute, albeit modestly, to efforts to reduce obesity. An increase in general education, by tending to reduce people’s discount rates, may have a greater effect than the ordinance in checking obesity, because the ill effects of obesity are greater in the long term than in the short term and education tends to reduce discount rates. The argument for the New York City ordinance thus comes down to the argument for social experimentation generally: that it will yield valuable information about the effects of public interventions designed to alter life styles. I therefore favor the ordinance, though without great optimism that it will contribute significantly to a reduction in obesity.

Comments

[James N. Markels]

Jack: "BTW a tip of the hat to the many new immigrant or ethnic cafes that by dint of tremendous labor have been able to survive and provide a locally owned, tastier, and most likely far healthier alternative to the corporate juggernaut."

With all due respect, that is a very rose-colored view more inspired by one's political inclinations than by fact. Unless the restaurant strives to be low-fat or whatever, most, including the mom n' pop ones, have no more interest in keeping calories down than any fast-food chain out there. How many mom n' pop restaurants do you think are out there testing their offerings for fat content and the like? None. We put more blame on the big chains only because they have the resources to do that kind of research.

And let's not forget that chain restaurants are more stringent with meeting health and cleanliness standards. Your average McDonald's is cleaner and more sanitary than the average mom n' pop/local ethnic restaurant. Getting fatter is one thing, getting food poisoning is another. Now, that doesn't mean that I won't eat at a little Chinese dive -- I love ethnic eateries as much as the next person -- but I know the odds. There are some sketchy places I avoid.

I think the interesting question is, if we see that it is unreasonable to only target fast-food restaurants for open disclosure based on the fact that fast-food isn't the only unhealthy/fattening food out there, what costs will we be imposing on those mom n' pop restaurants that will now have to expend resources to have their menus tested? How many of those restaurants will be unable to afford that additional compliance? And will we be better off with fewer mom n' pop restaurants around? As much as Jack hails those plucky entrepreneurs, I wouldn't be surprised to see many of them having a big problem with fitting in testing costs under their already-thin profit margins.

[Jack]

James: Good comments and I agree with many of your points.

Perhaps I do favor a politic and economic view that is not all that entranced with corporations taking over most of the turf that was one left to local business owners and that relies upon paying substandard wages in order to pump the profits out of the locale to some far off HQ's or to the brokerage accounts of wealthy stockholders. As many of the fast food chains at least have local franchise owners they're not quite the prime example as is the Walmart model that has so effectively killed off local merchants, depressed wages and produced one of the fattest bottom lines in history.

I do give ample credit to Walmart's use of modern tech and etc as I do to fast food chains for their mechanization and "product development".

I've not read the NYC statute but would assume it directs its focus to the large chains where it's not much of a burden for them to divulge what they put in a "french fry" that bears no resemblance to the potato that was once part of the name or a "milkshake or softee"

IN terms of economics can it be that when a machine become ubiquitous that "the market" can no longer be relied upon in terms of the competition that a single restaurant faces to ensure quality and value at varying levels of price and service? And therefore must face more regulation? I would think the answer is yes.

BTW if you're concerned about the odds of food poisoning perhaps what you eat is more important than were you eat it. In a Congressional debate over putting in more inspections of seafood some years ago I learned that incidences involving seafood were among the lowest @ 1 in 150,000 meals if one included raw shell fish. Chicken is the worst having a rate of 1 in 25,000 and of course ground meat ie burger is far riskier than is solid meat and the reason burger is always cooked well done these days.

As for being better off with few Mom and Pops, I suppose that logically speaking IF the chains are subjected to more intensive inspection, I'd assume the answer to be yes. But! here in Anchorage all appear to be inspected the same, and were a customer to get sick in one of the local cafes I frequent the owner could be quickly notified. Have you had any luck giving helpful feed back to a corporate chain?

And thanks! for a well reasoned response, Jack

[Andrew]

A reason the ordinance may very well work is that for once, the alibi of "ignorance is bliss" can no longer be applied. It is possible that a person did not care about calories because he/she was not aware of the quantity. Now that the information is thrust upon everyone, new "calorie-conscious" people will be created. Thus, we have a constantly growing population of calorie-counters, rather than the original people with the "natural incentive."

Analogously, it is not likely that a person will react to carbon monoxide until it is too late. This ordinance acts as an alarm, protecting the eater.

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[James N. Markels]

Jack: The fat "bottom line" of WalMart has also made things more affordable and available, so that even low-income folks stuck in the boonies have a full range of commodities they can afford within a relatively short distance. Although we like local merchants, would you like them so much if you realized that their inefficiencies actually gouged their customers?

Anyway, while I am cognizant that big chains can afford to do this research, once again we are necessarily giving smaller producers a pass simply for being smaller. And, unfortunately for Andrew, this hurts the ability to educate the populace, and even fosters ignorance. If we all see how "bad" fast food is, but see no information about the local diner's menu, then people may very well let their common sense go and decide that the diner's food is healthier. After all, if it wasn't healthy, the government would have required that information about it be provided, right? If your goal is truly to combat obesity, then selective information is not helpful. If your goal is simply to hurt fast-food restaurants, well, mission accomplished.

[Ethan]

Judge Posner loses credibility when he does things like referring to fast foods as containing sugar and butter. Not likely!
What is in fast food? Perhaps high fructose corn syrup, and lard or margarine?
Information costs are just too high, aren't they.

[Jack]

James: Some truth......

"Jack: The fat "bottom line" of WalMart has also made things more affordable and available, so that even low-income folks stuck in the boonies have a full range of commodities they can afford within a relatively short distance. Although we like local merchants, would you like them so much if you realized that their inefficiencies actually gouged their customers?

............ I gave them credit for developing state of the art merchandising and inventory control et al. BUT! When such new tech generates FAT bottom lines wages should NOT be so low that taxpayers have to kick in a billion a year to subsidize the lives of their employees.

........ also the DO engage in predatory pricing until they've killed of the local guys. Let's hope our slumbering Anti-trust Division will be awoken by the next admin for both these cases and the oil heist.

Anyway, while I am cognizant that big chains can afford to do this research, once again we are necessarily giving smaller producers a pass simply for being smaller.

.......... Possibly. But when it comes time to improve standards, it seems wise to take a practical approach and make change where change is possible.

And, unfortunately for Andrew, this hurts the ability to educate the populace, and even fosters ignorance. If we all see how "bad" fast food is, but see no information about the local diner's menu, then people may very well let their common sense go and decide that the diner's food is healthier.

........... This seem like tap dancing. But... following it along, SURELY were the majors to lose market share to what either IS or is perceived to be better they'll either make improvements or .......... ramp up their propaganda!

After all, if it wasn't healthy, the government would have required that information about it be provided, right? If your goal is truly to combat obesity, then selective information is not helpful. If your goal is simply to hurt fast-food restaurants, well, mission accomplished.

......... I think of the problem as the health of the people who paid for the food being a top priority, of which the obesity epidemic is only a part. Today, sadly, but for fine dining, most restaurants appear to be designed to most efficiently get the money while doing as little as possible. Beyond the low quality food the whole combo of florescent lit rooms with hard cushionless seats where newspaper racks are prohibited. After all, god forbid that anyone linger longer than it takes to rapidly bolt their food.... which in itself is a cause of obesity.

Perhaps we're due for a paradigm change as Starbuck, Panera, and others are offering comfortable surroundings with WiFi, music etc along with (Panera) and healthy choice of sandwiches, etc and Subway while stuck in the zero ambiance past? does well with healthy products.

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