Is Government Intervention in the Fast Food Industry Justified? Becker
New York City's ban on the use of trans fats in restaurants is the first of many efforts to restrict not only trans fats, but also the whole fast food industry. Boston has approved a similar ban, while on Friday California became the first state not only to ban trans fats in restaurants, but also to ban trans fats in all retail baked goods-packaged goods are so far exempt. San Francisco as well as New York City has approved bills that require fast food chains to post on menus the calorie content of the food they serve. Los Angeles is considering a bill that would prevent fast food restaurants like McDonald's from adding any outlets in a 32 square mile part of the city that already has many such restaurants. The concern behind these and similar ordinances is that trans fats and fast food restaurants have contributed in a significant way to the rapid growth in obesity among Americans.
Several arguments have been advanced to support these and even more onerous bans and restrictions on fast foods, but I believe they are of dubious merit. One claim is that consumption of trans fats, and of fast foods more generally, creates an "externality" because this helps produce obese teenagers and adults. The so-called externality results from the fact that greater obesity raises taxes on others because the medical bills of the obese are partly paid by general taxpayers due to subsidized medical care. As Posner points out, this argument may be weak because obese adults die earlier than others and in this way obesity saves medical costs. However, even if true, I am uneasy about such externality arguments. Typical true externalities occur when actions by one individual or firm directly harm others, as when pollution by a company worsens the health of inhabitants, or when a drunk driver crashes into another car and injuries or kills the driver and passengers of that car.
But the alleged "externality" with regard to obesity is due only to the government's subsidy of medical expenditures, so that it is a case of one government intervention- justified or not- causing another intervention-control of eating. It is not a path of intervention causation that most people would be comfortable with in many situations. For example, since the government subsidizes the medical care of children of poorer parents, a mechanical application of this type of externality argument would say that this justifies governmental control over the number of children that poor parents can have. Additional children of these families create an "externality" by raising taxes on others to pay for the medical costs of these children. Many similar examples can be given where government regulations and other government programs cause certain types of behavior that raise taxes or subsidies and adversely affect taxpayers, even though there would be no externality from this behavior in the absence of the government programs.
Another argument made for interventions in the fast food industry and sales of other foods is that individuals are somehow duped into eating too much, and into eating unhealthy foods. As a result, they gain weight, and become vulnerable to diabetes, heart disease, cancer, and other ailments. Yet it is hard to justify the word "duped" when studies show that much of the growth in obesity has been due to the development of cheap fast foods that consumers find tasty, and also to the growth of television, computer games, the Internet, and other attractive activities that are sedentary. Increased consumption of low priced tasty foods and changed time allocation toward more sedentary leisure and work activities would be optimal responses according to any model of human behavior where individuals are trying to increase their well being, as they, rather than outsiders, interpret their well being. Economic analysis would predict that the lower priced high caloric goods and sedentary technologies that are found throughout the world would lead to weight gain and growing obesity not only in the United States but also in other richer countries. And so they have. Special theories about consumers being duped, misled by advertising, etc are not needed to explain what are normal responses to low prices and new technologies.
To better understand this movement against fast foods, one has to appreciate first of all that many individuals do not like fat persons. This might be called an externality from obesity because overweight people lower the utility of others, but few people, even including most economists, would want to take government actions to try to correct eating that has such (prejudicial) effects on others. A second crucial point is that most of the gain in obesity is concentrated among children and adults in low income, low educated families, especially African-American families and other minorities. Educated people find it easy to claim that less educated individuals are often misled into choices that the more educated do not like, and often do not understand.
Yet it is no surprise that poorer individuals- poor whites as well as African-Americans-find fast foods particularly attractive. Fast food outlets are so common in poorer neighborhoods partly because they are cheap. In addition, since working single parents (mothers), and working dual parents, predominate in minority families, fast foods are a time saving way to consume tasty foods when free time is scarce. Any possible longer term adverse health consequences of these foods are put on the back burner when immediate needs to feed children and parents are much more pressing.
Requiring restaurants to post calorie content of foods will have a negligible effect on demand for these foods because, as I argue above, consumers are buying these foods not mainly because they are ignorant of the effects on weight, but because of cheapness, convenience, and taste. Banning fast food restaurants would have an effect by eliminating their convenience. Still, substitutes would develop, such as prepared foods in supermarkets, or fast foods served not in chains but in individually owned restaurants (hostility to food chains is also partly responsible for the growth of legislation against them). Maybe eventually some of these substitutes would be banned too. Such continuing extensions of the power of government are a very unattractive prospect. Given all the ineptitude in government regulation, as reflected for example in the regulation of Freddie Mac and Freddie Mae, and in other housing problems, I believe it is better to tolerate some mistakes by consumers in their choice of foods. Such additional regulation of fast foods will make people worse off in the long run as well as in the short run.