Anyway. Here's some new interesting research by Bryan Bollinger, Phillip Leslie and Alan Sorensen on mandatory calorie posting in restaurants. Here's the abstract:
We study the impact of mandatory calorie posting on consumers’ purchase decisions, using detailed data from Starbucks. We find that average calories per transaction falls by 6%. The effect is almost entirely related to changes in consumers’ food choices—there is almost no change in purchases of beverage calories. There is no impact on Starbucks profit on average, and for the subset of stores located close to their competitor Dunkin Donuts, the effect of calorie posting is actually to increase Starbucks revenue. Survey evidence and analysis of commuters suggest the mechanism for the effect is a combination of learning and salience.This is a pretty big deal because, while a law forced calorie posting in New York awhile back, the new health care law is going to force all chain restaurants to do this. And it looks like it will have a big effect. Six percent may not sound like much. But six percent of 2500 calories a day (a conservative estimate of average consumption) equals over 15 lbs per year. Of course, we only eat about half our food away from home and while a large portion of that come from fast food, a lot comes from other non-chain restaurants as well. Also, some may eat more in other places even if they eat less at fast food joints. But I think other evidence suggests chain restaurants seem to cause more problems with health than other kinds of restaurants or food eaten at home.
Pretty interesting stuff. I have a hard time seeing the downside to this kind of mandatory labeling. While food labels seem to have had no effect on food consumption at grocery stores this looks like an entirely different story.
Oh, evidence in the paper suggests the effect sticks around over time, too. At least for ten months (the length of the study).
Update: Amid a slew of spam comments (much like the one below which I will delete) I did receive one substantive comment that I inadvertently deleted with the others. The anonymous commenter asked what the market failure was that would justify regulatory intervention.
In this case it's not very deep: almost all market failures come down to information. Information is a public good: it's about as non-excludable and nonrival as goods get. Asymmetric information poses a whole other set of potential problems.
Market failure doesn't necessarily justify market intervention; the benefits of intervention should exceed the costs. We don't have numbers here, but, for chain restaurants anyway (which is what we are talking about), the cost of calorie posting must be trivial, since it only has to be done once. It's hard to quantify the benefits in monetary terms. But this study shows the information affects decisions a lot, which is a tell-tale sign of big benefits. So this seems like a no brainer from an economics perspective.
The benefit-cost analysis of calorie posting at non-chain restaurants with frequently changing menues would be far more ambiguous since the costs would be far greater and the benefits could be smaller.
Where is the economic justification for mandatory labeling? I don't see a market failure. The whole food safety area of regulations lacks justification in my view.
ReplyDeleteAnonymous: See the update. I would agree that evidence of *past* mandatory labels (cigarette warnings, nutrition facts labels, etc.) having had much of an effect on decisions is thin. But the costs of mandatory labels are almost always trivially small while the benefits lie somewhere between zero and something substantial. I certainly don't see a strong economic case against them (information has strong public good attributes).
ReplyDeleteI find this case particularly interesting because the large effect on decisions likely implies big benefits. There's nothing deep here, just plain revealed preference.
So what justifies your view?