Dispatches from the Asylum

Dr Eric Crampton
Insights Newsletter
28 November, 2014

America got a little bit crazier this week. I’m not talking about the Ferguson riots, round two, which make me ever-grateful that New Zealand maintains an unarmed constabulary. I’m looking instead at the new regulations on restaurants that were part of ObamaCare.

Vox reports that Section 4205 of the regulations require any retail food establishment with 20 or more locations to provide calorie-counts on the menu. The regulation is meant to be part of the Obama administration’s anti-obesity push.

A funny thing happens when the government becomes payer of last resort for health-care costs. Pretty soon, individual lifestyle decisions, like those around exercise and diet, start being seen as a matter of public rather than private interest, because resulting costs fall in part on the taxpayer. The overall package is then perhaps less appealing than it might have originally seemed. “Here’s free healthcare!” sounds a lot nicer than “Here’s free healthcare! By the way, to help us keep our costs down, here’s your new mandatory lifestyle package: no opt-out. Serve and enjoy!”

The costs of mandatory calorie counts are pretty obvious. In addition to the usual labelling costs, they also make menus a lot more rigid. For places like McDonald’s, it’s pretty easy.

Standard menu items across thousands of locations make it easy to spread the fixed costs of assessing calorie counts and changing the menus. But what about smaller chains that like to encourage their chefs in a bit of experimentation? Trying out new dishes gets a lot harder if you then have to run a nutritional analysis on each one before serving.

And it isn’t just restaurants: a scoop of ice cream at the dairy counts too, if the dairy is part of a chain of 20 or more; movie-theatre popcorn also counts.

It’s always possible that, despite the costs, the information is sufficiently valuable to consumers that the policy makes sense. But there are two pretty big problems.

First, if customers really wanted calorie counts, they’d already have them. Restaurants are highly competitive: they run on thin margins and have to work really hard to draw customers. Most restaurants offer well-labelled options catering to vegetarian or gluten-sensitive customers, helping them to make choices. And some restaurants, like Subway, provide calorie counts.

Second, if customers really found the information valuable, it would show up in changes in the choices they make when presented with calorie information. Instead, field experiments show consumers don’t change their behaviour.

I hope that when people predictably ignore the calorie counts, the government won’t move from labelling nudges to harsher shoves; I also hope New Zealand remains outside of this particular asylum.

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