Staring at the menu board on a recent and rare trip to a California fast-food chain, I was stunned by the cost of a milk shake: 880. Eight dollars for a milk shake, really? Well, no. That was the cost in terms of calories. But I would have gladly traded that in dollars and cents to be spared the knowledge of how many calories my post-triathlon race reward would cost me. Feeling sufficiently guilty once confronted with the calorie content, I downsized and saved a couple hundred calories. But I left feeling dissatisfied and unambiguously worse off.
This kind of experience could be coming to a restaurant near you by January, when the FDA plans to roll out mandatory calorie labeling regulations approved by Congress in the same bill that authorized ObamaCare. At chain restaurants with more than 20 locations, you won’t be able to avoid the calorie information, which is prescribed to be posted on menus and menu boards near prices and printed at least as large. So much for the days of blissful ignorance.
While the calorie labeling law is intended to improve health outcomes for individuals, it is effectively a government-mandated guilt trip and a sign that libertarian paternalism—the seemingly benign notion that “choice architects” can “nudge” people to make better decisions for themselves—has gone too far.
Economists have long-recognized the importance of information for ensuring well-functioning markets. Price information supports competition as consumers reward low-cost retailers. In the same way, information on product quality causes firms to up their game—making better products. And information about product attributes helps consumers make better matches between their needs and preferences and the offerings of firms. Incomplete information can be costly, leading to monopolistic prices and even the collapse of entire markets. In short, economists value information as the grease that makes the markets run.
So how can a self-respecting economist object to calorie labeling mandates, like those already imposed on chain restaurants in California and New York? The answer lies in the distinction between mandatory information provision and mandatory information consumption.
A policy of mandatory information provision would require restaurants to measure the calorie content of their menu items and make that information available to customers upon request—perhaps on a separate brochure at retail locations. Consumers could then make better-informed decisions at their discretion, weighing tradeoffs between taste and calories as they deem appropriate. Such an intervention would likely be welfare improving—the benefits to consumers from being armed with calorie information at their own choosing could very well outweigh the cost to restaurants of measuring calories and publishing the information.
The cost-benefit calculus for mandatory information consumption, however, is much less clear. What is clear is that it is likely inferior to mandatory information provision because it imposes extra costs on consumers and restaurant owners with no gain in consumer benefit: those who care about calories have access to the information either way. Regulations that force restaurants to post calories on menu boards like they post prices likely raise the cost of compliance relative to the less-intrusive alternative by requiring that all menus be updated as opposed to supplemented by separate calorie menus.
The real added cost of mandatory information consumption rules, however, is the one imposed on consumers who prefer not to know the calorie content of their meal choices. If calorie costs bombard them every time they look at a menu, these individuals are made unambiguously worse off because the government makes them feel guilty for the choices they make. This is a very real cost imposed on consumers that is completely avoided if regulators merely require restaurants to provide information as opposed to requiring diners to consume it. The Harvard economist Ed Glaeser has characterized the calorie labeling law as a “revenue-less tax.” Indeed, much like a tax on soda or cigarettes, labeling requirements raise the cost of consuming foods, particularly ones that taste good. Cleverly disguised, however, the opposition to a labeling law is likely to be less.
Existing research suggests that the benefits of such a revenue-less tax are minimal. Stanford economists, for instance, show (ungated version here) that New York’s law reduced calorie consumption per transaction at Starbucks by a mere 6% and didn’t change drink consumption at all. Tracking the purchases of anonymous Starbucks cardholders, they found no change in individuals’ common drink orders that could be attributed to the law. Mandatory calorie labeling in NYC, they estimate, reduces long-term body weight by less than 1%.
In the absence of a strong claim that mandatory calorie labeling improves welfare for a majority of Americans, surely the libertarian policy among these alternatives is to make information available to consumers, but to permit them to avoid it if they so choose. After all, the government has very little leeway to make us consume anything. And the notion that government should impose guilt on its citizens must be girded by weaker philosophical principles than those that support libertarian paternalism.
What comes next? When you buy a Cadillac Escalade, will you be confronted not just with the new EPA label telling you how green your car isn’t, but also with an admonition that savings from the cheaper Chevrolet Tahoe would be sufficient to equip 2,300 African children with malaria nets and possibly save their lives? Or will they tell your risk of killing someone in a sedan during a head-on collision is three times higher than if you drove a Toyota Camry?
When you sit down to watch your DirecTV NFL Sunday Ticket, will a government ad warn you that consumption of that product could lead to weight gain, intoxication, diabetes, and heart disease? Or will they admonish you during halftime that if you skipped the rest of the game and went out for a run, you could burn 1,400 calories?
Will the government stick grotesque photos in your face when you buy a package of cigarettes? Oh. Wait . . .
There is nothing libertarian about mandating information consumption. And making people feel guilty just seems paternalistic. The causal-chain from mandatory information consumption to improved health outcomes is so weak that one wonders whether it is worth making people feel bad about themselves—especially when better alternatives exist.