Too Much On the Plate: Adding Nutritional Information On Menus

Recently there have been heated debates about whether restaurant chains should be required to provide nutritional information on their menus. The total number of calories, as well as the fat and cholesterol content, in certain food items served in restaurants such as the Colossal Burger from Ruby Tuesday are becoming serious concerns to nutritionists. According to the Los Angeles Times, health advocates led by Margo Wootan labeled them “hybrid horribles” because “eating just one of those items would swamp the eater's daily calorie requirement, 2000 for women and 2500 for men.” And Michael Jacobson, the executive director of the Center for Science in the Public Interest (CSPI), declares even more frankly that they “are seemingly designed to promote obesity, heart disease, and stroke.” The issue has been brought to the attention of state legislatures. In California, for instance, “hearings are scheduled for next month on two bills that would require greater nutrition labeling on restaurant menus,” one by Senator Carole Migden from San Francisco and the other by Senator Alex Padilla from Los Angeles.

On the other hand, restaurant owners led by Jot Condie, the president of the California Restaurant Association (CRA), accuse nutrition advocate groups of making “misleading, inaccurate” generalizations based on just a few items from a few restaurants. Condie suggests that the public should have the freedom to choose their food without interference from the government or organizations like the CSPI. “Consumers are capable of making decisions about what to order and are tired of the ‘food police’ telling them what to eat,” says the National Restaurant Association. This argument, although seemingly noble in promoting freedom and consumer sovereignty, is no more than a defense of business interest, an exploitation of the public’s lack of knowledge for the purpose of maintaining high levels of profit.

The CRA’s claim has neither theoretical nor empirical support. While analyzing public welfare, economists assume that the consumer faces perfect information; in other words, he is given every detail about his options before making a rational choice. In the context of ordering in a restaurant, the eater would have the freedom to choose the food he desires from the menu after finding out exactly to what the choice leads, including the number of calories. Without knowing the nutritional information, the customer could not necessarily be making the decision in his best interest. Such unawareness is especially dangerous because food consumption decisions entail long term consequences. People live through multiple periods of time, which economists call the “present” and the “future” in an intertemporal consumer choice model. The model assumes that a person is aware of the impact of the choices he makes today on his wellbeing tomorrow. For instance, when he chooses to eat the Cheesecake Factory's Chris’s outrageous Chocolate Cake, he is ready to deal with the impact of its 1,380 calories on his health in the future, possibly including physical pain and extra medical expenses. “Poor health,” suggests economist Ruut Veenhoven, “lowers appreciation of life indirectly by hampering economic activity and social contacts.” While Veenhoven provides reasons behind the negative effect of poor health on life satisfaction, economics professor Richard Easterlin goes one step further to conclude that people never fully adapt to illness. After examining time series data from the General Social Survey, Easterlin states, “There is, on average, a lasting negative effect on happiness of an adverse change in health.” When restaurants do not publish nutrition facts, diners who act in ignorance risk not only deterioration of physical health in the future, but also permanent decline in happiness as a result.

In reality perfect information is impossible to obtain, yet more information leads to better decision-making. Though Condie and the CRA seem supportive of consumer sovereignty, in reality they are merely trying to avoid having to reveal the fact that some of their products have detrimental effects on health and life satisfaction. The Cheesecake Factory currently does not have nutritional information on its menu; Ruby Tuesday does, but only for the items in its “Smart-Eating Choices”category. By selling high-calorie treats without labeling them, these prominent restaurant chains are taking advantage of the public. Contrary to the claims of the CRA, laws requiring more nutrition labeling on menus will not rob customers of the freedom to choose what to ea t. In fact, such new legislation will help consumers make wiser dining decisions.

Seeking the True Promise: the Difficulty of Forming Cartels

My last two posts were inspired by recent news articles in the field of economics. While newspapers and magazines are important sources of reports on current events, blogs also provide interesting and valuable information that enhances our understanding of the world around us. For the general public who are uninterested in studying data and figures, reading economic news can be boring or overwhelming. Some authorities in the field, however, make enlightening, witty, and engaging comments in their blogs, which encourage people to examine some of the major issues. In my time of research this week I explored blogs written by university professors and economists and found two posts to be especially informative and humorous. One of the posts discusses the difficulties of establishing collusion in the classroom; the other mentions that the reluctance to cooperate in the international community hinders efforts to prevent global warming. The permanent links to the posts as well as my own comments can be found below.

As a student of economics I have witnessed many attempts made by my classmates to collectively cut back studying. Unfortunately all of the collusion efforts, as predicted by Professor Caplan, ended in failure. When my high school economics teacher encouraged the class to organize a boycott against his final, no one believed that he was serious, for we all thought forming a cartel would be easy—at least easier than studying for a cumulative exam. Had we understood the four big reasons, we would not haven been so optimistic. I must admit that I am a “hold-out,” always reluctant to participate in the collusion because I love studying economics. I act as a consumer deriving satisfaction from my education rather than as a firm trying to maintain high price, or high grade in this case. My level of utility does not depend solely on my grade in a positive and linear relationship; instead I have indifference curves mapped on two axes—“economic wisdom accumulated” and “points received on the exam.” I would enjoy the same level of utility if I learn the material but fail the exam or if I learn nothing but receive an A. If I study and earn an A as a result, however, my indifference curve and thus my level of happiness would be much higher than under the two previous conditions. Of course not all of my classmates share my interest. So I agree that heterogeneity is an important cause of the failure of collusion in the classroom.

Permanent Link: EconLog

Dr. Roberts’s argument treats China and the U.S. as two firms in a cartel trying to maintain low level of pollution. If both countries honor the Kyoto treaty, they benefit from the slowing down of global warming. Because reducing greenhouse gas emission leads to a decrease of output, however, if one country keeps its promise while the other continues to pollute, the GDP of the latter would increase at the cost of that of the former. Dr. Roberts predicts that China will not reduce gas emission and suggests that the U.S. should not do so either. But according to Qin Dahe, who co-chairs the Chinese intergovernmental panel on climate change (IPCC) working group, China has set “the goal of cutting its energy consumption by 20 percent per unit of GDP in the period from 2006 to 2010” and has already “reduced emissions by some 800 million tons of coal equivalent from 1991 to 2005.” Qin also states that China’s “forests, grasslands and natural reserves have helped absorb another 3.06 billion tons.” If these data are accurate, the U.S. should, perhaps, make an effort to cut back emission as well. After all, assuming the worst from the partner firm is not the best attitude with which to start collusion.

Permanent Link: Cafe Hayek