Libertarians and labeling

Ezra Klein has a weird post up today accusing libertarians of being hypocritical in their opposition to laws requiring restaurants to post calorie information:

It’s a bit rich to watch libertarians and associated anti-government types oppose a regulation that gives consumers more useful information. This, after all, is how markets are supposed to work best. Consumers have better information, can pursue their preferences in a more coherent manner, and the market can provide, adapt, and innovate in response. Take trans fats, which have disappeared from just about every food save margarine now that they need to be listed on the package. If caloric information was posted, a lot of currently popular items would become unpopular (the awesome blossom, say), and restaurants would innovate towards lower calorie, but still filling, foods. In the absence of that information, the incentives to do so are weak. It’s one of those soft ways of making the market work better towards a social end: We agree that people should be healthier, people agree that they want to be healthier, and all this would do is give them the information to make healthy decisions. It would not actually bar any foods from production or sale. But because there’s some odd desire among some on the right to lionize unhealthy decisions (smoking!) and defend existing business models, whatever they may be, to the death, this regulation faces a steep uphill climb.

Information is a market good, too. It’s not a perfect market and one can reasonably argue that in some cases mandating label inclusions is for the public good, but more information isn’t always an improvement. Nor is government always better than the market at deciding what information ought to be provided; recall the mandated GM labels that were roundly ignored in the Netherlands. Corruption by lobbying is also an issue, as with Diageo’s manipulation of low-carb wine labeling and its current push to force nutritional labeling on the entire alcohol industry.

Requiring chain restaurants to post calorie counts might indeed have the effects that Ezra hopes it would by making people think twice about what they eat and the social benefits might be worthwhile, but there’s nothing unlibertarian in being skeptical of mandates for information that we’re not sure customers are demanding in the first place.

Update: See Megan McArdle, too.

Guess what? Burgers make you fat!
Do people know what they want to know?


10 thoughts on “Libertarians and labeling”

  1. What do you mean we’re not sure they’re demanding it? People are clearly demanding it, via the political process! I understand the concerns about abuses and reasonable limitations, but let’s not pretend that people don’t want calorie information displayed at restaurants.

  2. Hey Matt,

    We’ve been over that in previous posts. I meant “demand” in the economist’s sense of the term. For reasons we’ve also discussed already, I generally consider that a more useful measure than what people demand in the political process.

  3. I know that’s how you meant it, but as currently written that’s not how it comes across. You’re using jargon that sounds exactly like common parlance, and people are bound to get confused. I’d suggest re-writing the sentence to say what you really mean:

    “…there’s nothing unlibertarian in being skeptical of mandates for information that we’re not sure customers are willing to pay for directly in the first place.”

    Of course, the real reason we’re “not sure” has an awful lot to do with market failure and the absence of meaningful alternatives. Which I guess prompts a question for you: in the absence of meaningful alternatives that demonstrate preferences, how can we know what consumers demand/prefer?

  4. Hmm, you might have a point on the word choice. It doesn’t seem like jargon to me, but I spend a lot of time with economists. I’ll consider that in the future.

    I’m not convinced there’s a market failure here or a lack of meaningful alternatives. There are no barriers to entry preventing restaurants from providing the information if they think their customers want it. And chains have gone out of their way to point out the healthier alternatives on their menus. I suspect this sort of general guidance is adequate for most people’s needs, and just as useful (and more pleasant to peruse) than precise calorie counts.

  5. Really? No barriers? Then why don’t we see any of these alternatives? Maybe there’s something else going on… maybe consumers really don’t have the power here.

    As for the healthy alternatives issue, I must admit I found your little joke to be quite amusing. What with the fact that healthy alternatives are so very rarely healthy and themselves contain shocking amounts of calories.

    And that’s what it really comes down to, whether you want to admit it or not. Restaurants don’t want to display calorie counts because they’re so amazingly high that they’re afraid people will be turned off of eating out. Just like how big tobacco opposed advertising restrictions; it’s a regulation that increases honesty and transparency, and corporate America hates those two ideas above all others.

    And while I’m at it, I’d like to challenge your assertion that information is a market good, at least in this setting. When people buy lunch the furthest thing from their minds is how their decision may or may not affect the information that is getting to them. To say it’s a market and therefore we should let it be how it is makes some huge assumptions that fly in the face of how people actually act.

  6. One of the hottest trends in food right now if providing more information about what people are eating. Organic and Fair Trade labels are two of the biggest examples, but far from the only ones. Even in fast food you’ve got places like Chipotle advertising humanely raised meat or even Five Guys posting where the day’s potatoes came from. If you don’t think increasing information is a force in the lunch market, you’re missing a major development.

    Do chains have an interest in not posting calorie info for many products? Of course. But there’s also nothing stopping them from offering some healthier options and giving info only for those, or for opening a new restaurant that’s healthier and honest about its product. Restaurants are a very competitive market, and the fact that neither of these things is happening on a large scale is suggestive that consumers aren’t that interested in exact calorie counts. (Or perhaps they’re happier being in the dark: when I go out for a decadent meal, I might rationally prefer not having to think about the nutritional details. And nothing screams “All the food in this crappy restaurant comes from Sysco” like putting nutritional info by every item on the menu.)

    Incidentally, you don’t have to make the leap to market failure here to be in favor of mandating calorie counts. As with the hideous photos some countries require to be put on cigarette packaging, you could take the paternalistic view that people need to be shocked into healthier eating for their own good.

  7. I guess I still don’t see how this is anything but an extremely minor extension on the already-existing requirement to place nutritional information on all products sold in grocery stores. I mean, I don’t really like the idea of government forcing restaurants to do it, but I also don’t really see the harm.

  8. I guess the argument is that restaurants can’t easily determine the calorie content of each of their dishes, and that restaurants that change their menus seasonally or that are relatively small wouldn’t be able to do that easily. Though it’s my understanding that the labeling requirements apply only to large chain restaurants with standardized food…

  9. I don’t really get your point about GM food labeling. Just because a majority of consumers who have a stated preference for non-GM foods did not in fact switch to non-GM foods when they had the information to do so does not imply that the labeling isn’t effective. It’s actually the essence of choice: they’ve evaluated the trade-offs and made their decision.

    Besides, it’s ridiculous to say that the labeling did not affect anyone’s decisions. Even if, as you imply, the majority of consumers are indifferent to the labels… it’s up to each consumer to determine what information is relevant to him.

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