Mandatory Fast Food Nutrition Labels and Obesity

Blog, Healthcare & Welfare, Ben Eisen

Mandatory nutrition labelling on menus doesn’t appear to have had any effect on consumers’ decisions, at least at one fast food chain. 

It’s just one data point, but it supports my instinctive sense that the primary reason we have a socially sub-optimal  amount  of obesity is because there are externalities associated with being obese – not because people don’t know what to do and eat to stay thin.

When I say there are externalities, it just means that people don’t pay the full social cost of being obese – some of the costs are passed on to others. Usually, when something creates negative externalities we can expect to get more of it than is socially optimal.

If I’m right that externalities are the reason we have too much obesity, it suggests that food labelling, public awareness campaigns, etc. aren’t likely to have much of an impact on the phenomenon. Instead, policy responses that change incentives would be more likely to work – either pigouvian taxes on fattening foods or, more promisingly, a direct financial incentive to avoid obesity would be your best type of policy bet.

Of course, there is not always a cost-effective policy response available for every social problem. Sometimes, what policy types call the “static response” (doing nothing) is the best thing for governments to do even when a serious problem exists.