I'm confused by this article by Sharon Begley that appeared in Reuters yesterday. She writes:
“U.S. health regulators estimate that consumers will suffer up to $5.27 billion in “lost pleasure” over 20 years when calorie counts on restaurant menus discourage people from ordering french fries, brownies and other high-calorie favorites.
The lost-pleasure analysis, which is criticized by some leading economists and public health groups, was tucked into new regulations published last month by the U.S. Food and Drug Administration which require chain restaurants, grocery store chains selling prepared food, large vending machine operators, movie theaters and amusement parks to display calorie counts.
Public health advocates alerted Reuters to the inclusion of the analysis, which they say makes such regulations more vulnerable to challenges by industry because it narrows the gap between the government’s projections of a regulation’s benefits and costs. ”
Here's the problem - I can't find any evidence the FDA did such a thing in relation to calorie counts on menu labels. Here is the FDA's final rule, which puts total costs at about $1.7 billion, which is far less than the $5.27 billion from "lost pleasure" cited in the article. Indeed, the net benefits cited in the final rule are only $510 million - far less than the supposed "lost pleasure". Maybe there is another cost-benefit analysis not mentioned in the federal register?
Also, the article makes reference to a paper by Jason Abaluck, but the only paper of his I can find that seems to have any relation to this topic is this one, and it includes no such "lost pleasure" calculations that I see in my quick look at it. Again, the paper may very well be out there and I've overlooked it.
What I can find, after a bit of internet searching, is much concern about including "lost pleasure" in relation to tobacco labeling policies from back this summer, including the concern mentioned by some economists about using "lost pleasure" in this context.
It's clear why many public health advocates don't like the idea of "lost pleasure" in a cost benefit analysis. However, a good cost benefit analysis needs to include ALL the costs and ALL the benefits; and it must also consider the longer-term second order effects. Moreover, many of the articles seems to suggest that "good economists" would never include "lost pleasure" in a cost benefit analysis - an implication that is wholly false.
A lot of the discussion in these articles, including the one in Reuters, seems to suggest that "consumer surplus" is an invalid way to measure the benefits/costs of a policy. That's baloney. And, indeed I think you'd have a hard time finding many economists who wouldn't say that any policy analysis of food (or tobacco) taxes or bans SHOULD use "consumer surplus" which captures "lost pleasure" from being unable to consumer the same consumption bundle as was the case pre-policy.
At issue seems to be the question of whether the same holds true for a mandatory labeling policy. The argument is that information does not change prices or available options per se, and as such more information can only make consumers better off (more consumer surplus). On the surface that's true - and I suspect that is the point the cited economists are making in objecting to using "lost pleasure" in this particular context. However, it is not unreasonable to include "lost pleasure" in a cost benefit analysis of a label or information policy if:
- food/tobacco companies respond to the new law by removing some options;
- food/tobacco companies respond to the new law by changing prices; or
- consumers continue making the same purchases after the policy, but only do so now with more "guilt" (there can only be a value of information if people change behavior; if you just reduce the pleasure they get from buying a product without changing behavior, then there is indeed "lost pleasure").