DRI-276 for week of 3-10-13: Understanding Motivation in the Nutritional Regulation Debate

An Access Advertising EconBrief:

Understanding Motivation in the Nutritional Regulation Debate

What is the rationale for government to intervene in our lives – that is, to insert itself between us and the objects of our actions? It is either to prevent something bad from happening or to bring about something good that would otherwise not occur.

This would appear to be an obvious answer to a straightforward question. Yet by this simple standard recent declarations on nutrition by American authorities and government officials seem utterly incoherent.

To make any sense of their comments, we must ask ourselves: Who are they really talking to? What are their real motives, as opposed to their stated or apparent ones? And what is their underlying agenda?

That is where our understanding of economics comes in handy.

The First Lady’s “Business Case for Healthier Food Options”

In a widely publicized Wall Street Journal op-ed (2/28/2013), First Lady Michelle Obama made what she called “the business case for healthier food options.” Ms. Obama has seized upon the so-called “epidemic” of childhood obesity as her personal cause célèbre, much as Nancy Reagan urged kids to “just say no” to recreational drugs. “For years,” she recounts, the problem was viewed as “insurmountable” because “healthy food simply didn’t sell – the demand wasn’t there and higher profits were found elsewhere.”

No longer. “Today we are proving the conventional wisdom wrong… American companies are achieving greater and greater success by creating and selling healthy products.” Now, it seems, “what’s good for kids and good for family budgets can also be good for business.”

A herald of the dawn of a new age had better be able to point to sunlight on the horizon. Ms. Obama cites the example of Wal Mart, which has “cut the costs to its consumers of fruits and vegetables by $2.3 billion and reduced the amount of sugar in its products by 10%. It has also “launched a labeling program that helps customers spot healthy items on the shelf.” Sales of these products have increased.

Disney has “eliminate[d] ads for junk foods from its children’s programming and improve[d] the food served in [its] theme parks.” Walgreens is adding fruits and vegetables to (selected) stores. Restaurants “are cutting calories, fat and sodium from menus and offering healthier kids’ meals.”

The First Lady refers to an opinion-survey finding that “82% of consumers feel that it’s important for companies to offer healthy products that fit family budgets.” She cites a Hudson Institute study that finds over 70% of sales growth in consumer-packaged goods comes from “healthier foods.” Moreover, in recent years the Institute found a direct correlation between percentage of healthy food sold and rate of return.

Ms. Obama closes her piece on a ringing note of patriotic boilerplate. American businesses are at last heeding the call to arms – they are “stepping up to invest in building a healthier future for our kids.” The bandwagon is rolling like an avalanche down a mountain and everybody is hopping aboard. Teachers, mayors, faith leaders, parents, leaders from every sector – why, even “Republicans and Democrats are working together in Congress” to improve school lunches, for goodness sake!

In Mississippi, obesity rates have fallen by 13% at the elementary-school level. Childhood obesity has fallen measurably in California and in cities like New York City and Philadelphia. Of course, we have “a long way to go” since “the problem is nowhere near being solved,” but she “has never been more optimistic.”

Fact Check: Mirabile Dictu, Ms. Obama Seems Factually and Substantively Accurate

It is never safe to take politicians at their word. Ms. Obama does not hold elective office, but First Ladies have long been as politically saturated as their husbands. Thus a fact check of Ms. Obama’s contentions is in order.

Lo and behold, there are indications that not only the sum but the substance of her remarks is accurate. Quoting from the HealthDay newswire earlier last month (2/7/2013): “A leaner menu may lead to a fatter wallet for those involved in the restaurant industry, research suggests.” The Raymond Johnson Foundation surveyed 21 of the nation’s largest restaurant chains for a 5-year (2006-11) period. According to an analyst from the Hudson Institute, “those [businesses] that increased the amount of low-calorie options they served had greater increases in customer traffic and stronger gains in total servings than those that didn’t.”

The researchers developed their own categories for “low-calorie” servings of main courses, side dishes, desserts and drinks. During the survey period, new items that met the low-calorie criteria outperformed others in 17 of the 21 participating chains. The servings classified as low-calorie increased their percentage of total sales in all 21 chains.

Among the chains surveyed were McDonald’s, Wendy’s, Burger King, Taco Bell, Applebee’s, Olive Garden, Chili’s and Outback Steakhouse. Not surprisingly, the chains included in the study comprised 49% of the total revenue in the top 100 U.S. restaurant chains, or some $102 billion in annual sales.

Meanwhile, Back at the Regulatory Ranch…

A few days earlier (2/1/2013), the HealthDay newswire carried this story: “FDA Should Work to Cut Sugar Levels in Sodas, Experts Say.” The subheading was: “Petition by leading consumer-advocate group and academics urges artificial sweeteners be used instead.”

The “leading consumer-advocate group” was none other than the Center for Science in the Public Interest (CSPI), the left-wing group that can with justification be characterized as the nation’s leading scientific-scare-mongering activist organization. Draping the organization in the mantle of “nutrition experts and health agencies from a number of U.S. cities,” Director Michael Jacobson announced a petition urging the Food and Drug Administration (FDA) to set a “safe level” for high-fructose corn syrup (HFCS) and other sugars used to sweeten sodas and other drinks.

The petition claimed that 14 million Americans get over 1/3 of their daily calories from added sugars like these. They “are causing serious problems – obesity, diabetes and heart disease, among others,” according to Jacobson. But Jacobson’s statement accompanying the petition dialed down the relationship from causation to correlation, pointing out the “great deal of evidence linking sugar to [these] problems,” from which CSPI is now “concluding that much of the evidence centers on HFCS.”

Having first donned his scientist hat, Jacobson then doffed it for his lawyer hat by declaring that the FDA is legally obligated to act by – in effect – treating sugar as a toxic substance. Since the First Law of toxicology is “the dose makes the poison,” the FDA must determine the safe level of consumption for HFCS and other sugars in drinks. Then it should set “voluntary sugar targets” for manufacturers of other foods. Finally, Jacobson completes his expert-witness hat trick by posing as an expert on education. The FDA should “educate consumers” about the dangers of sugar, he concludes.

Just what, exactly, should manufacturers of America’s most popular drinks use to sweeten their products – assuming that they are permitted to go on producing them at all? “Artificial sweeteners” is CSPI’s papal verdict. Ironically, their blessing is exquisitely timed to coincide with a barrage of publicity suggesting that aspartame and alternative sweeteners are linked to diabetes and other adverse health outcomes. Yet here, Jacobson is mysteriously complacent. “The FDA considers all these sweeteners perfectly safe. We think the certain harm [from HFCS and sugars] greatly outweighs the speculative risk from artificial sweeteners.”

Jacobson’s position conclusively establishes CSPI as an irony-free zone. Two decades ago, CSPI waged a vocal public campaign to gain regulatory approval for Trans fats as the

“healthy alternative” to saturated fats in the American diet. Today, of course, Trans fats are so firmly fixed in the bad graces of regulators that food manufacturers take care to note their absence on ingredient lists whenever possible.

The Economics of the Current Nutrition Debate

It is no accident, as old-time Marxists were fond of saying, that economics is routinely omitted from the public debate about nutrition and regulation. (Indeed, Michael Jacobson went so far as to demand that “economic issues shouldn’t figure in this” at all.) Economic logic reveals that – even when the principals make statements that are factually accurate – their underlying logic is completely awry and their motives have no relationship to their public utterances.

First, consider Michelle Obama’s “business case” for “healthy foods.” To whom is she speaking? And why? After all, her remarks appear in the Bible of American business, The Wall Street Journal. On their face, they appear to be addressed to food manufacturers in an effort to persuade them to produce more “healthy foods.”

And this is completely crazy, is it not? After all, the livelihoods and happiness of food manufacturers depend on their producing foods that people like and want to buy. Their sales and profits provide a clear-cut index of consumer wants. Their gaze is fixed on sales 24/7. This truism can hardly be news to left-wing commentators like the Obama’s, since half the time the Left is criticizing business for producing the wrong things and the other half the Left excoriates business for its maniacal pursuit of profit and inordinate success in attaining it. If there is one thing business does not need to be reminded to do, it is to produce more goods that consumers want in order to earn higher profits.

Ms. Obama spends a thousand words in the Journal telling American business that healthy foods are now profitable. Does she really believe this was unknown to them before she spilled the beans in print? When these foods are the sales leaders for 17 of 21 leading restaurant chains over the last five reporting years? Who is she kidding?

No. Even the First Lady cannot be this obtuse. She cannot believe that food manufacturers are utterly ignorant of their own business, nor can she expect them to take her advice on how to run their business. They are the experts on the food business. Even if they needed advice, they would never solicit hers. She has openly disdained business; advising young people to forego careers in the business world.

No, Ms. Obama’s motive is not what it seems to be. She has another agenda.

The same thing is true of Michael Jacobson. In response to CSPI’s petition, the American Beverage Association released a statement pointing to the elephant in the room alongside CSPI and the self-appointed nutrition “experts.” 45% of all non-alcoholic beverages consumed in the U.S. today have zero calories. Average calories per beverage serving are down 23% since 1998. Calories from sugar in beverages are down 37% since 2000. In other words, the free market has beaten CSPI and its small army of would-be regulators to the punch.

If the FDA had set voluntary guidelines in 1998 for a changeover to artificial sweeteners, it would today hail the current state of the market as a great victory for regulation. (And then it would demand an increase in its budget on the grounds that much, so very much, remained to do in order to usher in soft-drink nirvana for American consumers.) But because our current status was achieved by free markets, without regulatory carrots or sticks, a crisis exists for the regulatory Left.

The obesity “epidemic” is not a crisis for the Left because it threatens the health of Americans. It is a crisis because it represents a wasting opportunity. Onetime Obama advisor Rahm Emmanuel gained fame by coining the slogan “Never let a crisis go to waste.” His point was that every crisis is a potential opportunity to expand the scope and power of the federal government. A political administration should seize that opportunity by creating more federal agencies, spending more money and enacting more regulations. Failure to do so sacrifices power – and power is all that matters in politics.

The history of the obesity and diabetes “epidemics” reveals why the Left is now sweating bullets on the issue of nutritional regulation.

The Real Cure for the Obesity “Epidemic” – and the Scramble to Get Back in Front of the V

Ms. Obama’s op-ed was not only right about the growing popularity of so-called healthy eating. She was also right about its previous lack of appeal to consumers. For many years, the Left hectored food producers to produce what consumers ought to eat instead of what they wanted to eat. And for years, consumers voted for tasty food over what the experts told them they ought to want.

The Left reacted to this by blaming the victim. Academics and public-health officials insisted that consumers were sluggards who refused to eat right and shunned exercise. In reality, consumers were only following the revised nutrition guidelines that advised them to make carbohydrates the chief source of energy and eschew fat in general and meat in particular. Weight loss was a mechanical process in which calories expended in energy exceeded those ingested in food. Counting calories was the necessary centerpiece of this process.

Food manufacturers did not refuse to produce low-calorie foods. But fat not only produces flavor in food, it also makes it filling – thus producing satiety. Food manufacturers discovered that cutting back on fat made foods tasteless and left consumers feeling hungry. They learned that by adding carbohydrates in the form of sugars, they could replace the taste with only a moderate increase in calories. (Simple carbohydrates are not calorie-dense.)

The problem with this program is that it did not work. Consumers would buy foods that replaced fat with simply carbohydrates but these did not promote weight loss. In this regard, it is vital to appreciate the difference between expertise in the marketplace – as represented by food manufacturers – and in academia. Food manufacturers are experts because they have to be. If they fail, they go out of business and are experts no longer. But academic experts on nutrition and weight loss did not actually have to aid customers in losing weight or reaching optimal nutrition. They only had to surmount the hurdle of peer review. Consequently, they were able to mislead two generations of consumers.

The damage wasn’t limited to obesity. The emphasis on carbohydrates also caused a ghastly upward spike in the incidence of late-onset, Type II diabetes. While the rush of insulin generated by the ingestion of carbohydrates was sufficient to prevent diabetic shock and coma, it did not prevent the damage caused by frequent, repetitive upward spikes in blood sugar. Because the insulin eventually returned blood sugar to normal and because standard medical practice has been to check blood glucose after a period of fasting, these spikes and the accompanying damage went undetected for many years. Eventually, the baby-boom generation began to suffer peripheral neuropathy and other symptoms of nerve damage resulting from Type II diabetes. The influx of television commercials offering treatments for this condition is an index of its prevalence.

It took a doctor on the fringes of scientific respectability named Robert Atkins to explain that the culprit in weight gain was not fat consumption per se. Instead, carbohydrates were at fault. When consumed undiluted, carbohydrates entered the bloodstream quickly and caused the body to release insulin to counteract the resulting upward spike in blood sugar. The insulin caused the body to store fat in the body’s cells rather than burning it as energy.

The key to weight loss was to make protein, rather than carbohydrates, the body’s leading energy source. Carbohydrates should be consumed only when their release into the bloodstream could be slowed by simultaneous consumption of fiber (as with whole apples), fat (as with butter), protein (as with meat) or acid (as with sourdough bread). Meat consumption is not problematic for weight gain or cholesterol accumulation because the body burns fat for energy.

The observed trend toward healthy eating is largely this revolution in blood sugar regulation, which modifies the original Atkins insight with a more precise scientific rationale developed by cardiologists like Arthur Agatston. The difficulty in finding unsweetened iced tea on store shelves – Rush Limbaugh was forced to add an unsweetened option to his lineup of sweet teas – is one indication of the power of this approach. The sudden ubiquity of broccoli, once the butt of standup comedy routines, is another. (Broccoli is high in fiber as well as phytonutrients.) The French fry was a mainstay of the 20th century American diet, but it now shares menu space with sweet-potato fries because sweet potatoes do not share the glycemic (blood-sugar related) drawbacks of white potatoes.

This is the healthy eating referred to by Ms. Obama and the Robert Johnson Foundation study. It endures where its predecessors failed because it works. People actually lose weight without having to count calories. They eat until they are full, so do not feel deprived and find it easy to put up with the loss of starches and desserts.

This approach was developed by the free marketplace, over the hysterical objections of the academic and regulatory nutrition authorities. The establishment labeled the Atkins diet dangerous and predicted it would kill its adherents. Instead, the descendants of Atkins’ program are killing off the nutritional competition. And this puts the Left wing in an untenable position today.

The late Nobel-prizewinning economist Milton Friedman compared political leaders to the leader in a V-formation of ducks. Every once in a while, Friedman said, the leader would look back and notice that he was flying alone. The ducks had deserted him, flying off in another direction. The leader was forced to scramble after them in order to get back in front of the V and resume his leadership position. In this case, the public realized that the government’s nutrition leadership was wrongheaded and disastrous. They left formation and flew off in pursuit of an approach that worked – the principles pioneered by Atkins and refined by newer, more scientific approaches like the SouthBeach diet.

Now the Left is scrambling to get back in front of the V. She knows that she needs to hurry. Ms. Obama doesn’t just want children to stop getting fat. She wants to be able to claim the credit for that result.

As it stands now, she can hardly claim credit for trends that began well before she even became First Lady. Her only hope is to associate herself in the public’s mind with the business trend away from the failed Establishment diet. That is why she chose the Wall Street Journal as the venue for her piece, because of its association with business. She knows her public will not actually read the op-ed. That is good; she wants them to hear about it through the filter of the mainstream media, which will spin its content in ways favorable to her. Her constituency will believe anything bad about business, so she will be seen as telling business what is good for them and for the public. And when the Administration eventually proposes rules telling food producers what they can and can’t produce and how to produce its output, she can then be seen as benign – somebody who is merely helping business to do what is good for it as well as everybody else. And she can claim credit for outcomes attained before those rules ever went into place. The public will have forgotten, if it ever knew, the real story.

Michael Jacobson’s back is against the wall because the blood-sugar revolution is threatening to abort the CSPI’s cherished goal of federal regulation of the American diet. If free markets are allowed to cure the obesity “epidemic” unaided by FDA regulation, it will dawn on the public that the FDA is the equivalent of Edmund Rostand’s character “Chantecler” in the eponymous allegorical play. Chantecler was a rooster who lived his life convinced that his own crowing was responsible for the rising of the sun at dawn, only to suffer cruel disillusionment after a bout with laryngitis.

Jacobson is desperate to achieve FDA regulation in time to claim credit for lobbying in its favor. He, too, is scrambling to get back in front of the V. If the free-market stampede away from sugar and carbohydrates goes on, soon he will not be able to claim the existence of a crisis as grounds for an FDA takeover of American nutrition. CSPI’s raison d’être will be exposed as intellectual pretense.

Jacobson cannot appeal to consumers directly because they are not about to accept his self-appointed expertise as a substitute for their own. After all, they are the experts on their own bodies, their own tastes and preferences – not Michael Jacobson and CSPI. He wants his views enacted as regulatory law because consumers won’t be able to veto their adoption and will then be stuck with them, like it or not.

How (Not) to Cure Social Problems

The most striking aspect of the nutritional debate is its utter clarity when explained as above. So-called “epidemics” of obesity and diabetes were caused by failures of regulation and academic expertise. They are now being eradicated by the free market. As the lawyers say, these facts are not in dispute. Ms. Obama herself is at pains to establish them, although she does not say so in these words.

The Left only wants nutritional regulation for reasons of naked opportunism. There is no case for regulation to prevent obesity and diabetes because it is too late for that. There is no case for regulation to cure them because that is already happening, to whatever extent possible. There is no case for regulation to prevent future incidence because the free market’s program for prevention is already well under way.

Of course, one could always argue that the free market is taking too long to do its work. The contention that markets work slowly while regulatory government works quickly and expeditiously seems grotesque on its face, which is probably why we don’t hear it advanced by Ms. Obama or Jacobson. Of course, we will continue to be browbeaten with news reports about obesity and diabetes. It takes time for blood-sugar levels to normalize. Nerve damage caused by diabetes, even the Type II kind, is probably irreversible.

But truth is like a cat. Once it escapes confinement, it is hard to get back in the sack.

DRI-280 for week of 11-11-12: Restaurant-Dish Takeaway and Comparative Economic Systems


An Access Advertising EconBrief:

 Restaurant-Dish Takeaway and Comparative Economic Systems

You are eating dinner in a casual restaurant with a spouse. No sooner does the last forkful of food ascend toward your mouth than your waiter whisks away the plate. His request for permission – “Done with that?” – is purely a formality since the plate is gone before you can object.

You have observed a tendency in recent years for restaurant servers to remove dishes with increasing alacrity. You remark this to your dinner companion who, unlike you, is a non-economist. Her all-purpose explanation of human behavior is binary: Is the object of study a nice guy or not? Nice guys remove dishes quickly so diners have more elbow room to relax.

You are an economist. You believe people act purposefully to achieve their ends. Moreover, you are thoroughly acquainted with tradeoffs. You have often had waiters take your plate before you were through with it. Some people bristle when they perceive others constantly hovering over them. There are even those – not you, of course, but boors and gluttons – who eat the food of others after finishing their own. One of these types might just react by snatching back his plate and declaring, a la John Paul Jones, “I have not yet begun to eat!”

The “nice-guy” explanation won’t suffice, since the quick-takeaway approach will suit many people well but others poorly. Restaurants that follow a consistent policy of quick takeaway risk offending some customers. Offending customers is not something restaurants do lightly. In order to make this risk worthwhile, there should be some strong motivation in the form of a compensating prospect of gain. What might that be?

One way to define an economist is by saying that they are the kind of people who ask themselves questions like this. And the mark of a good economist is that he can supply not only answers but also further implications and ramifications for social life and government policy.

The Economics of Restaurant Service

Americans have eaten in restaurants ever since America became the United States and before that. While the basic concepts underlying the restaurant sector have remained intact, structural changes have remade the industry in recent decades. The most important contributor has been the institution of franchising.

Fast-service franchising began was begun in the 1920s by A&W root-beer stands and Howard Johnson motel-restaurants. Baskin Robbins, Dairy Queen and Tastee Freeze hopped on the bandwagon in the 1930s and 40s. McDonald’s and Subway became big business in the 1950s. The decade of the 1960s saw restaurant franchises zoom to over 100,000 in number. After overcoming legal challenges posed by antitrust and the economic threat of OPEC in the 70s, franchising became the dominant form of restaurant business organization in the 1980s.

Franchising enlarged markets and made competitive entry easier. By standardizing both product and service, it made restaurant operation easier. It raised the stakes involved in success and failure. All these increased the intensity of competition. In turn, this shone the spotlight on even the minutest aspects of restaurant operation. Franchises and food groups ran schools in which they taught their franchisees and managers the fundamentals of restaurant success. Managers went out on their own to put those principles into practice. The level of professional operation ratcheted upward throughout the industry.

The word “professional” means numerous things, but in context it refers to the rigorous, even relentless application of restaurant practices single-mindedly aimed at achieving profitable operation. This entails developing a repeat-customer base and making the largest profit possible from serving that base.

Whether the quality of all types of restaurant food improved is open to debate, but it cannot be doubted that average quality rose. Today, the “greasy spoons” of yesteryear are nearly as scarce as passenger pigeons.

It was during this period of franchise domination that the practice of quick takeaway gained widespread currency. Maximizing the daily turnover of the given restaurant capacity is a commandment in the operations bible for profit-maximization. Minimizing the time between the departure of one set of guests and the arrival of their successors at each table is one way to maximize turnover. One way to reduce the time taken by clearing tables at meal’s completion is to begin the process before departure rather than waiting until the guests get up to leave; that way, fewer dishes remain to remove upon actual departure.

Fast removal of dishes not only maximizes turnover, it also maximizes the revenue take from each separate turnover. From the restaurant owner’s perspective, maximizing the size of each table’s check is another step toward maximizing total profit. After-dinner items like coffee and dessert are the obvious route to that goal. (Alcoholic drinks are the before-dinner complement of this strategy, which is why attainment of a liquor license is a coveted goal for most restaurants.) Quick takeaway aids this strategy in two ways. First, it speeds the transition from dinner to dessert. Second, it aids the server, who is in no position to handle dish removal when arriving at the table laden with desserts.

“Quick takeaway” has been standard practice throughout most of the industry for quite awhile, though. This doesn’t account for a recent speedup. For that, look deeper into the details of restaurant operation.

Table Size, Takeaway and… Demographic Trends?

Concomitant with the trend toward faster takeaway, the economist has also observed a trend toward smaller tables and booths in casual restaurants. Tables, chairs and booths come in standard sizes (there are five different booth sizes, for example), but the observed trend has been toward more booths designed to accommodate two people. Greater usage has been made of bar areas to provide food service, wherein diners can often obtain quicker service at the cost of table space and chairs limited to two people.

To understand the rationale for this changeover, pretend for a moment that all of the restaurant’s patronage consists of parties of two. Larger tables and booths would waste space and unnecessarily limit revenue per turnover, whereas designing for two would maximize the number of people served (and revenue collected) from an individual full-house turnover.

The link between table size and quick takeaway is obvious. Smaller table and booth sizes leave less room to accommodate elbows, books, newspapers, miscellaneous articles – not to mention additional dishes like dessert. (Technically, a smaller table doesn’t mean less room per person, but the whole idea behind the move to smaller tables is to achieve better utilization of capacity – the result leaves much less unused space available than did the larger tables and booths.) Now servers have even more reason to get those vacated dishes moving back to the kitchen, since there was barely room for them on the table to begin with. This reinforces the preexisting motivation for fast table-clearing and enlists the diners’ sympathy on the side of management, since table-crowding has become all too obvious.

There is still one major link left out of the chain of reasoning. In practice, restaurant parties do not consist entirely of twosomes. Casual restaurants usually include a few larger tables and/or booths, but what is to prevent larger parties from dominating smaller ones in the great scheme of things?

The last four decades have seen an increasing demographic trend toward smaller U.S. household size. In 1970, there an average of 3.1 people comprising the average U.S. household. By 2000, this had fallen to 2.62; by 2007, to 2.6 and by 2010, to 2.59.

Several forces drove this trend. First has been a shrinking birthrate. Here the U.S. is merely following the lead of other Western industrialized nations, which have seen shrinking birthrates throughout the 20th century. In the U.S., the shrinkage has waxed and waned since the 1930s. The 1990s saw a modest resurgence and U.S. births barely struggled above 2.0 per 1,000 early in the millennium. That is the replacement point – the level at which births and deaths counterbalance. As noted by leading demographer Ben Wattenberg and others, the large influx of Hispanic immigrants in recent decades undoubtedly spearheaded this comeback. Hispanics tend to be Catholic, fecund and pro-life. But since 2007, the rate has backslid down to 1.9; even the Hispanics seem to have assimilated the American cultural indifference to reproduction.

Other cultural forces have reinforced demography. Birth control has become omnipresent and routine. Divorce and illegitimacy have lost their stigma, thereby conducing to households containing only one parent. Whereas formerly it was commonplace for two men or two women to room together and share expenses, the legal status granted to homosexual partnerships has now placed a question mark around those arrangements. (This applies particularly to males; apparently the politically correct status conferred upon homosexuals does not much reassure two heterosexual men who contemplate cohabitation.) Indeed, it is today less socially questionable for unmarried male/female couples to live together than for same-sex couples – but this is practical only as a substitute for marriage, so its effect on household size is negligible.

The aggregate effect of this cultural attrition has been nearly as potent at the declining birthrate. In 1970, the fraction of households containing one person living alone was 17%. By 2007, this had risen to 27%.

Given this trend toward declining household size, we would expect to see a corresponding decline in the average size of parties at casual restaurants. After all, households (particularly adults) typically dine together rather than separately. Certainly, large groups do assemble on special occasions and regular get-togethers. But the overall trend should follow this declining pattern.

And there you have it. Smaller average household size produces smaller restaurant table and booth size, which in turn produces quick – or rather, quicker – takeaway of dishes at or before meal completion.

Many people instinctively reject this kind of analysis because they can’t picture most restaurant owner and employees thinking this deeply about such minute details or putting their plans into practice. But the foregoing analysis doesn’t necessarily assume that all restaurant owners and managers are this single-minded and obsessive. In a hotly competitive environment, the restaurants that survive and thrive will be those that do take this attitude. They will attract more business – thus, the odds of encountering smaller tables and quick takeaway will be greater even though those practices may not be uniform across the industry. Indeed, this reasoning supports the very notion of profit maximization itself. This survivorship principle was pioneered by the great economist Armen Alchian.

The Larger Meaning of Little Details

Economics is capable of supplying answers to life’s quaint little questions. (Some people would rearrange the wording of that sentence to “quaint little answers to life’s questions.”) But economics was developed to tackles bigger issues. It turns out that the little questions bear on the big ones.

One of the big questions economists ask about the behavior of business firms is: Is it socially beneficial? Business firms exist because, and to the extent that, they produce goods and services cheaper and better than individual households can. The gauge of success is the welfare of consumers.

Smaller tables and quick takeaway enable restaurants to achieve better capacity utilization. This enables them to cut costs and serve more customers. These are beneficial to consumers. The more intense competition serves to lower prices of restaurant food. This also benefits consumers.

What about the quality of food served? Table size and dish removal do not bear directly on this question, but the industry shift towards corporate control and franchised ownership has sometimes been blamed for a supposed decline in overall food quality. This hypothesis overlooks the analytical nose on its face – the fact that consumers themselves are the only possible judges of quality. Even if we assume that average quality has fallen, we have no basis for second-guessing the willingness of consumers to trade off lower quality for lower price and greater quantity. This is the same sort of tradeoff we make in every other sphere of consumption – housing, clothing, entertainment, medical care, ad infinitum.

The Left wing has recently developed a variation on its theme of corporate malignity in production and distribution of food. Corporations are destroying the health of their customers by purveying food containing too much sugar, salt, fat and taste. Only stringent government regulation of restaurant operations can hope to counteract the otherwise-irresistible lure of corporate advertising and junk food.

This hypothesis is not merely wrongheaded but wrong on the facts. Consumers have every right to trade off lower longevity for heightened enjoyment of life. This is something people often do in non-nutritive contexts such as athletics, extreme leisure pursuits like hang-gliding or public-service activities like missionary work. History indicates that, far from promoting public health, government has aided and abetted the increased incidence of type-II diabetes through wrong-headed dietary insistence on carbohydrate consumption as the foundational building block of nutrition.

Any objective appraisal must recognize that nowhere on earth can consumers find such abundance and diversity of cuisine as in the United States of America. World cuisine is amply represented even in mid-size metropolitan markets like Kansas City, Missouri and Sioux City, Iowa. There is no taste left unfulfilled – even the esoteric insistence on vegetarian meals, organic cultivation and free-range animal raising.

Restaurant Regulation

In order to appreciate the operation of a free market for restaurant meals, we need to dial down our level of abstraction and conduct a comparative-systems comparison. Heretofore we have conducted an imaginative exercise: we have explained a piece of restaurant operations under free-market competition. Now we need to envision how that piece would work under an alternative system like socialism.

In a socialist system, public ownership of the means of production dictates thoroughgoing, top-down regulation of business practice. For example, a regulator will pose the questions: How many booths and tables should the restaurant have? How big should they be? How far apart should they be spaced? How many people should we allow the restaurant to serve and how many should be allowed to sit at each table and booth?

In a socialist system, a regulator or group of them will ask this question in a centralized fashion. That is, he will ask it for a large grouping of restaurants – perhaps all restaurants, perhaps all fast-service restaurants, all bar-restaurants, all casual sit-down restaurants and all fine-dining restaurants. Or perhaps regulators will choose to group the restaurant industry differently. But group it they will and regulate each group on a one-size-rule-fits-all basis.

How will the regulator decide what regulations to impose? He will have government statistics at his disposal, such as the information cited above on average household size. It will be up to him to decide which information is relevant and how to apply the aggregate or collective information that governments collect to each individual restaurant being regulated. Even in the wildly unlikely instance that a regulator could actually visit each regulated restaurant, that could hardly happen more than once per year.

As we have just seen, free markets don’t work that way. One of the most misleading of popular perceptions is that free markets are “unregulated.” In reality, they are subject to the most stringent regulation of all – that of competition. But because the regulation part of competition works invisibly, people seem to miss its importance completely.

Instead of waiting for a central authority to certify its product as tasty and wholesome, markets supply their own verdict. Consumers try it for themselves. They ask their friends or take note when opinions are volunteered. They seek out reviews in newspapers, online and on television. When the verdict is unfavorable, bad news travels fast. This applies even more strongly to the aspect of health, by the way. Nothing empties a restaurant quicker than food-borne illness or even the rumor of it – as entrepreneurs know only too well.

In contrast, government health regulation doesn’t move nearly this fast. The cumbersome process of visits by the health inspector, trial-by-checklist followed by re-inspection – a pattern broken only rarely by a shutdown – is a classic example of bureaucracy at work. Political favoritism can affect the choice of inspections and the result. The de facto health inspector is the free market, not the government employee who holds that title.

Competitive regulation is decentralized. In our restaurant example, decisions about table size and restaurant takeaway are not made by a far-off government authority and applied uniformly. They are made on the spot, at each restaurant on a day-by-day basis. Restaurant owners and managers may possibly have the same government-collected information available to regulators, although it seems likely that they will be too busy to spend much time evaluating it. More to the point, though, they will have what the late Nobel laureate F. A. Hayek called “the information of particular time and place.” That is the time- and place-specific information about each particular restaurant that only its owner and managers can mobilize.

Merely because average household size has fallen over the U.S. does not mean that households in each and every individual neighborhood are smaller. It may be the case, for example, that in Hispanic neighborhoods – not gripped by declining birthrates or an epidemic of divorce – average household size has not fallen as it mostly has elsewhere. Those restaurants would not feel the urge to decrease table size and speed up dish collections in line with most restaurants. And well they shouldn’t, since they would serve their particular customers better by not blindly playing follow-the-leader with national trends.

Would centralized regulators pick up on this distinction? No, they would have to be clairvoyant in order to sort out the kind of exceptions that markets automatically catch.

After all, their aggregate statistics simply do not sift the data finely enough to make individual distinctions and differences visible.

But decentralized markets make those individual differences keenly felt by the people most affected. For restaurants, variations in consumer preference are felt by the very people who serve the consumer groups. Changes in demographic trends are witnessed by those whose very livelihoods are at stake. Competitive regulation works because it is on the spot, informed by the exact information needed and directed by the very people – on both sides of the market – with the motivation and expertise needed to make it effective.

Free markets allow participants to collect, disperse and heed information from any source but do not force people to respond to it. They do, however, provide incentives to respond proportionately to the magnitude of the information provided. A huge disruption of the supply of something will produce a big increase in price, suggesting to people that they reduce their consumption of this good a lot. A small decrease in a good’s price will offer a gentle inducement to increase consumption of something but not to go hog wild over it.

Again and again, we find ourselves saying that free markets nudge people in the right direction, towards doing the thing that we would want done if we could somehow magically observe all economic activity and direct by waving a magic wand. Economists laconically define this quality as being “efficient.”

Restaurant Economics and Rational Behavior

This object lesson in restaurant economics reminds us of a perceptive argument for free markets put forward by Hayek. He was responding to longtime arguments put forth by critics on the Left. The same arguments have recently reechoed following the housing bubble, financial crisis and ensuing Great Recession. Free markets may be logical, the critics concede, but only if people are rational. Since people behave irrationally, free markets must fail in practice, however well grounded their principles might be.

Hayek observed that the critics had it backwards. Markets do not require rational behavior by participants in order to function. Instead, markets encourage rational behavior by rewarding those who act rationally and penalizing those who do not. The history of mankind reveals a gradual movement towards more rational behavior; the widely noted reduction in the incidence of warfare is one noteworthy example of this.

The Audience Responds With a Burst of Applause

Can you imagine a nobler progression from the trivially mundane to the globally significant? That is what economists do.

And, by way of gratitude for this insight, your dinner companion rewards you by inquiring: “OK, now explain why restaurants are so stingy with the butter these days.”

DRI-424: The War on Big Soda

Some moments in the course of human events bear the imprint of destiny, as plain as if stamped by the USDA. Such a moment was last week’s announcement by New York City’s Mayor Michael Bloomberg of a ban on commercial sales of high-calorie beverage servings in excess of 16 ounces.

Every public-policy proposal has virtues and drawbacks. But historic significance is often gauged more by reaction to the proposal than by its intrinsic worth. This applies to Mayor Bloomberg’s so-called “Big Soda Ban” (hereinafter, BSB) – a reference to the oversized servings at which the measure is targeted.

While the measure itself has attracted widespread reaction, it has mostly been visceral and superficial. Yet it is the BSB’s implications, rather than its literal impact, that should concern us most. They tell us how far down the road to serfdom we have come.

BSB and its Effects

On May 31, 2012, Mayor Bloomberg announced that he would propose a ban on 16-ounce or larger servings of beverages containing 25 or more calories per 8 ounces of volume in restaurants, delicatessens, arenas and by street vendors. Curiously, convenience and grocery stores are exempted from the proposal. Calorie content in beverages results from adding carbohydrates in the form of various sugars, so the incidence of the ban falls on large servings of sugared drinks. Violators of the ban would face $200 fines.

The ostensible intent of the ban is to reduce the incidence of obesity among New Yorkers. The rationale apparently runs as follows: carbohydrates contain calories and large amounts of sugared drinks contain large amounts of calories – therefore, banning large servings will reduce consumption of sugared drinks, thereby lowering total calorie consumption, resulting in weight loss.

If only life were that simple. But then, if life were that simple, totalitarian countries would be the happiest and most prosperous nations.

Opposition to the Mayor’s proposal was full-throated and immediate. One vocal contingent highlighted the futility of the BSB by listing its omissions. For example, the proposal left untouched sugared beverages like fruit juices, which contain naturally occurring fructose as well as added sucrose. Milk shakes and malts were unmentioned; these contain not only sugar but high concentrations of fat, and are offered in large servings. Alcoholic drinks, which contain very high concentrations of nutritionally dubious sugars like maltose, were ignored.

Another common reaction noted the ease with which BSB could be evaded. The proposal does not prevent consumers from buying multiple smaller servings, either simultaneously or in succession. Indeed, the Mayor’s focus on restaurants and delis seems especially quixotic since the custom is to provide (one or more) free refills, thereby vitiating the need to order the larger serving in the first place. Meanwhile, convenience stores – where marketing gimmicks like Quik Trip’s “Big Gulp” were devised precisely to counter competition from fast-food and sit-down restaurants – can blithely continue supersizing their beverage offerings as before.

Recognition of BSB’s clumsiness and incompetence seems to have dulled appreciation of the pain it would inflict. One potential advantage of larger orders is economy; for example, you might well pay a lower price for one 16-ounce soda than the combined price for two 8-ounce drinks. Not any more! It is easier to make one visit to a concession stand than two – oops, too bad. The fact that some types of businesses are harmed (arenas, street vendors) relative to others (convenience stores) is more evidence of the gains and losses randomly distributed by the BSB.

Opposition to the BSB is miles wide but only inches deep. The unspoken consensus seems to be, “This plan is so confused and contradictory that it will never work.” This holds open the possibility that a better plan – perhaps more comprehensive and coercive in nature – would succeed. Few people are willing to come right out and say that Mayor Bloomberg had no right to act as he did – either because he trespassed on the sacred domain of individual choice or because he exceeded the constitutional powers granted a municipal executive.

Government as All-Purpose Problem Solver

The BSB further cements a widely shared perception of government as all-purpose problem solver, the Mr. Fix-It of First Resort. We associate this attitude with the Left. The plain truth is, however, that liberals and socialists are an underwhelming minority. Our current complacency with government intervention of all sorts could never have developed without tacit acceptance by conservatives.

The latent disposition was always there. From its earliest days, modern conservatism often deserted free trade in favor of tariffs and quotas. Anti-communism resigned the movement to the permanence of a lavish, wasteful Pentagon, fighting its way through red tape. The drug war and consequent evolution of local police toward paramilitarism were tolerated as part of a cultural pushback against the permissive Left.

Gradually, the Right discovered that big government came in downright handy in enforcing its own prejudices. That attitude emerges in support for Bloomberg, as evinced in comments like “It’s about time somebody did something about those people – I’m tired of paying high health-insurance premiums and taxes to subsidize their overeating.” A subset of the Right has given up on getting government out of health care and settled for co-opting it as their proxy nanny.

Bloomberg on Bloomberg: Grasping the Enormity of His Action

Rather than comparing Mayor Bloomberg to Huey Long, commentators have been more likely to liken him to Huey of Huey, Dewey and Louie. Reading the Mayor’s own comments on his soda ban is the surest antidote to this complacency.

“We’re not taking away anyone’s freedoms.” Exactly how does a head of government ban the sale of a popular consumption item without taking away somebody’s freedom? One suspects Mayor Bloomberg is trying to suggest that, after all, the whole issue of soft drinks is pretty trivial. But he can’t have it both ways. Elsewhere, he refers to studies showing the calorie consumption from soft drinks is a leading contributor to obesity. Now he’s trying to defuse criticism by undercutting his big point.

“It’s not something the Founding Fathers fought for.” They didn’t “fight for” soft drinks, but their writings referred specifically to the niggling, unwarranted intrusions of the British into their commerce and affairs.

“In moderation [soft drink consumption] is fine… You tend to eat all of the food in the container. If somebody put a smaller glass or plate or container in front of you, you would eat less.” By his own logic, Mayor Bloomberg would be fully justified in next limiting the physical volume of food served in restaurants, delicatessens, arenas and on street carts. Indeed, we should expect the delivery of just such limitations as soon as the BSB fails to relieve the nutritional emergency invoked to justify it. Can’t you already hear the Mayor at his press conference? “Well, the soda ban didn’t work the way we wanted to, so we had to try something stronger. When somebody puts less food in front of you, you eat less, right?”

“We’re just forcing you to think about what you’re buying.” Aside from the fact that government has no warrant or authority to force its citizens to “buy twice so they’ll think twice,” there is the implicit premise behind this claim to consider. Mayor Bloomberg’s theory of consumption – if one may so dignify his megalomaniac diktats – is that we buy and eat on impulse, so government regulators have no choice but to interdict our impulsive actions. But what makes Mayor Bloomberg – or the regulators or academicians who support him – a superior breed of human who is somehow immune to the irresistible impulses that cripple the rest of us? Come to think of it, how do we know that it isn’t Bloomberg himself who is irrationally acting on impulse? Given these comments and the surrounding analysis, that conclusion is surely indicated.

The Roots of the “Obesity Epidemic”

Mayor Bloomberg clearly understood his own action to be extreme. When the time came to justify his actions, he played the post-9/11 trump card: emergency measure. After all, we can’t just stand here and do nothing in the face of this obesity epidemic, can we?

Our reflexive deference to government has blinded us to the fact that obesity is not an epidemic. Obesity is not transmitted contagiously between individuals; it is not even an illness. It is the result of over-nutrition – too much of a good thing. Stopping an epidemic may require government coercion in order to stop the spread of contagion and administer vaccine. In contrast, government intervention in the area of obesity is not only unnecessary, it is counterproductive.

A recent Wall Street Journal editorial claimed that most obesity is caused by excess caloric intake. This would make BSB a trivial exercise since a 16-ounce soda contains fewer than 300 calories. The Journal is doubly wrong. The evidence continues to accumulate that the dominant cause of obesity is blood-sugar irregularity, not caloric excess per se. Consumption of carbohydrates that are absorbed too rapidly into the bloodstream triggers the release of insulin into the bloodstream, which in turn signals the body to store fat rather than consuming it as energy. This is the condition known as Type II diabetes. Sugared sodas can be a key contributor to this disease – if you happen to suffer from it or be predisposed to it. Carbohydrates that do not contain fiber – ranging from simple sugars to white potatoes to processed breads – are culprits. Fiber, fat and protein play the beneficial role of slowing down the conversion of carbohydrates to glucose in the bloodstream.

We know all this thanks to the pioneering efforts of Robert Atkins, whose low-carbohydrate diet was introduced almost forth years ago. Atkins was demonized by the nutrition establishment and his diet was panned as unsafe. Meanwhile, the authorities – including the federal government – promoted carbohydrates as the staple of a healthy diet and our primary source of energy. But so many people lost so much weight on the Atkins diet that private researchers were forced to study it. Atkins’ grasp of the underlying science may have been uncertain, but his central principle – that it was not dietary fat consumption but rather carbohydrates that promoted obesity – was vindicated by time and testing.

The devaluation of carbohydrates has been accompanied by a revaluation of fat and protein. We now strongly suspect that low-fat diets may actually be dangerous for those who overproduce a certain type of LDL cholesterol. Protein is once again assuming its rightful place as energy source and building block of muscle. One corollary to this is that meat is no longer verboten.

Hayek on the Rule of Experts

Decades ago, Nobel laureate F. A. Hayek insisted that central governments could not successfully plan an economy, even with the aid of experts in the various industries and professions. The information necessary to coordinate supply and demand was not centralized in the hands of government or a few experts, but rather decentralized in the minds of billions of individual producers and consumers. Only a free market process could unlock it and render it effective.

The new learning on diabetes and obesity is one locus classicus of a Hayekian market process at work. An entrepreneur like Atkins refuses to swallow the conventional thinking of government nutritionists. He puts forward a new hypothesis. The establishment experts loathe it, but consumers love it. It receives the truest of all tests – the market test – and the clamor of consumers forces the reevaluation of the product by researchers.

Milton Friedman once compared the actions of government bureaucrats to that of leader ducks who fly at the head of a V-formation until they look back and notice that their followers have deserted them. Then they scramble to catch up to the formation and resume their place at the head. That is what establishment nutritionists have done. The ones outside government have adopted Atkins’ ideas, or variants of them, without giving Atkins credit for them. The ones inside government or academia are calling for government regulation of consumers’ nutritional choices before everybody becomes aware that government regulation is superfluous at best and deleterious at worst.

Another illustrative case is cancer research. For decades progress was painfully slow. Scientists began to make headway when they tumbled to the fact that cancer is not one disease but many. Even more illuminating is the fact that individuals react to the disease and respond to treatments differently. The best way to proceed is to allow each of us to craft our own therapy in partnership with our personal physician and oncologist. Instead, the federal government and FDA have persisted in imposing a “one-size-fits-all” approach on cancer patients, using tests of statistical significance to gauge the success of cancer drugs and condition their approval. The pretense that doctors treat statistical populations rather than individual patients has killed many thousands of patients prematurely. Now that effective treatments are on the horizon, the prospect of a rising death toll is triggering a veritable mutiny among the community of cancer patients and physicians.

It is not coercion and control by central governments that will overcome obesity and diabetes. Government was a principal stumbling block to enlightenment in these areas. The free market is now succeeding where government failed.

Politics vs. Markets

Mayor Bloomberg is not guided by science or free markets. Instead, he heeds the dictates of politics. In markets, individual patients and their doctors have the strongest possible incentives to find out what actually works and act upon it – patients because their happiness depends on it and doctors because their livelihood depends on it.

But incentives in politics do not lie with uncovering the truth about obesity and diabetes. Millions of Americans are losing weight and controlling their diabetes, but the measure of this success will be taken only gradually over a period of years in the medical journals and epidemiology data. By then, Mayor Bloomberg will be dead or out of politics. The truth will do him no good. He is interested only in what will win him votes in the short-term present – which means looking as busy as possible and pressing the emotional hot buttons of the electorate. And he has succeeded, judging from the numbers of people pounding their fists and yelling, “Somebody is finally DOING something about those gluttons who are getting fat on my dime!”

The Philosophy of Freedom

Commentators on BSB sometimes allude to our “freedom to choose” before dropping the subject in favor of wisecracks about “nanny Bloomberg” or diatribes against the overweight. Yet freedom should be at the heart of the debate.

Philosophers and political scientists have long argued whether freedom is a good thing for its own sake or strictly because its consequences are favorable. Or, rearranging the argument, would we value freedom so much if it did not lead to more material wealth and happiness than the alternative?

However interesting the question may be in the abstract, it is moot in the practical sense. Freedom is preferable both morally and practically. The doctrine of free will allows us to make incorrect moral choices – that is what gives morality its meaning. It surely allows us to err where only our own welfare is at stake. We are not obligated to bail out our fellow human beings out of their personal difficulties, because they would then lack the incentive necessary to pursue the good life. But we are encouraged to help those who fail through bad luck or who express sincere repentance for past misdeeds. Our voluntary choice to help others gives our decision its moral dimension.

The history of the 19th and 20th centuries is a triumph of freedom over totalitarianism, of capitalism over socialism. The positive proof lies in the victories of free trade and anti-slavery in 19th century Great Britain, the rise of U.S. capitalism, the German and Japanese economic miracles after World War II, the resurgence of the U.S. and Great Britain under Reagan and Thatcher, the rise of the Southeast Asian Tigers and the birth of economic development in India and China. The negative proof was provided by the end of communism in Soviet Russia and China, the death of fascism in German, Italy and Japan, the fall of British Socialism after World War II and the suffocation of one-party cronyism and dictatorship in Africa and South America.

In light of all this, government’s place as the default option for every choice is astonishing. Despite being wrong in theory and practice, despite an unbroken record of failure, government nevertheless continues to be tapped to handle whatever comes up. To hear Mayor Bloomberg talk, you’d swear that freedom was hopelessly incapable and government was infallible. Actually, it’s the other way round.

Steppingstones to Serfdom

As noted above, BSB seems so comically inept that it has lulled many into not taking it seriously. That is a grievous mistake, one not made by Mayor Bloomberg himself, who treats the issue with the utmost gravity. He is knowingly engaged in a step-by-step process of reducing our freedom. It began with his ban on trans fats. When nobody thought it worth their while to stop him – probably because nobody wanted to be stigmatized as being in favor of consuming a substance known to be harmful – this established a precedent that set the stage for the nextintervention, and the next and the next. As so it goes. Each new intervention sets the precedent for the next one. That is why it is always worthwhile to defend freedom, no matter how trivial the freedom being defended may seem.

Now Mayor Bloomberg is trying to stop New Yorkers from consuming soft drinks. Few consumer goods are as thoroughly American in their essence. Around the world, Coca Cola is an instantly recognizable symbol of American culture. The amount of happiness we derive from soda pop is incalculable, but palpably enormous. Arbitrarily, on the phony pretext of an epidemic, with no hope or pretense of distinguishing between those actually hurt by soft drinks and the rest, Mayor Bloomberg proposes to establish the precedent of directly meddling in his constituents’ diets.

If, as expected, the New York City Board of Health rubber-stamps the Mayor’s proposal, is there any limit to what he can do? If a city mayor can casually reduce consumer choices without any warrant or medical justification, is there any limit on what any government can do to anybody, anywhere, anytime?

The late Keynesian economist and Nobel Laureate, Paul Samuelson, of economic textbook fame, once lamented the respect accorded colleague F. A. Hayek’s cautionary polemic, The Road to Serfdom. Hayek pointedly exposed the threat to freedom posed by central economic planning and the welfare state. Where are the barbed-wire fences and concentration camps? Samuelson demanded. The West has embraced the welfare state, he maintained, but we have not lost our freedom as Hayek foresaw.

Of course, history does not repeat itself verbatim, but its great themes do recur. Samuelson died in 2009, just in time to miss seeing Mayor Bloomberg at work. From here on, Bloomberg will serve as walking rebuttal to those who doubt Hayek’s thesis.