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the fda, calorie counts, and the lost pleasure of junk food

Tyler Cowen has his markets in everything. Some days I feel like we need another tagline: the commensuration of everything.

Cost-benefit analysis is ubiquitous in government. But the question of what counts as a cost and a benefit, and how to measure them, has been up for debate pretty much since people started tallying them up.

The FDA has, somewhat controversially, been calculating “lost pleasure” as one impact of its regulations. This came up most recently around requirements that restaurants post calorie counts of their menu items. Headlines crowed that consumers might lose some $5.27 billion in pleasure from giving up their high-calorie junk foods, although the value of the health benefits still, according to the FDA, justified displaying calorie counts.

The FDA analysis was based on economics — a working paper by Yale economist Jason Abaluck plus calculations by internal staff, according to Reuters — but a lot of economists disagree that it makes sense to think about it this way. Calorie counts are just providing information. So if you order differently upon being presented with this information — you give up your Gordita for the bean burrito — you’re basically by definition making a choice you prefer, and thus can’t be losing from the decision.

This was a second round in this battle for the FDA, the first having been over the monetary costs of the lost pleasure of smoking. Earlier this year, the FDA, in an analysis of the costs and benefits of graphic warning labels on cigarettes, similarly gave considerable weight to the lost pleasure of smoking — to the extent that the avoidance of death and disease caused by quitting smoking would have to be discounted by 70% to account for the loss in pleasure.

This did not go over well with many economists. In fact, an all-star team wrote a response paper detailing their disagreement with the analysis. What I found interesting was that here they made a slightly different argument than for calorie counts. It’s harder to argue that graphic warning labels just provide information. And if they’re not just providing information, perhaps smokers—rationally choosing to smoke but deterred by gross-out pictures of rotting lungs—are really losing consumer surplus.

smokers

So the critics bring addiction into it. Smoking is addictive and therefore not rational. Moreover, people often become addicted before they are adults. Perhaps some people have rationally chosen to smoke, but surely not those who were daily smokers by the age of 18. Since 70% of American smokers started smoking before they turned 17, at least that fraction of any lost consumer surplus should be ignored.

For those who started smoking as legal adults, the authors turn to behavioral economics. Addiction causes us to discount the future too heavily, rendering decisions irrational. Thus even the smokers who started later in life aren’t really losing consumer surplus, either.

I don’t follow current cost-benefit politics closely, but I’ve spent a fair amount of time reading about cost-benefit politics of the 1950s, 60s, and 70s. And what strikes me about this debate that is so similar to conversations that people were having about building dams or calculating the benefits of education or the polio vaccine is how fundamentally political they are.

There’s no avoiding it. In many cases, there’s simply no absolute way to determine that one method of calculating costs and benefits is better than another, and so people make methodological choices based on other factors. Sometimes those may be overtly political, as in, “I think the FDA should do everything it can to deter smoking and I’m going to come up with reasons that make sense for it to do that.” Sometimes they may be based on disciplinary politics, as in “This is my intellectual team, and I’m going to defend our position here, wherever that takes me.” And of course they can be less purposeful, too, and well-intentioned, but such decisions are still judgment calls.

Eventually, practitioners may reach consensus over which choices are the right ones, and then people don’t have to argue anymore over whether to value life based on people’s expected future earnings or on their willingness to pay to avoid risks (as they did some decades back). But just because the choices are settled doesn’t make them any less normative.

In the end, I tend to think these debates are more than a little insane, because they lend false precision to decisions that involve judgment call upon judgment call, and questionable assumption upon questionable assumption. But they matter. Cost-benefit calculations aren’t determinative, but they make a real difference in what decisions are seen as no-brainers, and which find their way into the dustbin. And powerful interest groups — hello, tobacco and junk food lobbies — have stakes in which methods get chosen, not just economists.

Myself, I’d vote for just listing multiple types of costs and benefits and quantifying them by order of magnitude, rather than pretending to an unachievable precision. That’s not likely to happen. If we’re stuck with trying to commensurate the incommensurable, though, at the very least we need to keep making explicit the choices that go into such calculations. That means laying out the assumptions — both normative and methodological — that lay behind them.

 

 

Written by epopp

December 30, 2014 at 2:15 pm

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