Policy Wise

Couple of months back, BongoP’o'ndit had brought to our attention, the New York’s Board of Health’s decision to ban use of Trans fats in restaurants. Much discussion ensued and we were supposed to write a post on it. As it usually happens, laziness intervened and we never got around to writing it.

Anyway, now the debate has been joined by two eminent scholars, Professors Richard Posner and Gary Becker of the acclaimed Becker-Posner blog. Firing the first salvo, Professor Posner concludes that the ban is justified. He bases his argument primarily on cost benefits. Using back of envelope calculations, the professor attempts to prove that the ban would actually save money-in the form of health costs and saved lives. I wasn’t too impressed by this logic, primarily because while cost is an important factor to be considered in any public policy intervention, it requires careful research. Professor Posner’s calculations can easily be demolished by another set of crude calculations which Professor Becker actually does in his rejoinder.

What impressed me more was the second argument which Professor Posner made- the cost of information.. The cost of information increases exponentially with complexity of information being disseminated. As the Professor argues

It is different with Trans fats. Many people have never heard of them; many who have don’t know that they are (very probably) harmful to health; and, above all, almost no one outside the medical and nutrition communities knows how harmful trans fats are, and in what quantity. That is, they do not know what a dangerous level of trans fats is, what their own consumption of trans fats is relative to that level, and how much their restaurant-going increases the total amount of trans fats that they consume. They have, in short, no idea of the benefit of avoiding trans fats in restaurants

Let me explain this further by example of cigarettes. By now, almost every one knows that smoking is harmful to health. Cigarettes contain at least 43 known carcinogens. However, to make people understand that smoking is harmful, it is not required that every compound and its effect is explained to them. . Now imagine, if many different types of cigarettes were manufactured: some containing ten carcinogens, others twenty and so on and so forth. The cost of information in this case-explaining to smokers the potential harmful effects of each type of cigarette would go up.

Professor Becker counters this argument by giving examples of restaurants which have given up using Trans fats even before the ban was proposed. He argues that given time, the market and informed consumers would ensure that the Trans fats are not used. However, with all due respects, Professor Becker misses a point here-information asymmetry.

One of the paradoxes of modern healthcare is that those who can afford to pay are far more likely to take care of their health. Let’s take obesity as an example. In America, obesity is a problem largely of the poor, present most frequently in the inner city areas inhabited mostly by the poor minorities- African-American and Hispanics. Two reasons- lack of information about the possible ill-effects of obesity and lack of access to sources of fresh food. Thus while the figures which Professor Becker cites may be absolutely right but till we know the breakdown of their location of food establishments which have given up using Trans fats and demographic profile of their clientele, it would not be prudent to base public policy interventions on them. It is entirely possible that the rich, more aware of the ill-effects of using Trans fats and unaffected by minor price increases have benefited disproportionately from this voluntary action.

Hence, state intervention in this case can be considered useful to correct the imbalances which already exist and cannot in my view corrected solely by education.

One genuine concern which arises from this ban is that of the nanny state-should we let the state control what we eat? How far should it go? Tomorrow the state might want to ban what we read and so on and so forth.

BongoP’o'ndit comments

It sets you on a slippery slope of nanny-statism and is arguably just a step away from enforcing daily compulsory jogging.

As a matter of general principle, when you have the concept of subsidized medicine in the form of Medicaid/Medicare or even private group insurance where your actions affect the lives of others, you expose yourself to some sort of class action. Hence, the limits of individual freedom are a natural corollary of a system where actions are not independent any more. Today, only the super rich can afford to live as they please-that they would be perhaps the first to adopt healthy practices is beside the point.

Most certainly, by any yardstick compulsory daily jogging would be idiotic. For one, it is unenforceable. Apart from the sheer logistics, any such measure would lead to resistance and would be counterproductive. However, it does not mean that public policy cannot be directed towards ensuring such an outcome. For one, public money can be invested in parks and jogger tracks. For another, insurance companies would be well within their rights in increasing the premium for those who don’t take care of their health. But they must be coupled together. If those living in inner city areas have no access to parks, it would not be correct to penalize them for lack of physical activity.

So why not advocate the same for Trans fats? I think the issues here are slightly different. As I mentioned earlier, the lack of information about Trans fats makes it extremely hard to educate people. Interestingly enough, the same lack of information actually makes a ban easier to enforce! People generally resist what they understand or can ’see’, this is one of the reasons why Prohibition has been such a resounding failure. Second, the cost of enforcement is much lower at restaurants than individual homes. That is why I would oppose any attempts to ban Trans fats across the board. Banning any product in its entirety as opposed to limited and hence more enforceable bans, for example no smoking in public buildings or bars makes far greater sense.

In conclusion, while the ban on Trans fats is not a no-brainer like seat belt usage, I would, based on available evidence, still support it.