Peter Passell
Editor, The Milken Institute Review; Senior Fellow
California and Capital Markets and Europe and Finance and Global Economy and Labor and Public Policy and U.S. Economy
Peter Passell is editor of The Milken Institute Review, the Institute's economic quarterly. A senior fellow, Passell joined the Institute after eight years as economics columnist for the news department of The New York Times. He previously served on the Times' editorial board and was an assistant professor at Columbia...
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"Nanny" Bloomberg: A modest defense
By: Peter Passell
June 04, 2012
Michael Bloomberg seems to have a knack for bringing out almost everybodyaEUR(TM)s inner libertarian. The billionaire mayor of New York, has spent an inordinate amount of his three terms trying to take away your cigarettes, trans-fats aEUR" and now, the Big Gulp! Even Jon Stewart, couldnaEUR(TM)t resist the path of least comedic resistance target="_blank"> couldnaEUR(TM)t resist the path of least comedic resistance, defending his demographic's right to drown itself in buckets of Berry Citrus Slam Slurpee.

As a card-carrying free market economist, IaEUR(TM)m uneasy about the proposed ban, too. For one thing, itaEUR(TM)s a bit arbitrary: StarbucksaEUR(TM) equally sugary venti (24 ounce) Caramel Frappuccino clocks in at 510 calories, but will probably be exempt because it contains milk. For another, it singles out sugar and high fructose corn syrup for chastisement when the specific linkage to obesity and diabetes is still largely circumstantial. And did we mention that the regulation may prove to be regressive? Lots of low-income Americans eat lots of fast food, and supersized drinks are a lot cheaper by the ounce.

But the real question here is the sanctity of consumer choice: If people want to drink soda by the gallon, and their behavior affects them alone, why is it the business of the state to say otherwise? Actually, that way of phrasing the issue opens the door to one theoretical justification for the regulation: If excessive sugar consumption makes you ill, others bear some of the net cost in the form of government-subsidized medical treatment -- and thus deserve a say in how much you consume.

In this case, the "externalities" argument seems pretty flimsy. As noted above, thereaEUR(TM)s no smoking gun linking sugar to illness. Equally to the point, all manner of lifestyle decisions affect the probability of illness, and the business of picking which to regulate is a slippery slope. Remember, too, that, even if there is an externality to sugar consumption, its magnitude surely varies enormously from individual to individual. Why should well-insured slim folks who spend their free time at the gym be treated the same as obese individuals with a family history of diabetes and no insurance coverage?

In the end, though, I (cautiously) favor the mandate, and think I can justify the position without being drummed out of the Milton Friedman Appreciation Society. Start with the reality that the market for soda is not aEURoeefficientaEUR? in the sense that it probably doesnaEUR(TM)t equate value to the full cost. The biggest consumers of big, sugary drinks are young, and therefore almost certainly more inclined toward myopia than grownups who somewhat better understand that what folks put in their mouths affects the quality and length of their lives. So, someday, they are likely to regret their freedom to harm themselves.

Then thereaEUR(TM)s the addiction exemption: Once you start, you may find it very hard to stop. Sugar doesnaEUR(TM)t fit the addiction category as cleanly as, say, nicotine or methamphetamine, but itaEUR(TM)s hard to dispute that consumption of sugar increases our taste for sweet things. And while economists happily spin theories about "rational" addiction, these depend on the risible assumption that consumers fully understand the consequences of putting themselves at risk.

Consider one other defense of Nanny that comes from the field known as "behavioral" economics. As a practical as well as an ethical matter, itaEUR(TM)s problematic to mandate what we consume aEUR" remember the unintended consequences of AmericaaEUR(TM)s grand experiment with banning alcohol. But as Richard Thaler and Cass Sunstein pointed out in their book aEURoeNudge,aEUR? there are lots of ways short of prohibition (or taxation) to change behavior in socially desirable ways. School cafeterias can put the fruit in more visible locations than the cream pies, employers can create a minimum "default" level of employee contributions to 401(k) plans that can easily be overridden, the department of motor vehicles can ask motorists to opt out of organ donations rather than to opt in, and so forth.

BloombergaEUR(TM)s plan, it strike us, fits the nudge approach pretty well. He would not bar consumption of sugary drinks, or even limit their consumption. But he would require consumers to make the purchase decision twice if they wanted to drink more than a pint at a time. Like when your mom started you off with one doughnut, but promised a second if you still wanted it later.

We suspect that the Bloomberg regulation will never become law aEUR" itaEUR(TM)s just too sweet a target in a nation having a collective hissy fit about intrusive government. But those who oppose the rule might ask themselves whether they have a kinder, gentler way of getting Americans to think about obesity before they suffer the consequences.