Ken Rogoff on the need for government to intervene and overcome important market failures:
Coronary Capitalism, by Kenneth Rogoff, Commentary, Project Syndicate: A systematic and broad failure of regulation is the elephant in the room when it comes to reforming today’s Western capitalism. ... But is the problem unique to the financial industry...?
Consider the food industry... Obesity rates are soaring around the entire world... Of course,... there are numerous other examples, across a wide variety of goods and services, where one could find similar issues. Here, though, I want to focus on the food industry’s link to broader problems with contemporary capitalism...
True, market forces have spurred innovation, which has continually driven down the price of processed food, even as the price of plain old fruits and vegetables has gone up. That is a fair point, but it overlooks the huge market failure here.
Consumers are provided with precious little information through schools, libraries, or health campaigns; instead, they are swamped with disinformation through advertising. Conditions for children are particularly alarming..., children are co-opted by channels paid for by advertisements...
If our only problems were the food industry causing physical heart attacks and the financial industry facilitating their economic equivalent, that would be bad enough. But the pathological regulatory-political-economic dynamic that characterizes these industries is far broader. We need to develop new and much better institutions to protect society’s long-run interests.
Of course, the balance between consumer sovereignty and paternalism is always delicate. But we could certainly begin to strike a healthier balance than the one we have by giving the public far better information across a range of platforms, so that people could begin to make more informed consumption choices and political decisions.
I appreciate the sentiment, I've been a long-time advocate of more aggressive intervention to solve market failure problems myself, but was less excited about the particular example. Then, by chance, one of the next things I read was this:
Societal control of sugar essential to ease public health burden, EurekAlert: Sugar should be controlled like alcohol and tobacco to protect public health, according to a team of UCSF researchers, who maintain in a new report that sugar is fueling a global obesity pandemic, contributing to 35 million deaths annually worldwide from non-communicable diseases like diabetes, heart disease and cancer.
Non-communicable diseases now pose a greater health burden worldwide than infectious diseases... In the United States, 75 percent of health care dollars are spent treating these diseases and their associated disabilities.
In the Feb. 2 issue of Nature, Robert Lustig MD, Laura Schmidt PhD, MSW, MPH, and Claire Brindis, DPH, colleagues at the University of California, San Francisco (UCSF), argue that sugar ... is far from just "empty calories" that make people fat. At the levels consumed by most Americans, sugar changes metabolism, raises blood pressure, critically alters the signaling of hormones and causes significant damage to the liver – the least understood of sugar's damages. These health hazards largely mirror the effects of drinking too much alcohol, which ... is the distillation of sugar.
Worldwide consumption of sugar has tripled during the past 50 years and is viewed as a key cause of the obesity epidemic. But obesity ... may just be a marker for the damage caused by the toxic effects of too much sugar. This would help explain why 40 percent of people with metabolic syndrome—the key metabolic changes that lead to diabetes, heart disease and cancer—are not clinically obese.
"As long as the public thinks that sugar is just 'empty calories,' we have no chance in solving this," said Lustig, a professor of pediatrics,... and director of the Weight Assessment for Teen and Child Health (WATCH) Program at UCSF.
"There are good calories and bad calories...," Lustig said. "But sugar is toxic beyond its calories."
Limiting the consumption of sugar has challenges beyond educating people about its potential toxicity. "We recognize that there are cultural and celebratory aspects of sugar," said Brindis, director of UCSF's Philip R. Lee Institute for Health Policy Studies. "Changing these patterns is very complicated"
According to Brindis, effective interventions can't rely solely on individual change, but instead on environmental and community-wide solutions, similar to what has occurred with alcohol and tobacco, that increase the likelihood of success.
The authors argue for society to shift away from high sugar consumption, the public must be better informed about the emerging science on sugar.
"There is an enormous gap between what we know from science and what we practice in reality," said Schmidt, professor of health policy at UCSF...
Many of the interventions that have reduced alcohol and tobacco consumption can be models for addressing the sugar problem, such as levying special sales taxes, controlling access, and tightening licensing requirements on vending machines and snack bars that sell high sugar products in schools and workplaces.
"We're not talking prohibition," Schmidt said. "We're not advocating a major imposition of the government into people's lives. We're talking about gentle ways to make sugar consumption slightly less convenient, thereby moving people away from the concentrated dose. What we want is to actually increase people's choices by making foods that aren't loaded with sugar comparatively easier and cheaper to get."
Some of this was news to me (e.g. "significant liver damage"), so maybe there's more to the market failure in the food industry due to informational asymmetries claim than I thought.