Our Research on Menu Labeling

For the past couple years, I've been working with one of my former graduate students, Brenna Ellison at the University of Illinois, on some papers related to effects of calorie labels on menus (for those who may not be aware, "Obamacare" mandated that chain restaurants include such menu labels but the FDA has yet to release the final rules and implementation date).  

The first part of that research was finally published last week in the International Journal of Behavioral Nutrition and Physical Activity, where we report on a smaller sample from the larger study which includes the group of people Brenna interviewed after they ordered.  The results have been picked up by a couple news outlets, including this one from Reuters: 

Showing diners how many calories are in restaurant food items may influence how much they eat - especially among the least health-conscious people, a new study suggests.

That's true - but only partially true.  We find that the numeric labels mandated by "Obamacare" do not have a statistically significant effect on the number of calories people order.  The labels that we find to be (somewhat) effective are stop-light labels, in which we put a red dot next to the high calorie foods, a yellow dot next to the medium calorie foods, and a green dot next to the low-calorie foods.  As the story suggests, the labels are less influential among people who we rate (based on their survey answers) as health conscious.  The result isn't terribly surprising - people who are health conscious are probably already familiar with the caloric content of the foods they eat, and as such, adding labels are unlikely to provide new information.  Still, we'd want to know something about the cost of the label to know whether the policy was a net-plus (this is an issue we take up in our other papers still in the works).    

The result I found most interesting from the whole study was only discussed in the conclusions (and was missed all together in the news story) is the following:

Interestingly, despite the calorie+traffic light label’s effectiveness at reducing calories ordered, it was not the labeling format of choice. When asked which of the three labeling formats was preferred, only 27.5% of respondents said they wanted to see the calorie+traffic light label on their menus. Surprisingly, 42% preferred the calorie-only label which had virtually no influence on ordering behavior. These responses imply diners may want more information on their menus (the number of calories), yet diners do not want to be told what they should or should not consume (i.e., green = good, red = bad).

Summer School on Experimental Auctions

Pardon the public service announcement, but I wanted to let readers know that applications are now being accepted for a summer school I've co-taught on Experimental Auctions for the past 2 years in Italy.  Experimental auctions are a technique used to measure consumer willingness-to-pay for new food products, which in turn is used to project demand, market share, and benefits/costs of public policies.  We've had a fantastic time the past two years and I'm looking forward to the third, which was just approved for credit hours by the University of Bologna.  The content is mainly targeted toward graduate students or early career professionals (or marketing researchers interested in learning about a new technique).  You can find out more here and register here.

For a little enticement, here are some pictures of the previous years' classes.

Do Food Consumers Vote Differently Than They Shop?

According to some research I just published in the Journal of Agricultural and Resource Economics with a former graduate student, Kate Brooks, who is now an assistant professor at the University of Nebraska, the answer is "yes."  

Our research suggests caution in using people's shopping behavior (as, for example, indicated by grocery story scanner data) to infer which public policies they may or may not support.  In the particular application we studied, people were willing to pay large premiums to avoid milk and meat from cloned cows when asked what they wished to buy when shopping in a grocery store.  One might conjecture from this behavior, then, that the consumers would approve of a government ban on use of clones in meat and milk production.  

According to our research, that conjecture would be wrong.  The majority of consumers did NOT favor a ban on cloning in food animals.  In fact, most people would demand compensation if a ban were enacted (rather than be willing to pay to have the ban).  This finding defies many of the explanations often given for differences in voting and shopping behavior, such as the consumer-vs-citizen hypothesis or the hypothesis that consumers perceive the existence of externalities.  The behavior is more consistent with the notion that people have an option value (they don't want to get rid of a technology that may produce some promising result in the future even if they don't want it now) or that people respect the freedom of others to arrive at their own choices even if they happen to be at odds with one's own preferences.     

The other interesting thing about our finding is that is exactly the opposite of what has been observed in other food issues.  For example, in California, 63.5% of voters voted in favor of Prop 2 in 2008 to effectively ban battery cages in egg production.  Yet, the retail market share of cage free eggs is less than 5%.  In this case, shoppers aren't willing to shell out the extra bucks for cage free eggs in the grocery store, but they enthusiastically voted to ban the product they normally buy in the voting booth.  Why?  Hard to say.  My feeling is that the costs are much more salient in the store than in the voting booth.  Another possibility is that the universe of voters is different than the universe of shoppers (all voters shop but not all shoppers vote).  There are, of course, other possible explanations.  

Gaining a better understanding why people behave differently when shopping and voting is a key area of future research for food economists.  And, the fact that people often behave so differently in the two environments represents a key challenge for food economists who conduct regulatory cost-benefit analysis and advise policy makers.  

Pollan's Advice and Kahneman's Warning

I enjoy reading Michael Pollan’s books, such as The Omnivore’s Dilemma.  He is a great writer and story teller - so much so, in fact, that his arguments sort of sneak up on you.  I often find myself agreeing with his premises and conclusions without the conscious stepping in to argue the points.  In fact, a few years ago when I finished reading The Omnivore’s Dilemma, I only had a nagging feeling that something was amiss, but it took several months of reflection to systematically figure out what it was (The Food Police boils down my thoughts on it – primarily chapters 2 and 9).

I see that Pollan recently gave an address to the American Historical Association.  He asked the audience:

Why do people like me who use your work end up selling more books than you do?

His advice?

Write in a human voice, he encouraged. Embrace storytelling techniques like scene-setting, suspense, and personification.

Almost everyone more enjoys reading a good story to an academic treatise.  But one should take caution.  A good story does not equate to a true story.  I recently finished reading the book by Nobel Prize winner Daniel Kahneman, Thinking Fast and Slow.  Kahneman routinely points out that we humans are suckers for a good story.  We fit together (sometimes spurious) facts to create a coherent account that is pleasing to the mind – not because the facts actually fit together this way but because that’s how we are psychologically wired.  Here are a couple quotes from Kahneman (pg. 239):

We are confident when the story we tell ourselves comes easily to mind, with no contradiction and no competing scenario.  But ease and coherence do not guarantee that a belief held with confidence is true.  The associative machine is set to suppress doubt and to evoke ideas and information that are compatible with the currently dominant story . . . It is therefore not surprising that many of us are prone to have high confidence in unfounded intuitions

And (pg. 199):

In The Black Swan, Taleb introduced the notion of narrative fallacy to describe how flawed stories of the past shape our views of the world and our expectations for the future.  Narrative fallacies arise inevitably from our continuous attempt to make sense of the world.  The explanatory stories that people find compelling are simple; are concrete rather than abstract; assign a larger role to talent, stupidity, and intentions than to luck; and focus on a few striking events that happen rather than on the countless events that failed to happen.  . . . Good stories provide a simple and coherent account of people’s actions and intentions.  You are always ready to interpret behavior as a manifestation of general propensities and personality traits – causes that you can readily match to effects.      

My take: if you’re trying to write a book to convince readers and gain sales, you’d better try to tell good stories.  However, if you’re a reader, you have to beware that good story telling can mask weak arguments and hide important relevant facts that should be considered.  The more one becomes engrossed in a story, the more they should be on guard for the narrative fallacy or, as Kahneman puts it, the biases associated with associative coherence.

Does the Food Stamp Program Subsidize Obesity?

At his NYT blog, Mark Bittman says that beneficiaries of SNAP (otherwise known as food stamps) shouldn't be allowed to pay for sodas.  Here is Bittman:

What’s to be done? How to improve the quality of calories purchased by SNAP recipients? The answer is easy: Make sure that SNAP dollars are spent on nutritious food.

This could happen in two ways: first, remove the subsidy for sugar-sweetened beverages, since no one without a share in the profits can argue that the substance plays a constructive role in any diet. . . . 

Simultaneously, make it easier to buy real food; several cities, including New York, have programs that double the value of food stamps when used for purchases at farmers markets. The next step is to similarly increase the spending power of food stamps when they’re used to buy fruits, vegetables, legumes and whole grains, not just in farmers markets but in supermarkets – indeed, everywhere people buy food.

On one level, I'm sympathetic to Bittman's argument.  Why should my tax dollars be used to subsidize bad behavior?  But, if we are going to accept that argument, where do we stop?  As a professor, I indirectly get a paycheck from the State of Oklahoma.  What is to stop someone like Bittman one day proposing that the federal or state government dictating where and how I can spend the portion of my paycheck that comes from taxpayers?     

Aside from this "slippery slope" argument, it is useful to consider the broader debate in economics on whether foods stamps, in general, cause obesity.  Unless a person (before receiving food stamps) is constrained in the food they buy, a standard economic model suggests that food stamps simply act as an income transfer.  Stated differently, under the aforementioned situation, a person shouldn't treat food stamps any differently than a monthly cash gift.  There are lots of empirical papers studying whether this true and the evidence is a bit mixed but I think its safe to say that a big part of the effect of food stamps (if not the total effect) is simply an income effect.  

This is useful to consider this perspective because - if we are going to give food stamps out of some feeling of charity or benevolence - we have to realize that restricting their use may not have the intended effect.  Money is fungible.  If you can't use food stamps to buy sodas, you'll use them to buy more of something else - freeing up money to buy soda.  

I also think it isn't particularly helpful to claim that food stamps are "subsidizing" obesity simply because sodas can be bought directly with food-stamp dollars.  Food stamp recipients are choosing to use their dollars (and food stamp coupons/debit cards) to buy sodas.  Food stamps are only "subsidizing" obesity to the extent that extra income is subsidizing obesity.  It isn't food stamps per se that are causing soda consumption - it is people's preferences for sodas that are leading to soda consumption.