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What are Voters Willing to Pay for Food Labels?

Several months ago, I published a study in the journal Food Policy entitled The Political Ideology of Food.  The results, which suggested most people want more food regulation, were picked up in a variety of outlets such as the Food Navigator and Reason.com.

In responding to media inquiries about the study, I consistently told reporters something along the lines of the following: I’ve done lots of surveys like this over the years and one of the things I routinely find is that people appear much more favorable of regulation and labels in hypothetical surveys as compared to when real money is in the line.  In fact, I indicated at the end of the paper:

One important factor that our survey did not address is whether public support for
food and agricultural policies will remain high when people are made more aware of the specific costs of government action in this area. Many economists, including myself, have been critical of many of the policies this sample of consumers found so favorable, in part because it does not appear the benefits outweigh the costs. Only time will tell whether economic analysis on these matters will have any influence on the public’s ideologies with respect to food.

This insight is particularly relevant to the study we released earlier this week on Californian’s desire for mandatory labeling of genetically engineered foods.   In that study, we found a whopping 76.8% of likely voters said they intended to vote in favor of Prop 37 and the mandatory labeling policy.  Yet, when we followed up and asked people if they would still be in favor if food prices increased as a result of the policy, a different story emerged. 

Below is a graph of the percentage of the percentage of Californians projected to vote yes as the costs of the policy increase.  Citizen’s support for regulation is indeed price sensitive.  As the graph shows, at a food price increase of more than 11.9%, in fact, Prop 37 looses majority support.

Our research has been covered in a varied of blogs and media outlets (e.g.,here, here, and here).  And a few stories, such as the one over at Take Part, argue that the actual cost of Prop 37 will be far less than the 11.9% “break even” point.  As a result the author posits that:

But perhaps the most important detail—one that the survey didn't discuss and likely many voters don't know—is that the cost of food prices will be much smaller than 25 percent, much closer to a number which is almost negligible. 

Could be.  But it is it is important not to confuse cost with demand.  We were not measuring the costs of Prop 37.  We were measuring the price point at which people would be indifferent.  Those are two different things.  Though, the author is correct to say that if you analyze the demand for Prop 37 at the low price they assume (about 0.1%), then yes you’d still project strong support.  The costs have be highly debated and it isn’t particularly constructive to rehash those arguments here.

One thing I will point out in relation to the survey results is that economic research on how people respond to surveys suggests that the tend to over-estimate how much they are willing to pay for policies.  One widely cited review study, for example, showed that the amount people said they were willing to pay in hypothetical surveys was about three times what they were actually willing to pay when money was on the line.  Applying that insight to our analysis reveals that the “true” break-even price is probably something closer to 11.9%/3 = 3.97%. 

That said, we also have to remember that people don’t actually have to pay the price of the policies they support at the poll like they do when they’re shopping.  The result is that the costs of policies often get overlooked when people vote.

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