How do you order at restaurants?

Yesterday, Alexandra Sifferlin at TIME.com wrote about some research I've worked on with Brenna Ellison at the University of Illinois.   Brenna collected data on what people order at restaurants and correlated that with what other people at the same table also order.  Here is a snippet from the TIME blog:

The researchers then created a model to assess how customers felt about their choices. Based on the popularity of menu items, the researchers determined the probability that individuals were satisfied with their choice. Interestingly, this gauge of satisfaction was influenced by expected factors such as price and calories, but also by fellow diners’ menu choices as well. They found that even if a customer initially felt less satisfied about their choice of say, a salad, they felt better about it if their friends ordered an item within the same menu category.

“The big takeaway from this research is that people were happier if they were making similar choices to those sitting around them,” study author Brenna Ellison, an economist at the U of I, said in a statement. “If my peers are ordering higher-calorie items or spending more money, then I am also happier, or at least less unhappy, if I order higher-calorie foods and spend more money.” So if you’re hoping to eat better, try dining with friends who do too.

You can read the actual research paper here.

What Explains the Difference in the Way Americans and French (and Brits) Eat?

I ran across this fascinating paper entitled "Do Prices and Attributes Explain International Differences in Food Purchases" by Pierre Dubois, Rachel Griffith, and Aviv Nevo that is forthcoming in the American Economic Review (an earlier version of the paper is here; a gated forthcoming version can be found by searching here).

According to the paper, French consumers eat about 1777 calories every day.  Americans, by contrast, eat 2103 calories (UK falls in the middle at 1929).  The differences don't end there.  49% of our calories come from carbs; but for the French its only 38%.  A much larger share of French calories comes from fat than those of us in the US (46% vs. 37%).  When one digs a little deeper - it becomes clear why: The French eat more dairy and oils than Americans.

Now, here is the key question which Dubois and colleagues ask.  Why do people in the US, UK, and France eat so differently?   

The authors consider three possible explanations: 

1. differences in prices across countries,
2. differences in the food options available (and nutrient content of foods) across countries, or 
3. differences in what people like to eat across countries (i.e., differences in preferences).

Their data reveals a number of interesting findings.  For example, even though Americans eat more calories than the French, we spend less money doing so ($426/quarter vs. $466/quarter).  Part of the explanation is that food prices are generally higher in the France than the US, but interestingly, it isn't across the board in the ways one might expect.  Fruit and Veggie prices are similar in the US and France.  But, the prices for dairy, meats, oils, and prepared foods are 31%, 76%,  16%, and 18% lower in the US than France.  Interestingly, sweeteners and drinks are priced 39% and 43% higher in the US than in France.  So, one thing becomes apparent: the French are eating more dairy and oils than we are in spite spite of the higher prices.  They must either really like to eat those foods or there must be more of those kinds of foods in France to choose from (they also eat about the same amount of meat as we do - as a share of calories - despite meats being 76% more expensive it France).   

Ultimately,  Dubois and colleagues find that all the above factors matter.  The author's models predict that Americans consume an average of 2212 calories each day (slightly more than the "raw mean").  Then, the authors make some interesting projections.  They calculate that Americans would:

• eat 2158 calories if we were exposed to the same food options (or product attributes) as the French
• eat 1890 calories if we faced the same food prices as the French
• eat 1841 calories if we faced the same food options and prices as the French

The authors conclude:

The estimates allow us to simulate counterfactual quantities purchased by households with preferences from one country but facing prices and product attributes from another country. We use the simulations to learn about the relative importance of preferences versus the economic environment. We find that, the average US household when faced with French prices and product attributes, will purchase substantially fewer calories, bringing the level close to that of the average French household when faced with the same environment. However, the composition of these calories would differ. The simulated change is mostly due to price differences. In contrast, when we simulate the average US household’s food basket with UK product attributes this has a substantial impact on reducing calories, whereas changing relative prices in fact increases calories. From these findings we conclude that the economic environment makes a substantial difference on the consumption basket. However, in general, it is the interaction of preference, prices and attributes that explains the cross country differences.

I find these results interesting because there are many Americans who seems to subscribe to a view that the French have some kind of moral superiority when it comes to food and weight.  I read these results to say that the French are, in large part, just responding to the economic incentives they face.  And while they consume fewer calories than we do, it isn't all that clear they're better off given that they must pay more for many of the foods they desire than do Americans. 

I'm in Italy for the next two weeks. I wonder what I'll eat differently due to differences in food prices and availability?

Most overpriced items in the grocery store

Yesterday I received a phone call from a producer for a major cable news station asking if I'd be willing to come on a show and talk about this story that appeared in Business Insider entitled: "5 Of The Most Overpriced Items In The Grocery Store".

After reading the story, I gave the following response to the producer (slightly edited here for the blog).  Although it would have been nice to have a little air time, I'm happy to report that they decided not to run with the story, at least as it was originally premised.

The story equates “overpriced” with the “percent markup”, which is pretty shaky.  There are a lot of good reasons why the percent mark-up may vary across products that has little to do with being “overpriced”.  For example, differences in demand for convenience and other characteristics, differences in costs of packaging, storage, transportation, etc. will cause differences in the percent markup.  

Nonetheless, let’s play along.

1) Bottled water.  On the surface, it does seem crazy that there is a 4000% mark-up for bottled water.  But, part of the reason for the high percent is that the price of water is REALLY cheap to begin with (so the percent will look very high though the actual dollar mark-up in absolute terms is small).  More importantly, how valuable is convenience to you?  A lot of people are willing to pay an extra buck to have more convenient water and not have to fiddle with refilling and refrigerating a re-usable water bottle.  Who am I to say that an extra $0.50 or $1 isn’t worth it to the person whose paying for it?  If it were really the case that bottle water sellers were ripping us off, why doesn’t some entrepreneur enter the market and start selling cheaper bottled water and corner the market?  The fact is that most of the cost is in the packaging, transportation, etc.  When you buy bottled water, you’re paying for packaging and convenience.

The same arguments apply even more forcefully for pre-cut produce.  Who cares if pre-cut carrots and onions are marked up 40%?  I’m not having to do the work!  That’s an extra $1-$2 I’m definitely willing to pay.  And if someone else can figure out a way to do it for less than 40%, you can bet they’d have my business.  Competition – in the long run- will eventually drive down prices to their approximate costs. 

2)   In general, I would characterize something as “overpriced” if people have mis-perceptions; if they believe they’re getting something from a product that they’re not actually receiving.  Two of the examples in the story potentially fit that criteria: name-brand spices and brand-name cereal.  One way to know whether you’re being fooled by marketing is to do a blind taste test.  It is often the case that our brain is more powerful in influencing how we think something tastes than our tongues.  So, with a neutral friend, try it out: can you REALLY taste the difference?  If not, you may be over-paying.

3)  In this light, there are a number of products that many people have “incorrect” beliefs relative to what scientific studies say – thus, they may be paying a premium for characteristics that they’re not actually recieving.  One example is food with a "natural" claim. A “natural” label is pretty vacuous, and I've previously touched on those issues here and here.  Another example is organic food.  People believe a lot of things about organic foods that just aren't true: that they’re pesticide free, that they support small farms, that they are more nutritious, etc.  I’m not saying there are NO benefits to organic, only fewer benefits than most believe.  A lot of the same arguments apply to local foods.  Chapters 5 and 9 in The Food Police have all the details and citations.

Do Consumers Want Mandatory GMO Labeling?

The newest release of our monthly, nationwide food demand survey (FooDS) is now up.  The report contains data on trends in meat demand and awareness and concern over various food issues.  

Given the renewed interesting in mandatory labeling for genetically engineered food, we added two new questions to the July survey (if you're interested, you can see the results of a previous survey we conducted in California just before the Prop 37 vote); a version of that report is coming out in the Journal of Agricultural and Resource Economics).

The first question on GMO labeling asked in the most recent survey was worded:

Which of the following do you think the FDA or USDA should require to be labeled on food packaging?

Then, 10 items were listed, and respondents had to place four and only four items in a box indicating which items they though were most important to label.  Here are the results.

I must say that I am shocked by the results.  63.6% said they thought "added growth hormones and antibiotics" should be labeled followed by 55% who said "GMOs."  Oddly, those items which ARE currently required to be labeled, including fat content, total calories, and known allergens (e.g., nuts), fell further down the list.  At first I thought this might be a mistake, but after double and triple checking the data, this is apparently how consumers responded.  Perhaps they take currently mandated information (e.g., calorie content) for granted (or don't realize it is mandated).  Perhaps GMOs are just more in news these days drawing attention?  On a technical note, the order of the 10 items was randomized across respondents, so these findings cannot result from some sort of order effect.  All in all, I'm not sure what is driving the result but I welcome any insights if you have them.

Secondly, we asked consumers: 

Which of the following best describes your views on mandatory labeling of foods containing genetically modified (GMO) ingredients?

They could pick one (and only one) of the following responses: 

• I support mandatory labeling because consumers have a right to know regardless of the cost 
• I support mandatory labeling, but only if it doesn't significantly raise food prices or cause frivolous lawsuits
• I do not support mandatory labeling because voluntary labeling exists and will thrive if consumers really want to avoid GMOs
• I do not support mandatory labels because the scientific consensus suggests GMOs are safe to eat
• I don't know (5)

Here are the results

A majority (54%) said they wanted mandatory GMO labeling because they said they had a right to know regardless of the costs.  This result is surprisingly high and doesn't quite mesh with the actual voting outcome in California (or our previous survey which showed voting intentions influenced by cost and information).

As I articulated in several editorials in Sept-November last year, I do not think the economic arguments for mandatory GMO labeling are particularly strong (voluntary labeling is a different matter all together).  These survey results suggest little public support for that particular view.  However, there is also ample evidence to show that most consumers are woefully uninformed about biotechnology and that information can have big effects on attitudes (and as Prop 37 showed - voting outcomes).

What do farmer's market chickens, motorcycles, and unpasteurized milk have in common?

A friend sent me a link to a new study in the journal in the Journal of Food Safety. The study shows that 90% of the chicken sold at a farmer's tested positive for Salmonella.  By contrast, only 52% of non-organic grocery store chickens and 28% of organic grocery store chickens tested positive for Salmonella.  In addition, the study found that for another illness-causing bacteria, Campylobacter, 28% of farmer's market chickens were positive but only 8% of non-organic grocery store chickens and 20% of organic grocery store chicken.  So regardless of whether you buy conventional or organic chicken at the grocery store, it is likely safer than that bought at the farmers market (at least the farmers analyzed in this study).   For one bacteria (Salmonella), organic is safer, for another (Campylobacter), conventional is safer. 

Why is this result interesting?  Because the findings are likely to be strongly at odds with most people's beliefs.  I suspect (but do not know for sure) that if asked, most people would say they think foods from farmers markets are safer than from grocery stores.  They would also likely assert organic is safer than conventional.  Yet this evidence (and other studies like it) is at odds with people's beliefs.  

I don't have a problem with people eating at farmer's markets.  Go for it!  But, ideally one should act knowledgeably, knowing full well the risks they're undertaking.  And I fear all the hype often causes people to mis-perceive the true benefits and risks of conventional, organic, and local foods.  

A similar problem exists with unpasteurized milk (or raw milk).  Although it is illegal in many states, many people want to buy unpasteurized milk.  Again, I say go for it (as long as they are two consenting adults; kids may be a different story at least if they're not your own).  But, let's not be glib about the safety risks.  Sure, it might be possible that pasteurization kills some healthy bacteria but it is certainly true, and scientific studies clearly show, that pasteurization kills illness-causing bacteria.  

So, why do we have government regulations that ban unpasteurized milk but promote farmer's markets?  Maybe the risks are larger or are more well known in one case (raw milk) than the other (farmers market meat).  One of the proper roles of government, I believe, is to provide objective-science based information.  What people do with that information is up to them.  But, it does bother me a bit when certain foods attain a moral status that causes people to under-estimate risks and over-estimate benefits.  Kahneman talked about this problem in his book Thinking Fast and Slow: something that seems good is therefore perceived unrisky and vice versa.  It also troubled me that many calls for food policies by food activists seem to be based on inaccurate perceptions of risks and benefits.  

What does this have to do with motorcycles?  Regulations in many states don't allow people to ride without helmets (helmet-less riding is banned) .  Clearly, riding a motorcycle without a helmet is risky.  How much riskier is it than eating farmers market chickens or drinking unpastuerized milk?  I don't know.  Strangely, in Oklahoma, we allow motor cycle riding without a helmet.  But, sales of raw milk in grocery stores is banned (my understanding is that it can be bought direct from the farm in OK).  So, people are presumed smart enough to weigh the risks of riding a motorcycle without a hat but not smart enough to buy raw milk from a grocery store?  Seems like a consistent paternalist would outlaw both.  Or a consistent libertarian would make both fully legal.  Either way, shouldn't we all want the best information to make choices?