A Cost-Benefit Analysis of Sugary Drink Regulation in New York City
23 Pages Posted: 6 Feb 2014 Last revised: 16 Feb 2014
Date Written: February 14, 2014
New York City Mayor Bill de Blasio, who has been critical of the administration of his predecessor, Michael Bloomberg, has nevertheless committed to carry forward one Bloomberg initiative: the citywide size restriction on sales of "sugary drinks," or most commonly, carbonated sodas. The "Portion Cap Rule" would have prohibited the sale of sugary drinks in containers exceeding 16 ounces, had it not been enjoined by a State court. The New York State Court of Appeal will hear the case later this year. The Portion Cap Rule was motivated by public health concerns, and the growing obesity problem that stems in part from the consumption of sugary drinks.
Criticism of the Portion Cap Rule came from many quarters, including a broad coalition of industry groups (plaintiffs in a lawsuit), and civil rights organizations and others apparently concerned with public health and communities of color. Objections included the complaint that the Portion Cap Rule deprived consumers of freedom of choice, that it was not effective enough, and that it discriminated against minority-owned businesses. None of these criticisms, however, attempted to ascertain any sense of proportionality of the health benefits of sugary drink regulation, as opposed to the costs of this infringement of liberty. Given the continuing importance of the obesity problem and related health disorders, some quantitative analysis would appear to be useful. This paper performs a very rough cost-benefit analysis of sugary drink regulations such as the Portion Cap Rule. This paper seeks to answer the question: would sugary drink regulation generate more monetizable health benefits than it cost sellers of sugary drinks? While this is clearly not the only criteria by which sugary drink regulation should ultimately be judged, it seems beneficial to estimate the costs and benefits as a way of illuminating some of the tradeoffs involved in sugary drink regulation.
This analysis finds that the costs of sugary drink regulation, estimated in terms of lost profits, could be as high as $500 million. The potential health benefits, estimated in terms of avoided costs of obesity, related diseases such as type 2 diabetes and coronary heart disease, and the avoided costs of premature mortality due to these diseases, could range from about $3.2 billion to $13.2 billion. The extremely high benefit-to-cost ratios are driven by the relatively small number of premature deaths that can be statistically attributed to sugary drink consumption, through the causal pathways of obesity, diabetes, and coronary heart disease. Without premature mortality costs, the benefits and costs of sugary drink consumption appear to be of a comparable magnitude.
Keywords: cost-benefit analysis, sugary drinks, obesity, food regulation
Suggested Citation: Suggested Citation