Viewpoint: Are Food Labels Good?

Abstract

Do people from benefit from food labels? When? By how much? Public officials face persistent challenges in answering these questions. In various nations, they use four different approaches: they refuse to do so on the ground that quantification is not feasible; they engage in breakeven analysis; they project end-states, such as economic savings or health outcomes; and they estimate willingness-to-pay for the relevant information. Each of these approaches is subject to strong objections. In principle, the willingness-to-pay question has important advantages. But for those who favor asking that question, on the ground that it is the best way to measure the welfare effects of food labels, there is a serious problem. In practice, people often lack enough information to give a sensible answer to the question how much they would be willing to pay for (more) information. People might also suffer from behavioral biases (including present bias and optimistic bias). And when preferences are labile or endogenous, even an informed and unbiased answer to the willingness to pay question may fail to capture the welfare consequences, because people may develop new tastes and values as a result of information. A good path forward is to focus on the effects of food labels on people’s actual experience, in order to capture their welfare effects, rather than to rely on how much people are willing to pay for such labels, or on whether they report, in advance, that they favor of them.