Wednesday, September 27, 2006

Trans Fat Tradeable Permits

As I was planning to spend the day in New York today, I was pleased to read that "the New York City Board of Health plans to prohibit the city's 20,000 restaurants from serving food that contains more than a minute amount of artificial trans fats." Outstanding, New York City must have solved all of its big problems, since it has now decided to focus on this one.

What can I say? I'm an economist, and I'm here to help. Imposing a quantity restriction on trans fats does not accommodate different costs of trans fat abatement across cuisines. Taking the trans fats out of french fries may disproportionately reduce their taste or increase their costs. Instead, why not grant all restaurants an allotment of permits to cook with trans fats and allow them to buy and sell extra permits as the menu demands? As with other pollutants, tradeable permits allow the trans fat reductions to occur where the relative costs of doing so are lowest.

Economics in action -- working alongside the nanny state to keep you healthy.

9 comments:

Chip said...

Wonderful post. Economists blessed with good, dry wit are rare. I hope your post makes it farther up the media chain and, if it does, that you'll choose to expand on various options for exchanging the credits.

crocop said...

It seems to me that the thinking beyond such a system assumes that the unpriced cost of consuming a marginal unit of hydrogenated oil is equal across food groups. For example, even though the oil that goes into the french fries at McDonald's and the oil for upscale restaurants probably costs the same in the marketplace, the cost of getting rid of that oil is probably much larger than it is for an upscale restaurant, whose consumers are much more health-conscious.

As much as I dislike trans fats, I'm not sure there is room for effective public policy for regulating them.

Kenji said...

A good try, but all of the shortcomings of use of permits in other areas (e.g., air pollution) apply here equally. On what basis do you decide how many permits to issue, and how do you reduce the total production of transfat?

Noah said...

Interesting approach but how would you publicly regulate trans fats? I don't see how it could be done...

Crocop said...

Looking back at my original comment, I realize that I wasn't very clear.

My point is that all trans fats are not created equal. One gram of the stuff at Burger King does not represent nearly the same negative externality as that same gram at, say, Arezzo.

This is not--I repeat, NOT--analagous to a carbon tax or gasoline tax. In those instances, one unit of emissions from one power plant or gas station is essentially equivalent as far as externalities are concerned.

I suppose the effect, then, would be to punish the fast-food joints disproportionately. Of course, some might argue that bashing such plebian chains is in society's best interest.

Even if one buys the paternalistic argument, however, there are much more elegant policies for correcting the negative externalities associated with fast-food places than this.

Elsa said...

Interesting idea. While I support efforts to reduce restaurants' use of trans fats (my father's a cardiologist), the extent to which restricting restaurants' use of trans fats will result in their selling healthier foods is unclear. The restaurants in question may very well substitute other unhealthy fats (palm kernel oil, anyone?) for trans fats, the result being that the regulation would substantially increase costs for the restaurants without causing the desired increase in healthiness of the food. I think that if they want this regulation to be effective, they should restrict fats that are nearly as harmful as transfats as well. In order for this process to be efficient, however, I'd think they would need to consider options like the idea you've just proposed.

Anonymous said...

What about a fat tax with the idea that consumers pay the true cost of the good to society. The proceeds from the fat tax could go directly to the health care budget (of course I live in Canada where the government pays most of the health care bills). The basic idea is that we internalize the external health care costs to the consumer and all that cheap junk food will then start to reflect it's true cost. The added bonus would be that food businesses would have an incentive to make modifications to their foods - if they could do so by maintaining food taste - and avoid the higher prices.

Anonymous said...

The Holy Grail of Donuts...the Low Fat Donut
Forget the ridiculous hype on the new zero trans fat donuts out there.
You should do a story about Holey Donuts!, based out of Brooklyn. They
are Ultra Low Fat, Zero Trans Fats and FABULOUS. Zone Diet even buys
from them. http://www.holeydonuts.net/

Anonymous said...

The Holy Grail of Donuts...the Low Fat Donut
Forget the ridiculous hype on the new zero trans fat donuts out there.
You should do a story about Holey Donuts!, based out of Brooklyn. They
are Ultra Low Fat, Zero Trans Fats and FABULOUS. Zone Diet even buys
from them. http://www.holeydonuts.net/