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Free Market Mandatory Labeling?

August 10, 2008

I recently stumbled upon an interesting story about nutritional labeling in the restaurant business. The authors, Goldstein and Schlosser, from the LA Times, seem to be in favor of requiring business to provide nutritional information on their products. They state:

The restaurant chains and fast-food firms argue that mandatory menu-labeling laws restrict their freedom to do business. That’s true. But so do laws requiring them to pay a higher minimum wage, post health inspection grades and prohibit smoking — all of which they vigorously opposed. For more than a century, industry groups in the U.S. have also fought against food-safety and product-labeling laws. Since the days of President Theodore Roosevelt, a strong counter-argument has been made: The health of the American people is more important than allowing companies to do as they please.

So labeling restricts the freedom of businesses… however… Goldstein and Schlosser state just a few paragraphs later that mandatory menu labeling promotes the free market:

Mandatory menu labeling actually promotes free enterprise and the workings of the free market. In recent years, a number of fast-food chains have begun to promote healthier items. We applaud that decision. Requiring calorie information on menu boards would support those marketing efforts and enable consumers to make informed choices. Chains that sell good-tasting, lower-calorie foods will be rewarded; chains that don’t may see their sales decline. That’s how the free market is supposed to work.

Does anyone else see a contradiction in this? I can’t see how restricting the freedom of individual businesses to do what they want in their own private establishments increases the workings of the free market. After all, mandatory restrictions and freedom aren’t exactly synonyms.

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One Comment leave one →
  1. August 22, 2008 10:53 pm

    The discussion hinges on how much information is available to consumers. Neoclassical economists base their models on perfect information. In a sense, the authors you cite are just forcing businesses to provide the “prerequisite” information (as defined by mainstream economics).

    Of course, this perspective assumes individuals cannot (have not) discover(ed) this information on their own (or at least claim it is not worth the cost of their discovering it).

    In the end, it depends on how you define free markets. If you mean clearly defined property rights and the ability to willingly engage in any transaction, you are correct. But most people say “free-market” when they mean the mostly free system espoused by a majority of economists.

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