SCHILLER: Unhappy meals, repressed markets
The actions taken by San Francisco legislators to transform Happy Meals into “Unhappy Meals” have been reported widely. The new ordinance they have proposed mandates dramatic changes in the content of fast-food meals specifically targeted toward kids (e.g., with colorful packaging, toys, etc.). Every kids meal would have to include half a cup of fresh fruit or three-quarters of a cup of fresh vegetables. Those requirements, together with calorie and sodium limits, would effectively force McDonald's, Burger King and other franchises to substitute broccoli for french fries and a cookie. Imagine the joy this meal will bring to the kids.
A three-member subcommittee of supervisors is holding hearings on the proposed ordinance in the next week or two. If approved by the full board, it will reach Mayor Gavin Newsom’s desk by the end of September and could be law by the end of October. As this legislative process moves forward, it is worth considering both the avowed justification for this market intervention and its implied message for regulatory boundaries. This is not just another San Francisco quirk - the action by San Francisco’s supervisors is symptomatic of increased regulation of free markets at all levels of government.
The San Francisco supervisors justify their intervention into the fast-food market by pointing to America’s obesity problem. As we all know, we eat too much, exercise too little and tip the scales too heavily. So do our children. We’ve all known this for a long time. And we all know we should behave better. The supervisors single out Happy Meals as a prime culprit in these behavioral patterns. As they see it, the billion-plus happy meals ingested by our kids start the fat-farm syndrome. Cut out the Happy Meals, and kids will embrace healthier, slimmer lifestyles.
The supervisors’ perspective raises two fundamental questions - one factual, the second philosophical. The factual question is simple: Will transforming Happy Meals into Unhappy Meals really make a dent in America’s (kid) obesity problem? Unlikely. First of all, those billion-plus Happy Meals account for a tiny fraction of the calories and sodium kids ingest a year. All those potato chips, Pop-Tarts, candy bars, ice cream, pizza and sodas junior devours at home contribute much more to the obesity problem. For some kids, that Happy Meal may even represent one of their most nutritious meals. Making it less attractive may well lead to greater consumption of even less nutritious alternatives. So the health benefits of this intervention are at best uncertain. What is certain is that Happy Meal sales will decline, fast-food employment will decrease and increased regulatory uncertainty will discourage business investment in San Francisco.
But what if, as seems most unlikely, Happy Meals are really a prime calorie culprit. Should San Francisco’s supervisors assume the role of food police? Let’s remember that it is the parents who purchase all those Happy Meals. Although their kids surely put pressure on them, mom and dad ultimately made a free choice about what menu items to purchase. And McDonald's and the other franchises made deliberate decisions about how to satisfy those market demands. It is this interplay of demand and supply that generates all market outcomes, including those billion-plus Happy Meals.
Clearly, San Francisco’s legislators do not accept this laissez-faire outcome. They reject the free market in favor of government regulation. In the process, they are substituting their judgment about what is best for children for the judgments of the children’s own parents. (Ironically, this anti-Happy Meal campaign originated with a childless supervisor in neighboring Santa Clara County.)
If this Happy Meal saga were an isolated event, it might not deserve more consideration. Unfortunately, this is not the case: Governments at all levels have been encroaching on free markets. The federal health care act passed earlier this year is replete with such encroachments. One of them parallels the San Francisco case. The legislation stipulates that the federal government will assume content and labeling responsibility for all school lunches beginning in 2014. Congress, like San Francisco’s supervisors, does not trust parents to make nutritional choices. Ironically, Congress does not trust local school administrators ( or supervisors) to make those choices, either. Congress decided this is a federal responsibility. It is hard to find any economic - much less constitutional - basis for such a usurpation of power.
The repression of free markets rarely occurs with the drama of a political revolution. Rather, free markets get repressed in piecemeal fashion by the steady accumulation of government regulations. Even if no single regulation poses a substantial threat to private property, entrepreneurship or market function, the accumulation of market-inhibiting regulations can suffocate free enterprise. According to the Heritage Foundation, this process has accelerated in the past couple of years. In Heritage’s annual ranking of nations, the United States has fallen from sixth place to eighth because of increased federal regulation of housing, banking, health care, auto and other industries in the past two years - an anti-free-market barrage that Heritage researchers call a “regulatory tsunami.” Were one to take account of increased state and local interventions (e.g., San Francisco’s ordinances), that tsunami would appear even more devastating.
This market repression doesn’t bode well for economic growth, either in terms of short-term recovery or long-run prosperity. If we really want to regain economic momentum, we’ve got to put the brakes on government interference with free markets.There’s a lot more at stake than just Happy Meals.
Brad Schiller is an economics professor at the University of Nevada at Reno and author of “The Economy Today” (McGraw-Hill, 2010).
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