Pareto Policy Solutions, LLC

advancing innovation through smart regulation

Pareto Policy Solutions, LLC is a policy analysis and advocacy firm committed to advancing sustainability through “smart” regulation: regulation that rewards, and does not penalize, superior performance.  Often, such actions leverage advances in science and technology and make the regulatory program itself more effective as well as more efficient.

Sarah Palin's Big Gulp

Last week, Sarah Palin spoke at the Conservative Political Action Conference in Maryland.  Holding a Big Gulp from 7 Eleven, she raised it in the air as a toast to the crowd, and took a big sip.  This gesture—a visual rebuke of New York City Mayor Michael Bloomberg--received widespread press coverage.

Last year, with Mayor Bloomberg’s support, NYC imposed a regulation banning large (more than 16 ounces) sugary drinks at certain food establishments. The purpose was to encourage better nutritional habits.  (Ironically, the Big Gulp from 7 Eleven was excluded from the regulation.)  The ban was inevitably challenged and, last week, a New York court blocked the regulation just before it was to take effect.  The Mayor promised to appeal.  Palin’s toast was a big “thumbs up” to the court.

The NYC regulation is the latest poster child for those who believe government ought to use its powers to prevent obesity by regulating high-calorie, low-nutritional foods and beverages.  Although there is no argument that the American diet has gotten worse in recent decades, and childhood obesity is a huge public health issue, the idea that government should restrict people’s choice in food selection is a hot topic among regulators -- and economists.

According to economic theory, there is justification for regulation to address a “market failure”, such as air or water pollution, where the actions of some impose harm on others that is not addressed by the market.  In theory, appropriate regulation can provide net benefits to the public. 

But economists are not as sanguine over other types of regulation.  Susan Dudley, the former regulatory czar in the George W. Bush Administration and currently director of the Center for Regulatory Studies at the George Washington University, has expressed concern over regulations that aim to maximize “private benefits”. Dudley is alarmed by regulations that restrict personal choice—such as regulations setting minimum energy efficiency standards for appliances, or regulations to ban or tax low nutritional foods and beverages.

To Dudley, people ought to have the freedom to choose among products, and this freedom includes the freedom to choose products that are not so energy efficient, or foods that contain low nutritional value.  It simply may be that an individual values certain product attributes (taste) over other attributes (nutrition).   

The debate is not just theoretical.  In 2010, the Obama Administration imposed regulations that would raise fuel efficiency standards for automobiles. The “private benefits”, in terms of fuel savings, are expected to be very large and represent about 90% of the total benefits.  But is this kind of regulation – one that restricts consumer choice by forcing automakers to build more fuel-efficient vehicles -- something the federal government should impose?  Conservatives would say no.

Sarah Palin is raising an important issue of debate among regulators and would-be regulators.

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