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I don't think that this is necessarily a debate that should be confined to market terms... but even debating it within those confines, I would actually argue th
by aliston 13y ago
I don't think that this is necessarily a debate that should be confined to market terms... but even debating it within those confines, I would actually argue that this is a perfect example of a market failure.
For one thing, food distribution in the US acts essentially like an oligopoly. There are a surprisingly few number of food distributors with a huge influence on which products are emphasized in the store. Companies like Frito-Lay and Coca-Cola can use their size to push out smaller companies and local farmers that produce healthier foods before the consumer even has a chance to find those products on shelves. As a result, in economic terms, most consumers are operating without anything close to perfect information and, consequently, aren't really "maximizing their personal utility functions."
Second, a big reason people are buying a lot of these calorie-dense, unhealthy, processed "foods" is that they are cheap compared to, say, fresh fruits and vegetables. However, there are massive health care cost externalities that aren't factored into the costs of those products. It's a classic market failure, and if those costs were properly factored in, consumers would probably consume a lot less of them.
- chime 13y agoI agree, it really does sound like the perfect example of economic market failure hitting the requirements of (1) monopoly/oligopoly and (2) causing negative externalities (in health) but I find it hard to call it so because of one reason - the demand curve intersects the supply curve at current market prices. The people are getting what they want to pay for and the suppliers are more than glad to provide them that. This is more like an unplanned emergence of manufactured consent in the agricultural/food/health industry. No single company, lobby, or agency planned on turning our world upside down and replacing grocery stores and farmer's markets with supermarkets and drive-thrus. What happened was that over the past hundred years, innovative companies in the food industry came out with delicious snacks, fast foods, and ready-to-eat meals that created a market that never existed before. When these companies grew and got stronger, their marketing message became embedded in the common sense - eat cereal for breakfast, drink 8 glasses of water etc. It was in the best interest of these companies to say "Tired at 2pm? Take some 5 hour energy!" And the consumers voluntarily started stocking up on 48 packs of Capri Sun and 128oz bags of Ruffles. As the companies grew, they were acquired and optimized to sell only the most profitable products. Over time organizations and agency sprouted up to protect the interests of the industry's capital, labor, and assets. If that meant ensuring corn was subsidized, so be it. If sugarcane sugar tariffs needed to remain high, so be it. It is easy to claim market failure looking at this solely from the supply side but from the demand aspect, the current market is paradise. Regardless of how good or bad the products are, people genuinely want them. Every now and then, I myself want a can of Pringles. Fulfilling the demands at prices low enough to satiate the consumers does not seem like a market failure to me.