Waiting for the Invisible Hand: Market Power and Endogenous Information in the Modern Market for Food
WSU School of Economic Sciences Working Paper No. 2009-7
40 Pages Posted: 20 Feb 2009
Date Written: February 19, 2009
Abstract
In many ways, the modern market for food exemplifies the economist's conception of perfect competition, with many buyers, many sellers, and a robust and dynamic marketplace. But over the course of the last century, the U.S. has witnessed a dramatic shift away from traditional diets and toward a diet comprised primarily of processed brand-name foods with deleterious long-term health effects. This, in turn, has generated increasingly urgent calls for policy interventions aimed at improving the quality of the American diet. In this paper, we ask whether the current state of affairs represents a market failure, and-if so-what might be done about it. We review evidence that most of the nutritional deficiencies associated with today's processed foods were unknown to nutrition science at the time these products were introduced, promoted, and adopted by American consumers. Today more is known about the nutritional implications of various processing technologies, but a number of forces-including consumer habits, costly information, and the market power associated with both existing brands and scale economies-are working in concert to maintain the status quo. We argue that while the current brand-based industrial food system (adopted and maintained historically as a means of preventing competition from small producers) has its advantages, the time may have come to consider expanding the system of quality grading employed in commodity markets into the retail market for food.
Keywords: credence goods, history, food policy, certification
JEL Classification: D23, D83, I18, Q18
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Why Have Americans Become More Obese?
By David M. Cutler, Edward L. Glaeser, ...
-
Why Have Americans Become More Obese?
By David M. Cutler, Edward L. Glaeser, ...
-
The Economic Reality of the Beauty Myth
By Susan L. Averett and Sanders Korenman
-
An Economic Analysis of Adult Obesity: Results from the Behavioral Risk Factor Surveillance System
By Shin-yi Chou, Michael Grossman, ...
-
The Long-Run Growth in Obesity as a Function of Technological Change
By Tomas Philipson and Richard A. Posner
-
The Long-Run Growth in Obesity as a Function of Technological Change
By Richard A. Posner and Tomas Philipson
-
The Growth of Obesity and Technological Change: A Theoretical and Empirical Examination
-
Body Weight and Women's Labor Market Outcomes
By John Cawley
-
Maternal Employment and Overweight Children
By Patricia M. Anderson, Kristin F. Butcher, ...
-
Maternal Employment and Overweight Children
By Kristin F. Butcher, Patricia M. Anderson, ...