By Eric Crampton 26/06/2017 1


Versions of cost-benefit that tally up all of the savings to a public health system from banning people doing things they like, and ignore the costs incurred by people banned from doing things they like, lead to this:

We reveal today that new Ministry of Primary Industry guidelines for food outlets require your hamburger to be cooked to fried or grilled to 70C internal temperature. As any home cook can tell you (or indeed, anyone with a copy of the Edmonds Cookbook sitting handy) 70C is, to all intents and purposes, nuking it to high heaven. What is left is a hunk of dried out, grey tyre rubber.

…Chefs around the country have no doubt been stewing at the new “guidelines”, but it was executive chef Dan Fraser at the historic Duke of Marlborough Hotel in Russell who put a match to the flambé.

First he received an email from an MPI official. “You need to make some changes,” he was told – the same stern message they were sending other restaurants and caterers around New Zealand.

And it isn’t just hamburger:

Fraser said the rules will also cause issues for serving steak tartare, beef carpaccio, pate or chicken livers.

This is what you get when the government bears downside costs through the public health system and Vogons run things. If the justification is that people might underestimate risks of undercooked hamburger, then maybe you could make a case for putting warnings on menus about risks of undercooked hamburger. Maybe something like “Well done burgers are safest, but less tasty. We serve ours medium. Consider our non-burger options if that’s what you prefer!” At least that version of things has some respect for individual preferences.

I’d written on this back in 2012. Minister Wilkinson was citing $162 million in costs of food-borne illness. A chunk of that was enforcement costs that, if anything, would have to rise with her new regime. As for the rest? Count the costs of illness, ignore the benefits of tastier food. Standard drill when you want a high social cost figure to justify compulsion. My post of 2012:

The bulk of the remaining tabulated costs are individuals’ intangible willingness to pay to avoid a foodborne illness – about $100 million in residual private costs as estimated from NZ value of statistical life estimates. We can leave aside for now problems in that we don’t have good prevalence data on non-reportable illnesses like norovirus that manifests as mild gastroenteritis; Applied Economics is very up front about the limits of inadequate data here. But by far the biggest part of the cost estimates comes out of willingness to pay measures.* That’s important. Why? Because people are choosing, all the time, which dining establishments to frequent.

Suppose that there’s a roadside falafel place with food I adore but that comes with completely known 1% risk that I’ll get mild food poisoning. I eat there a hundred times, I get food poisoning once. But I keep going back because of the taste. If new food safety regulations mean the place shuts down, Wilkinson’s measure says I’m better off because I’m saved those willingness-to-pay derived figures on the costs of mild food poisoning. But I’ve already specified that I knew about the risk and judged it worthwhile; I’m then necessarily worse off if I can’t get a falafel. You can’t easily use a willingness-to-pay measure to overturn a consumer’s decision when consumer decisions underlie willingness-to-pay measures. You can perhaps make an asymmetric information argument; that tends to argue for random inspections and public posting of findings on facility cleanliness rather than for big compliance regimes.

So is the new regime worth the cost? That depends on the compliance costs that will be faced by small and mid-sized traders. Wilkinson assures us that small traders won’t face onerous burdens, but I’d really prefer seeing proper analysis of the Bill from someone like Otago’s Andrew Geddis. And we have to keep in mind that a substantial proportion of the costs Wilkinson cites might actually be voluntary choices consumers are making that, on lucky draws, yield tasty goodness any diminution of which consequent to regulation ought be counted against the Bill’s possible health benefits. Banning me and others like me from having my hamburgers medium-rare might save the health system a bit, but it’ll certainly cost me some utils. Equally bad is what a big fixed-cost regime would do to food startups. I really hope that the legislation isn’t as costly on those two fronts as some folks fear; I’d love to see independent legal analysis.

Emphasis added.

Remember when National campaigned against the nanny state? I know it was a long time ago. I think they’ve forgotten too.


One Response to “Inside the asylum: food safety edition”

  • Storm in a teacup – a matter of a particular chef looking for something to be affronted about. The guidelines are just that – guidelines, not regulations. As a fan of steak tartare rare steaks and raw seafood, I’m pretty sure common sense will prevail once the posturing dies down.

    I agree with the separation of social cost from benefit – the benefit accrues to the individual. A significant chunk of the direct cost of any health issue is borne by society. It makes good fiscal (if not economic) sense to disregard a notional benefit in cases like this. Your point on enforcement and compliance cost is salient however.

    This however is just bad statistics:

    “Suppose that there’s a roadside falafel place with food I adore but that comes with completely known 1% risk that I’ll get mild food poisoning. I eat there a hundred times, I get food poisoning once. ”

    – you can do better!