Category Archives: Information disclosure

Becker and Posner on Obesity and Externalities

Becker and Posner discuss in a recent post if it is justified for intervene in the fast food industries by introducing bans on trans fats or by requiring fast food chains to post on menus the calorie content of the food they serve as New York City as recently done.

I found particularly stimulating Becker’s critical take on whether it is appropriate to view obesity as imposing an externality on others. Here’s an excerpt from Becker’s post:

The so-called externality results from the fact that greater obesity raises taxes on others because the medical bills of the obese are partly paid by general taxpayers due to subsidized medical care. As Posner points out, this argument may be weak because obese adults die earlier than others and in this way obesity saves medical costs. However, even if true, I am uneasy about such externality arguments. Typical true externalities occur when actions by one individual or firm directly harm others, as when pollution by a company worsens the health of inhabitants, or when a drunk driver crashes into another car and injuries or kills the driver and passengers of that car.

But the alleged “externality” with regard to obesity is due only to the government’s subsidy of medical expenditures, so that it is a case of one government intervention- justified or not- causing another intervention-control of eating. It is not a path of intervention causation that most people would be comfortable with in many situations. For example, since the government subsidizes the medical care of children of poorer parents, a mechanical application of this type of externality argument would say that this justifies governmental control over the number of children that poor parents can have. Additional children of these families create an “externality” by raising taxes on others to pay for the medical costs of these children. Many similar examples can be given where government regulations and other government programs cause certain types of behavior that raise taxes or subsidies and adversely affect taxpayers, even though there would be no externality from this behavior in the absence of the government programs.

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European Pollutant Emission Register and market value of listed firms

New information on firms’ polluting emissions appears to have a significant impact on their market value. This is the result found in the article Analysis of the effectiveness of the first European Pollutant Emission Register (EPER) by Cañón-de-Francia et al published online 31 December 2007 on Ecological Economics (article in press). The study uses data of firms listed in the European Pollutant Emission Register. It confirms results from most previous studies, that find a significant impact on firms’ market value of environmental information disclosure. Most previous studies however, use data of firms listed in the US Toxic Release Inventory. Link to the abstract

Reference

Analysis of the effectiveness of the first European Pollutant Emission Register (EPER) , Ecological Economics, In Press, Corrected Proof, Available online 31 December 2007 by Joaquín Cañón-de-Francia, Concepción Garcés-Ayerbe and Marisa Ramírez-Alesón