Wednesday, July 09, 2014
There's No Place Like Foam
Washington, DC, being the seat of the U.S. Government, has a higher than average tendency to exert legislative control over its citizens. For some reason, the issue of food storage seems to be a particularly high priority, as evidenced by the city's abhorrent 5 cent tax on plastic grocery bags.
In the latest effort to choke off just a little more freedom from DC residents, the government has announced a ban on single-serving styrofoam containers - the kind used for take out food or to hold inexpensive beverages. In a town where busy workers rely heavily on food trucks and where home cooking is a time-consuming luxury few can afford, this is going to be a major blow to the city’s hungry.
The ban is being justified on environmental grounds. Styrofoam is famously durable, not able to be broken down by the ordinary bacteria that helpfully take care of the rest of our waste. This, it has been decided, poses an unacceptable risk to our planet, and must be stopped, without much - if any - consideration for the costs.
When a business makes a decision to use a certain type of product, it is calculated to be in that business’ best interest. This means not only inexpensive, but providing the customer with a value that will keep them coming back for more. There are very good reasons, apart from mere greed, that so many food service businesses rely upon styrofoam rather than alternative materials. As mentioned above, it’s durable. Food doesn’t leak out of it or gradually render it useless, as tends to happen with plain paper containers. It’s lightweight, it doesn’t impart an alien taste to its contents, and yes, it’s cheap. Simply put, it’s ideally adapted to food service.
So what will be the consequences of a ban on this most perfect of containers? Lower quality products for consumers at a higher price. A basic understanding of supply and demand shows that any kind of cost increase on business will be shared between the customer and the business owner, depending on how responsive consumer demand is to price changes. This means that not only will customers be paying higher prices, but business owners will be making less money. This might not be a problem for national chains like McDonalds and Starbucks, but for businesses on the margin - and a great many of DC’s food trucks are undoubtedly operating on the margin - increased costs could mean the difference between entrepreneurial life and death.
There are further unintended consequences to these kind of bans, as when cities like Los Angeles banned single--use plastic grocery bags in favor of reuasable cloth ones in an effort to be eco-friendly, not realizing that these bags turned out to be breeding grounds for dangerous diseases.
A cost-benefit analysis is only useful, however, once you accept that there is a role for government intervention in the market in the first place. Economic theory, recognizing the benefit of free markets, dictates that a market failure be demonstrated before government gets involved. Let's take a moment to see whether this criterion is met in the case of styrofoam containers.
The argument traditionally offered by economists is the problem of externalities, situations where the full cost of a good’s use is not borne by those who use it. The customer pays for the production of the styrofoam in the price of his food, but the costs to the environment are borne by everyone. Thus, there is a market failure resulting in overproduction of styrofoam, and the government must intervene to correct it.
There are problems with this argument, most notably the tenuous claim that styrofoam results in externalities at all. When someone finishes using a styrofoam container, assuming they don’t violate existing anti-littering laws, they typically contract with a private company to carry the trash away and store it on land designated for that purpose.
If the owners of that land decide they want to store styrofoam there, they are free to refuse (no pun intended) and consumers will have to find another way of dealing with the waste. However, if they are willing to store the trash, then what is the problem? Where is the externality? The environmental cost is borne entirely by landowners voluntarily accepting waste. There is no market failure, and no justification for government intervention.
If the issue is that many landfills are classified as public land, Congress is free to make a law prohibiting the storage of styrofoam on public land, but to outright ban a privately made product that satisfies the needs of consumers and businesses alike simple because it is durable is an unacceptable violation of individual rights from a city that makes a habit out of that sort of thing.
Posted by John J. Ray (M.A.; Ph.D.).