The War Over Salt

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The War Over Salt

• By Melanie Warner
• New York Times
• September 13, 2006

http//www.nytimes.com/2006/09/13/business/13salt.
html?ex1315800000en3b450e260b3991fcei5088par
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Opposition to Salt

• The average American consumes more than 3,300
  Milligrams of salt per day.
• Government dietary guidelines state that the
  average young adult should consume less then
  2,300 mg/day, and that the middle-aged and older,
  African-Americans, and those with high blood
  pressure should consume less then 1,500 mg/day.
• ¾ of salt consumed comes from processed foods
  such as soups, cereals, and even cuts of meat
  (processed to enhance flavor).
• According to the American Medical Association
  (AMA) and other groups, excessive salt
  consumption can induce hypertension (high blood
  pressure), which is a significant contributor to
  heart disease (the leading cause of death), and
  stroke (the 3rd leading cause of death).

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Opposition to Salt (2)

• The AMA at its annual meeting (June 2006),
  recommended the Food and Drug Administration
  (FDA) to limit the amount of salt that food
  companies are allowed to add to products.
• AMA wants salt regulated as a food additive, with
  limits based on the type of food.
• Specifically, the AMA wants
• 1. A minimum 50 reduction in sodium in
  processed foods, fast food products, and
  restaurant meals to be achieved over the next
  decade.
• 2. The (FDA) to revoke the generally recognized
  as safe (GRAS) status of salt, and to develop
  regulatory measures to limit sodium in processed
  and restaurant foods.

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Support for Salt

• The Salt Institute (The US salt industrys trade
  association) rejects the AMA claim, and questions
  whether lowering salt consumption would benefit
  large numbers of people.
• Food producers say it will be hard to reformulate
  products, and retain tastiness.
• Food producers question consumers interest in
  lowering sodium levels in food
• Campbells Soup has created an alternative
  using lower-sodium sea salt, and other flavors,
  but historically, consumers have rejected low
  sodium foods. Many of which are pulled from the
  market within a year of release.
• Reformulating products would force companies to
  invest in research, and possibly use more
  expensive spices, and seasonings.

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The Economics

• This is a classic negative externality case.
• We have Marginal social benefit (MSB) from
  enjoyment of taste.
• Marginal private cost (MPC) is from production
  and is typically lower do to the relatively low
  cost of salt as a flavoring.
• Marginal social costs (MSC) are greater than MPC
  because the excessive use of salt causes
  detrimental health effects.
• Regulation forces the use of other more costly
  ingredients to make food taste as good.

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The Economics

• Regulation Mandates a reduction in the level of
  salt in processed foods.
• As quantity of salt is reduced, the producers
  costs rise because they must use more costly
  ingredients to compensate for salt.
• So for every price they are willing to supply
  less bringing private costs more into line with
  social costs.

Processed foods
MPC

MSB
MSC
regulation
Deadweight Loss to Society
P
regulation
Quantity
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The Economics (2)
IsoquantOne Can of Soup
R
If the truth social cost of salt is taken into
account, we would be on TCS , the Social isocost
curve.
healthy sodium level soups
Initially, the social price of salt is not taken
into account by the producer. This results in
the producer having the isocost function TC0.
Flavoring
unhealthy sodium level soups
TCS
Regulation forces the firm to operate at healthy
sodium levels bringing the incentives of the firm
in line with that of society (assuming prices do
not change). The result is the socially
optimal level of sodium in food.
TC1
TC0
Salt