The Processed Food Industry And Coronary Capitalism

One of my recent posts was about the variety of capitalisms, each with a different flavor, that one finds across the globe. They contrast remarkably with plain vanilla capitalism which is the idealized state of capitalism at the core of economics. We have given names to some of these forms of capitalism. For example, "crony capitalism" is one variation from pure capitalism that has been receiving a lot of attention as an explanation for the financial crisis. Ken Rogoff coins a new form of capitalism in this article. He calls it "coronary capitalism". He argues that the processed food industry is characterized by market failures that pass external costs on to consumers and to society. The external costs include obesity and a host of ailments that result from the over-consumption of processed foods that are bad for our health. One source of market failure is asymmetric information. Food processors use advertising to stimulate demand by misinforming consumers about the products that they sell. Consumers do not have good sources of information about their food consumption decisions that might counter the misinformation provided by advertising. This raises questions about another doctrine in "pure capitalism". This idealized form of capitalism assumes "consumer sovereignty". That is, consumers make economic decisions that maximize their utility. Adherents to this idealized form of capitalism argue that there is no need for government to intervene in the market decisions made by consumers. The consumer is able to make choices without assistance from government agencies. The idea of consumer sovereignty is at the root of conservative efforts to reform education and healthcare. They argue that consumers should be empowered to make market decisions about the education that they purchase and about their healthcare choices. School vouchers, charter schools and a healthcare system that enables consumers to choose their insurance provider, and to make their own decisions about their healthcare choices, are variations on the theme of consumer sovereignty.

We learn a couple of things from thinking about these deviations from the idealized form of pure capitalism. We learn that the idealized form of pure capitalism is utopian. Market failures abound in the real marketplaces faced by consumers. We also come to realize that conservative efforts to make the world look more like pure capitalism are disingenuous. They use the idealized version of the marketplace primarily as a device to defend dominant suppliers from government efforts to prevent market failure.