A committee of the Los Angeles City Council unanimously approved a yearlong moratorium on new fast-food restaurants in several regions of Los Angeles recently. But what people choose to eat is none of the city's business. And even if it were, does it make sense for municipalities interested in reducing their citizens' waistlines to target restaurants?
Restrictions on developing chain restaurants are sometimes in place for aesthetic reasons or to "protect" existing retailers, but now Los Angeles is considering the public health effects of the prevalence of these restaurants. The question is, though, will this strategy produce any identifiable boons to public health? Recent research by economists Michael L. Anderson and David A. Matsa suggests that there won't be.
In their paper "Are Restaurants Really Supersizing America?," Anderson and Matsa isolate the effect of restaurants on obesity. The positive correlation between restaurant prevalence and obesity is well established, both across space and across time. The causal effect of one on the other, however, is much more difficult to measure.
The thesis that restaurants cause obesity is a classic case of researchers confusing correlation with causality. Anderson and Matsa use the prevalence of interstate highways as a measure of the changing cost of patronizing restaurants. Interstate highway penetration affects restaurant access and, therefore, allows us to derive a consistent estimate of the impact of restaurants on obesity. Restrictions on restaurants are, according to their estimations, unlikely to have much effect on obesity.
Restrictions on where and when restaurants can do business will affect consumer welfare and employment opportunities, though. One of the fundamental tenets of economics is that trade makes people better off. If we prevent people from making trades (money for food, for example), elementary economics suggests that we are restricting their ability to make themselves better off.
Restrictions on restaurants will not be effective because the net consequences are not as simple as they appear to be. One important consideration is that there is no clear definition of a "fast-food restaurant." Enacting the ban would require resources to enforce and would provide incentives for firms to change their business models so as to skirt the definition of a fast-food restaurant. The resources that will be used to fuel the cat-and-mouse game of dodging regulations will simply be wasted instead of being used to encourage local development.
It is also ironic that this is occurring in a place that has fought long and hard to keep Wal-Mart out. Wal-Mart and other big-box retailers help people save money and increase the availability of healthier foods, leading to reductions in obesity. Restricting access to healthy foods forces the very poor to substitute in cheap junk food. And now, Los Angeles seems to think it needs to impose a moratorium on fast-food restaurants in spite of evidence that such measures will likely do no good. With friends like these, L.A.'s poor do not need enemies.
A further cost of the restaurant moratorium is its effect on the investment climate in the area. Imposing restrictions on which businesses can open and where (via the strokes of a few pens) is a troubling encroachment on economic liberty. All else being equal, it will give people with money to invest locally the incentive to look elsewhere. Thus, a likely unintended but predictable consequence of the moratorium is fewer jobs and opportunities for those who need them most.
Anti-restaurant policies appear to be all costs and no benefits, to say nothing about the fundamental encroachment on personal liberty that such restrictions represent. Restricting restaurant operations treats an effect, not a cause, of the obesity epidemic and wastes resources. When people can substitute other things for restaurant meals, restricting access to restaurants will be ineffective. Los Angeles municipal leaders would be wise to consider other options.
Art Carden is an adjunct fellow at the Independent Institute, a non-profit, nonpartisan research organization in Oakland. He also is a professor of economics at Rhodes College in Memphis, Tenn.
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