What follows is a slightly edited version of an e-mail exchange I had with a former colleague of mine. I learn more economics by talking to him and thinking about his questions than I do from virtually any other source.
Here is an e-mail a former colleague of mine sent me recently:
Finally, I was at UNC Charlotte this week. In their grandiose student center (what we used to call a cafeteria–you gotta see to believe it), there was a sign up at the place you return your tray, to the effect of tracking the pounds of food “wasted” week by week (apparently some dude in the back actually weighs the garbage before disposing of it). Now the deal is, it’s $8 for all you can eat. My economic warning lights and siren went off. Is it as simple as the fact that students have no incentive to not to overload their plates because it is all you can eat? I am not sure that explains what bothers me about this. After all even if it was not “all you can eat” there would surely still be “waste.”
Take a regular restaurant entrée. If I order something and eat only half of it, was the part that was tossed “wasted”? Were the nuns right in Catholic school when they hovered over the trash can in the cafeteria and force you to eat every scrap, else you burn in hell? Was Mom right when she lectured you about starving kids in China when she told you to eat all your lima beans?
I just know there is something wrong with this, but I can’t put my finger on it. Maybe you can explain it to me. Good exam question?
I gotta get back to work!
My response to my friend John (quickly constructed) follows:
An excellent exam question … your angst is not with the “silly” all you can eat pricing policy (yes, it might cause you to eat too much, but that must be an efficient pricing strategy, since a la carte pricing is still an option and they chose not to use it … ask yourself why some apartments come standard with utilities included while some do not, and you are on your way to understanding why some places are all-you-can-eat and others are not.
But, John, you are falling into the trap of forgetting that the world is not zero sum. You of all folks!
That food on your plate would not be food available to other hungry people if you did not take it. In fact, you can think of just the opposite. Consider the logical simple case of buying food and eating none of it. The fact that you eat none, some or all of it is no different from the perspective of the rest of the world.
When you buy the food, you are not actually buying “food” (you might be thinking that I am buying too much Kool-Aid, so bear with me). What you are actually buying is a property right to obtain the exclusive authority to determine how that food is used. At different prices and packages you might choose to do a variety of different things with your food (students think back to our Burrito example). When the marginal cost (zero at a buffet) of food is low, we use it for all kinds of low valued uses – including eating too much, or even just tossing it at our friends. That behavior changes dramatically when marginal costs increase.
The point is, there is no intrinsically “correct” way to use a good, nor is there anything intrinsically valuable about any particular good. Is it similarly “wasteful” of me to purchase batteries to use as ornaments rather than putting them into flashlights? Is it “wasteful” for me to use elbow macaronis in Amelia’s arts and crafts projects? And if you think so, who says so? And why should I care? And by what standard will this concept be applied? By what mechanism would it be policed?
My well worn baseball cap is probably worth nothing to you as a cap and something to you as fuel, while the opposite is true for me, while it is worth nothing at all to my fire-fearing, hat-hating wife (I exaggerate for effect).
OK, so back to the question. How much you actually eat is a red herring for something different. The point is, what in this process is wasteful or not? If you buy food that is not worth it to you, you are only wasting your own resources – unless we live in a world without property rights. If you buy the food on someone else’s dime, then we start having problems (free health care, for example).
But the major reason for your angst (misplaced) is thinking that buying food and wasting/eating it is problematic for poor hungry people. But that is quite the opposite. When you buy food, it incentivizes food producers to make more. In a world of zero sum transactions, food in the trash or in your belly does come from someone else’s. But in a world of private property and prices, when you purchase food, you encourage the production of more food than would otherwise be available.
But the argument is deeper than this. Surely, for any one firm to produce more food raises costs, but the increased competition across firms reduces costs industry wide. Second, when you get food, either for $8 all you can eat, or at a restaurant a la carte, you don’t just clap your hands and get it. You must first have had to produce that much in economic value in order to exchange for that food. Even at $8 at an all you can eat, the value of what you produced by providing financial services is far greater than the value of what you are taking from the buffet line. So, in addition to incentivizing producers to make more food, and lower costs, you are leaving people with more goods and services than they would otherwise have available to them. And we care about more than just food, don’t we?