Regulating consumer behaviour

About two years back the Indian Ministry for Health and Family Welfare decided to have 'junk food' such as colas , carbonated drinks, pizza's, burgers/hot dogs, chips/fries etc from school and college canteens. It was pointed out that the consumption of such products led to diet related non-communicable diseases among the youth. The consumption and availability of tobacco products, on campuses , was also banned. Many consumer organizations are also for banning junk food advertisements that are targeted at children.
The basis for such a paternalistic type of regulation seems to be that children of school going age and also of colleges are not rational. Their consumption habits are based on a short term perspective and does not consider the long term implications such as obesity and other diseases which can possibly affect the quality of life and also the longevity of life. The consumption of junk food could also be addictive making it difficult for the child to break the habit. hence the government rationalizes that it is best to ban such products in places where children and college going youth frequent - the canteen.
Two issues need to be discussed at this stage. Firstly the assumption that the targeted consumers are not rational. It is well established that children are easily influenced by emotional advertisements. They are also not well placed to understand the implications of their consumption habits. Hence there is the necessity for regulation. Since parental regulation is not working you need the government to step in. But are parents not supposed to know the ills of such consumption habits? From discussions in the Indian media ,parents are faulted for using junk food as a 'hassle free' way of getting their children to eat! Working parents often find it easy to use packaged food which appeals to the taste buds of the young ones. This seems like a rational choice for parents!! They make a choice and since they are adults they should know better than their children about the possible dangers of junk food. Are parents trading off rationally or do they too suffer from ignorance and advertisement impact? Whichever way you read it, parents need some regulating and educating too!! In one case it is irrational behavior and in the other it is rational behavior that needs to be regulated.
But banning junk food from canteens may not prevent parents from sending it from home. Hence the need to alter parents behavior by educating them. Schools appear to be one step ahead - some have banned children from consuming junk food in school premises. This further constrains the choices for parents.
How do such bans work ? Are they effective enough in controlling consumption choices. A simple ban might serve to alter only the shape of the budget line but an awareness program and labeling of food products might alter even the indifference curve. Such alterations would determine the effectiveness of the government policy.
The next issue is whether only western junk food qualifies for banning. Are our local variants such as fried bondas or pakoras, chaats , samosas etc also junk food? Such food is also available in canteens and might just lead to a substitution effect.
What about college going youth? Are they also assumed to behave irrationally? Or is their choice a trade -off?The short term preferences for taste and economising on time might just prevail over the long term cost of poor health and drop in longevity. Would a ban have a similar impact on the budget line? Probably not as large as in the case of school going children who do not have too many options for purchasing. A college youth might just shift his purchase to a nearby outlet.

This option was available for tobacco consumption too. Probably realizing that strong addictive behavior needed stronger action tobacco sale was banned for 100 yards around educational institutions for youth below 18 years. See link http://www.hinduonnet.com/2009/06/30/stories/2009063060040400.htm
This has a catch - it depends on the effectiveness of enforcement. Given our stretched police force it is unlikely that they would spend too much time enforcing such laws. Their own rational behaviour would lead them to devote their scarce time for issues which have a higher marginal benefit (social or private ?). So , the effectiveness of such a ban might be weak. Here too a policy which alters preferences and not just costs through taxes and inconvenience effect may be important.
But, since the idea is to impact the budget line for junk food why not just have a higher tax? This again depends on demand elasticities. It is tough to implement a tax policy on the informal sector which provides 'desi - junk'.

Welfare schemes and backward bending labour supply curve

In an effort to have inclusive growth both the central and state governments have introduced several welfare schemes. The government of Tamil Nadu had introduced rice at Rs. 2 Per kg through the public distribution scheme, 2 acres of land free , a colour television, free LPG connection amongst others. The Andhra Pradesh and Karnataka governments are also in the process of launching similar schemes or have already done so. If this reaches the poor it has significant real income effects and people can consume more with the same given income.But , as in economics we are wont to say "everything hangs together", the effects of these schemes can have other types of undesirable repercussions.
If these schemes do reach the rural poor it might just work to prevent migration of labour from rural to urban areas or even other states in search for a job. Take for instance construction labour. The construction industry in Bangalore employs labour from different states such as Tamil Nadu, Orissa, West Bengal and Bihar. Lack of jobs forces these people out and labour moves from areas of surplus to areas of deficit. This process lowers wages in deficit areas and increases the same in surplus areas. This is not an entirely painless process.
With the introduction of welfare 'schemes' construction sites have complained of a drop in the supply of labour from the neighbouring states, particularly Tamil Nadu. Coming at a time when the construction activity has slowed down it may not be a big constraint as yet. But what is interesting is the drop in labour supply due to an increase in the real value of income. This appears to indicate a backward bending supply curve of labour where people are less willing to move out for work and higher income and are happy with smaller incomes that have now have greater purchase value. Is this a problem? If government schemes give an incentive to be less productive it is certainly a cause for worry. But with free land they might not sit unemployed , they might actually work on the land given. Or they might lease or sell it if self cultivation is unviable. The latter option could lead to an increase in disguised unpemployment .It is not sure as to what type of land and what conditions are attached to the distribution of land. Along with these welfare schemes it is important to create job opportunities and conditionalities such that they can be gradually phased out an not make them dependant on such measures.
Down the line the market will adjust to these circumstances with an increase in wages. This is good for the unorganised construction labour and might just attract the migrant labour again. This remains to be seen.