Bloomberg and the Soda Law

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The soda law introduced by Mayor Bloomberg to ban the sale of sodas larger than 16 fl. oz. at restaurants across the city will have zero to minimal economic impact on people who are currently buying them. The soda ban will have an extremely small net positive economic impact on businesses. And the rationale behind this is the fact that whoever drinks more soda will acquire more soda, regardless of how big or small the drink is.

A 20 fl. oz. soda, when banned will be replaced by a 16 fl. oz. cup of soda. How much soda an individual drinks may even increase if instead of drinking just one 20 fl. oz. soda, he decides to get a refill of his 16 fl. oz. soda, something that most restaurants allow. The benefits projected for the society from this law, that may reduce obesity are preposterous.

The cost of soda for restaurants is roughly $0.0132 per ounce (see Appendix). On a 20 fl. oz. soda, the net cost to the restaurant is about $0.22 (Appendix). A 20 fl. oz. cup of soda at an establishment such as McDonald’s, perhaps the main target of this law, sells for roughly $2.50. Once the 20 fl. oz. cup is gone, it will be replaced by the 16 fl. oz. cup, but at the same price. The restaurants will re-label the 16 fl. oz. cup as the new large, introduce a 12 fl. oz. cup as a medium and keep the 8 –ounce cup as a small. But will this add significantly to the revenues of the restaurant? It is very unlikely, since the customers will just get refills for their 16 fl. oz. cups. The only economical benefit for the restaurant might be the people who do not refill their cups and this is minimal since the cost of soda is just a rounding error for most restaurants.

This law is ineffective because it does not stop the consumer from consuming any less soda from what was being consumed before. The economic impact on the society will be in the red because of the hundreds and thousands of dollars spent on structuring the bill, the flawed methodologies of research that determined a...
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