From the USDA Economic Research Service:
Policies designed to improve the diet quality and health of Americans are likely to have only marginal effects on consumers’ food choices. However, policies targeted directly at consumers such as nutrition information and education programs, along with labeling regulations, can spur the reformulation of products with healthier ingredients by stimulating competition among food manufacturers to offer products that appeal to health-conscious consumers. Manufacturers’ responsiveness to food policy provides policymakers with a lever to affect diet quality for large numbers of consumers. Effective use of this lever can help stimulate a chain reaction leading to healthy food reformulations and a more nutritious food supply.
I’m not totally convinced by this argument. For one thing, relying on consumer choice can bring us grotesque satires of nutritious food such as the Cherry 7-Up with antioxidants. Most consumers are not educated enough to make the best choices, especially in the face of very powerful and compelling marketing campaigns. People who really want to do the right thing still end up buying fat-free cookies and sugary granola bars, because they’re “healthier”. And just look at the hideous mimesis of food that is epitomized by protein bars. You can figure out how to eat well, especially if you focus on whole foods, but it’s challenging.
In addition, “the market fixes everything” hasn’t worked out so great lately. Research suggests that consumers are not as responsive to small changes in food prices. Making healthy food cheaper or unhealthy food more expensive doesn’t work if the difference is only slight. Nobody really cares about a 20-cent difference, just as people didn’t really start rethinking SUVs until they felt gas was exorbitantly overpriced. (And compared to elsewhere in the world, North Americans get off really easy.)
On the other hand, policies that act directly at the manufacturer’s level can definitely affect what is produced. Producers are sensitive to small variations in the cost of raw materials, especially in the food production industry where profit margins can be relatively slight.
This can be bad — for example, as the cost of high fructose corn syrup decreased and the cost of raw sugar increased, manufacturers started jamming HFCS into everything.
It can (in theory) also be good. If the price of crap increases, perhaps producers may have to turn to making decent stuff. We can only hope.