Government Sanctioned Health Claims, Regulations and Economic Policies: Strategies to Increase Consumption of Healthy Functional Foods in Canada

Non-communicable diseases are chronic diseases that have significant economic and social burdens worldwide. Increased public awareness about the interaction between diet and health, a desire to improve well-being, and government efforts to reduce rising public healthcare costs have been major drivers of substantial growth in the healthy functional foods industry. This paper examines economic policies and regulations that could increase the consumption of healthy functional foods in Canada. It assesses the effectiveness of current public policies and regulations on consumer preferences/demand and considers alternative policies and regulations that could increase the development and growth of the healthy functional food industry, individual wellbeing, reduce health care costs, and stimulate an overall increase in social welfare. It is shown that the use of health claims and educational efforts alone are not enough to increase demand to the socially optimal level. The government needs to use stronger economic and public policies such as tax credits to consumers or subsidies on costs of production that provide consumers with additional incentives to consume healthier foods at the socially optimal level. Keywords: Functional/Health Foods, Market Failures, Health Claims, Economic Policies and Regulations