Should California Have Banned Red Dye 3? An Economic Cost-Benefit Analysis

On October 7, 2023, California passed the “California Food Safety Act,” which banned four food additives including Red Dye 3. This research explores whether California made the right decision to ban Red Dye 3 based on an economic Cost-Benefit Analysis. The major costs to California as a whole include the cost to food manufacturers and the cost of implementing the legislation. On the other hand, the major benefits to California residents include the reduced risk of thyroid cancer and fewer ADHD symptoms. After monetizing these costs and benefits, this Cost-Benefit Analysis results in a net gain (net present value) of over 14 billion dollars for a 20-year time frame. Therefore, the benefits of banning Red Dye 3 in California greatly outweigh the costs, and the legislation is socially optimal.