Coca-Cola: U.S. Fructose Sugar or Mexican Sucrose Sugar?

Lynne Kiesling

I recommend this recent Grant McCracken post about Coca-Cola in the U.S. and Mexico. Grant asks if the reason more Americans are buying Mexican Coke (and Coca-Cola is trying to stop it) is about taste. Perhaps. But several of his commenters hit on the crucial distinction between the two formulations: Mexican Coke still uses cane sugar (sucrose), while U.S. Coke has switched to high-fructose corn syrup (fructose, from corn or beets, plus glucose). They do have different flavors.

But they also may have different metabolic effects, with high fructose corn syrup as a culprit for more effect on blood sugar, and possible contribution to obesity:

So what’s the big deal? Some experts believe our bodies treat high fructose corn syrup more like a fat than a sugar. They think it may even trigger metabolic changes — tricking us to eat more and store more fat.

Peter Havel, a nutrition researcher at the University of California, Davis, who has studied the metabolic effects of fructose, has found that several hormones involved in the regulation of body weight do not respond to fructose as they do to other types of sugars, such as glucose.

“Fructose doesn’t appear to signal the hormonal systems involved in the long-term regulation of food intake and energy metabolism,” he said.

Havel’s research shows that fructose does not stimulate insulin and leptin — two hormones that help turn down the appetite and control body weight. At the same time, fructose does not suppress our body’s production of ghrelin, a hormone that increases hunger and appetite.

Other studies have shown that fructose kicks more fat into the bloodstream in the form of triglycerides, which may increase the risk of heart disease.

The debate picked up steam recently with the release of a new study in the July issue of Obesity Research that suggests fructose alters our metabolic rate in a way that favors fat storage.

This research did not use the fructose+glucose blend that is high fructose corn syrup, but it is still consistent with the hypothesis that high-fructose corn syrup and cane sugar have different metabolic effects in the body.

But none of this science sheds any light on why the Coca-Cola Company would seek to limit the import of Mexican Coke into the U.S. I can’t think of a good, logical reason without sinking into conspiracy theories, such as they have such a lucrative long-term contract with Archer-Daniels-Midland for HFCS that they will fight to keep up domestic demand in the U.S. But that’s not rational …

Eric Raymond’s Reply to Lanier

Lynne Kiesling

So then I go check out Eric Raymond’s reply to Jaron Lanier, and his critique of Lanier focuses on two aspects that I wanted to use as follow-up posts. The first is Liebowitz and Margolis’s “Fable of the Keys” argument:

The essay continues with a vulgar error about technology lock-in effects. I yield to few in my detestation of Microsoft and all its works, but S.J. Leibowitz and Stephen E. Margolis exploded the lock-in myth quite definitively in “The Fable Of The Keys” and their followup book Winners, Losers, and Microsoft. Vendor “lock-in” cannot survive the end-stage of lock-in success in which the monopolist, having achieved market saturation, must push prices forever upwards on its fixed-size customer base to maintain the rising returns that Wall Street demands. Eventually the expected cost to customers will exceed their cost to transition out of the technology, and the monopoly will melt down. This is why TCP/IP is king today and proprietary networking technologies only fading memories. It has already happened to Microsoft in the financial-services sector and the movie industry, and the handwriting is on the wall elsewhere.

Note how this argument rests on the crucial characterization of “natural monopoly” as a transitory phenomenon in a dynamic economy with contestability, as I mentioned in the prior post.

The second is Neal Stephenson’s essay, In the Beginning Was the Command Line. Stephenson takes, as Raymond puts it, “a more humane” perspective on command-line-based operating systems. Indeed: perhaps text-based systems are one form of a heuristic that humans can grasp intuitively as we try to impose structure on the world around us. Is it really the case that text-based and command-line-based structures limit creativity? I could argue otherwise: think of the command line as an analogue to simple, transparent institutions that leave a lot of room for individual creativity and productivity, as long as it whatever you create can interoperate with the simple infrastructure.

More as the discussion evolves.

Jaron Lanier’s “The Gory Antigora”

Lynne Kiesling

I can already tell that I am going to enjoy the Cato Unbound series on the Internet and technology. Jaron Lanier’s initial essay is full of provocative claims and ideas; I’ve been mulling over some of them all weekend. He ranges from criticizing the path-dependent nature of the file structure of operating systems to analyzing a category of entities he calls “antigoras”:

Another consequence of digital brittleness and lock-in is that more niches turn out to be natural monopolies than in previous technological eras, with Microsoft once again being a celebrated example. I call these niches “Antigoras,” in contrast with the classical idea of the Agora. An Antigora is a privately owned digital meeting arena made rich by unpaid or marginally paid labor provided by people who crowd its periphery.

Microsoft is an almost ideal example, because users are dependent on its products in order to function in cooperation with each other. Businesses often require Windows and Word, for instance, because other businesses use them (the network effect) and each customer’s own history is self-accessible only through Microsoft’s formats. At the same time, users spend a huge amount of time on such things as virus abatement and glitch recovery. The connectivity offered by Microsoft is valuable enough to offset the hassle.

Traditional stock markets, or even flea markets, are a little like Antigoras, in that they are also private meeting places for business. One obvious difference resulting from the digital quality of the Antigora is a far stronger network effect; Antigoras enjoy natural monopoly status more often than physical marketplaces because it would be almost impossible for locked-in participants to choose new Antigoras.

I’m probably a little more sensitive to the invocation of the concept of “natural monopoly” than most people (and I should point out that the Wikipedia entry incorrectly attributes natural monopoly to economies of scale instead of subadditivity of cost, which is economies of scale over the relevant range of demand, very important distinction). So I’d like to push back a little on Lanier’s discussion here. Just because of the network benefits and associated lock-in that can arise with information technologies, that does not necessarily mean that we will suffer the economic efficiency consequences of deadweight loss from a “natural monopolist” behaving like a monopolist.

Here’s what I mean: contestability can keep these “antigoras” from generating deadweight loss, even if the actual competitive alternatives seem weak. Lanier notes that these network benefits from using Microsoft products outweigh the hassle. If Microsoft were truly a “natural monopoly” (if such a thing exists), it would not have to pay attention to what is going on with Linux or Mac or anything else. But the truth is that it does, and that the threat of those alternatives changes its strategy space, and thus its behavior. When that is the environment, when the threat of competition induces a market leader to change its behavior in ways that are inconsistent with monopoly pricing, can you really call that a natural monopoly? I say no, and that even though Linux and Macintosh have small market shares relative to Microsoft, they still serve to change the strategy space and the behavior of Microsoft in ways that benefit consumers. Thus not a “natural monopoly”.

I thought his statement of the value of individual liberty and its relationship to digital technology was insightful:

The phenomenon of Antigoras exemplifies the intimate and unprecedented relationship between capitalism and digital information. Because of the magic of Moore’s Law and the network effect, the Invisible Hand has come to be understood not just as an ideal distributor, smarter than any possible communist central committee, but as a creative inventor outracing human wits. At the same time, tiny situational advantages, particularly related to timing and code compatibility, are amplified by the exponential growth environment of the Net in such a way that unusual figures can suddenly emerge as successful entrepreneurs. A recent example at the time of this writing is the Baltic crew who started Skype on a shoestring, although it’s still too early to say which firm will win this Antigora prize. The resistance of digital brittleness to interventions by governments, together with the possibility that any clever person can strike it rich with minimal starting capital by being in the right place at the right time to plant the seed that grows a new Antigora, has caused libertarianism to be the house philosophy of the digital revolution.

This is a clever articulation of Schumpeter’s perennial gale of creative destruction, and its 21st-century translation into competition for the platform, as opposed to competition on the platform. Dynamic competition, not just static resource allocation.

I have more to say, but I’m going to let it incubate a little, and incorporate it with comments on the subsequent entries in the series.