HonestTea: Barry Nalebuff responds

In May an MR reader alleged that the graph on Barry Nalebuff's tea (NB: Nalebuff is both an economist and entrepreneur) involved an elementary economics mistake.  Nalebuff asked if I would publish his response:

I'm afraid Randy Goldstein would have trouble our freshman economics course at Yale where the Honest Tea label has become an assignment problem. It is true that we at Honest Tea don't put in sugar to maximize taste even by our own standards. That's because the peak of the taste profile is flat -- like most maxima. Cutting back the sugar costs you very little in flavor but still save you a whole lot of calories. In technical terms, it is a second-order loss of flavor but a first-order savings in calories. We like to think that we maximize the flavor-calorie tradeoff, which is not the same thing as maximizing flavor ignoring calories. To say this one more time. Each additional teaspoon of sugar adds 17 calories. But each additional teaspoon of sugar has a declining additional benefit in terms of taste. We stop before the incremental value is zero (the maximum) and only add sugar where its value is worth the 17 calories.

See what you think: try Honest Tea for yourself: learn more at www.honesttea.com.

You can find the graph below.  Comments are open...

Addendum: Brad DeLong offers commentary.