The Political Economy of the Obesity Epidemic

May 28th, 2012 at 10:42 am

A few weeks ago I was called upon to debate the idea of taxing big, high calorie soft drinks to help offset the high health costs of the American obesity epidemic.  Since then, I been dipping a toe into this literature and finding it quite interesting.   Given partisan gridlock, money in politics, and filibuster abuse, nothing’s easy in public policy these days.   And when you start regulating food policy, you bump into the personal freedom/responsibility issues that always loom large in our debates.

But at least in terms of the economic arguments, there’s low hanging (and highly nutritious) fruit in terms of negative externalities, Pigouvian taxation, and “do no harm” legislation.

Before I get to those points, however, a quick review of some relevant facts of the case.   Here’s an excellent new infographic from the Institute of Medicine.   While there’s predictable controversy over what to do about this, there’s little disagreement over a) the facts, and b) their negative implications for both health and the costs to society (see also this fact sheet from the CDC).  Policy-wise, this gives this epidemic a leg up over, say, global warming, where we still have to argue the science with deniers.

–1/3 of kids and 2/3 of adults are overweight or obese (in each case, about half of those shares are obese, so about 1/3 of adults are obese and about 17% of kids).

–Trends over the last decade have drifted up, mostly among men and boys.

–CDC: “No state has met the nation’s goal to lower obesity prevalence to 15%. The number of states with an obesity prevalence of 30% or more has increased to 12 states in 2010. In 2009, nine states had obesity rates of 30% or more. In 2000, no state had an obesity prevalence of 30% or more.”

–Obesity rates are correlated with income, poverty, and education level but that’s not the whole story—there’s variation within all those groups.  The figure at the end of this post shows the correlation between obesity and poverty rates by state—the regression line is significant and has a slope of about 0.5, implying a one-percentage point increase in poverty is associated with about a half-a-point higher obesity rates, but the poverty variable by itself only explains about a quarter of the variation across the states.  BTW, the outlier there in upper right-hand corner is Mississippi.

Now, to the economics.

Here at OTE, we’re a bit obsessed with externalties and that’s what makes this obesity/overweight problem such a compelling area of inquiry.  The weight epidemic generates very significant and widespread costs that spill over to the rest of society.  About 20% of health spending is on related problems, and they tend to be chronic, like hypertension and type-2 diabetes—and in our health care system, chronic=expensive.

There’s also lost productivity at work along with lots of other less recognizable costs (air travel actually costs more now because heavier flight loads!).

So, as long as everyone’s paying the price—through higher health insurance premiums and taxes to support the public side of the health system—there’s an undeniable rationale for corrective public policy.  The question is, what’s the best policy response?

I see two venues here, call them micro and macro.

On the micro side, a Pigouvian tax is a tax on an activity that causes a negative externality, like taxing a polluter.  In prepping for my soft drinks debate, I found this brief by a couple of my CBPP colleagues very helpful.  The line of argument goes like this:

–the increased caloric content of sugary drinks has contributed to the epidemic;

–the epidemic is a significant contributor to the increase in health costs;

–there’s a large price elasticity in play here.

This last point is the crucial one from the policy perspective.  According the brief, a 10% increase in cost will reduce consumption by about 8%.  Now, that’s but one study but there have been others with similar findings, and the tobacco literature also supports this response.  Thankfully, consumers of big, fat soft drinks are pretty price sensitive.

I would strongly advocate that any proceeds from such a tax be used for health care, overweight prevention programs, and my personal favorite policy idea in this area: provision of active, fun, safe, and very cool play spaces for kids, with a big emphasis on places where such play spaces don’t currently exist.  There’s good research, btw, correlating the location of such spaces to lower obesity rates among kids.*

My advocacy for using the tax revenue in these ways is also based on making a simple, common-sense connection between the epidemic, the tax, and the solution.  I believe there’d be a lot more support for placing a tax of stuff that’s partially responsible for this problem if we’re using the proceeds to fix the problem, particularly if we do so in a way that improves neighborhoods.

On the macro side, there’s this interesting interview I stumbled on the other day.  This scientist who studies the epidemic is asked what, according to his research, caused it:

The epidemic was caused by the overproduction of food in the United States.

Beginning in the 1970s, there was a change in national agricultural policy. Instead of the government paying farmers not to engage in full production, as was the practice, they were encouraged to grow as much food as they could. At the same time, technological changes and the “green revolution” made our farms much more productive. The price of food plummeted, while the number of calories available to the average American grew by about 1,000 a day.

Well, what do people do when there is extra food around? They eat it! This, of course, is a tremendously controversial idea. However, the model shows that increase in food more than explains the increase in weight.

Of course, here again, there’s a lot more to it.  It’s not just food production, it’s the type of food, its fat and sugar content in particular, and the fact that the cost structure very much supports cheap, unhealthy calories relative to the stuff that’s much better for us.

But it’s hard to imagine we’ll solve our weight epidemic until we deal with the fact that public policy is subsidizing the production of the food that’s causing it.  We can have good arguments about whether we should implement measures like new Pigouvian taxes that would help solve obesity—we shouldn’t have to argue too hard about getting rid of the wasteful, harmful spending that’s making it worse.

Finally, what about personal responsibility?  That’s the conservative response to all of this—the idea that your weight is your problem and not an issue for public policy.

I understand the impulse here—the idea that no one wants the government getting involved in the menu.  But that’s where the externality comes in.  As long as something like this is solely a problem in the personal realm, where prices fully reflect the risk factors, then I’d agree—gov’t stay out!  The minute it becomes a cost to the rest of us, that argument is toast (whole-wheat toast, in this case).   Those massive soft drinks are socially underpriced, and that’s a problem for all of us.

In this regard, there’s another policy idea that is increasingly bandied about here: the idea that we can “internalize the externality” by simply charging overweight individuals themselves for the costs they’re imposing on the rest of us.  For example, you could ratchet up insurance costs for overweight people, or provide insurance discounts for those engaging in weight loss activities.

A lot of this latter stuff goes on already and there’s more to come in the Affordable Care Act—I’ll post on it soon.   But there are problems here—what about low-income, overweight people who can’t afford the higher premiums?  What about the uninsured?  I’m all for an “all-of-the-above” approach to solving the obesity epidemic, and these targeted ideas should be part of it, but they won’t work by themselves.

More to come as I continue to delve into this research, including info on some neat local programs that are helping.   But the larger point is that, assuming we someday get back to making useful national policy, here’s an area where we could make a big positive difference both to people’s lives and to society’s balance sheet.

Obesity and Poverty Rates, by State, 2010

Sources: Poverty Rates, Census Bureau (avg for 2009-10); State Obesity Rates, CDC

*BTW, here’s a particularly cool addition to a playscape, one they added a few years ago to a playground up the street from me (but you need to have a soft area underneath, for obvious reasons):

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17 comments in reply to "The Political Economy of the Obesity Epidemic"

  1. Michael says:

    I once helped build a diabetes prediction model. BMI was the biggest thing. But one could also predict BMI pretty well just by looking at a zip code. Of course, a zip code is highly correlated with education, wealth/poverty, race, etc.

    Then again, when my wife and I moved to the south, we both put on weight. We think part of it is the change in lifestyle, moving from dense urban areas where we relied on walking, biking, public transportation, etc. to the typical sprawling southern city where driving is a must. Some of it’s also due to the different culinary traditions. We moved from a place heavy in fish, middle-eastern food, etc. to the land of fried food, BBQ, tacos, etc. Not only was the food “worse” but the portions much larger.

    I’d also argue the differences in how we socialize plays a role too. The arts culture in our new location is sub-par and all our former “artsy” outings with friends, be they gallery openings or art walks, have been replaced by going out to dinner or attending a backyard BBQ. We socialize around food. Change in landscape has affected us too. We’ve gone from a place where we used to hike in hills or woods, swim at the beach, or go on long bike to a sprawling, flat, ugly, landlocked city where there’s simply little natural beauty to draw you outside and be active. Sometimes we make it out to a lake with friends, but they don’t seem to want to do much other than sit in an intertube and drink beer or ride around in a speed boat. Even when out in nature, physical activity seems to be avoided like the plague as a matter of cultural preference here.

  2. PeonInChief says:

    I don’t think middle-class people understand the deadly mindlessness of most lower-wage jobs. I had one of those jobs once and found that the hardest part was turning my brain back on at the end of the day. I know this because I also worked for a non-profit that had run out of money, so I did that job after the mindless one. It would have been so much easier to go home and flop in front of the TV. It’s not a matter of personal responsibility, but the way in which the 20% has organized labor for the rest of us.

  3. readerOfTeaLeaves says:

    Well, speaking of externalities, there is now abundant evidence that the chemicals in the plastic bottles used to store, transport, and sell all that corn-syrup based soda contain hormone disruptors. In other words, chemicals from the plastic bottles leech into the soda. (This problem is even worse if the bottles have been sitting in the sun).

    As the soda from these bottles is ingested over time, the hormone disruptors that have leeched into the soda from the plastic bottles slowly begin to interfere with the chemical signals and pathways that regulate metabolism.

    In this sense, obesity is an environmental problem: if the prevalence of obesity and diabetes (and metabolic syndrome) can be traced in part to hormone disruptors, then widespread obesity is a manifestation of a widely unrecognized environmental and pollution problem. In a sane world, research exploring these links would generate some powerful, prompt policy responses. In an even saner world, more money would be used to fund more research.

    To clarify: if hormones are disrupted, then metabolic processes become dysfunctional. Eating poorly and being sedentary compound the problem; however, someone with poor metabolic regulation is likely to crave carbs and not be very energetic. It’s a hideously vicious cycle.

    There are fortunes being made by developing and producing drugs to medicate diabetes, but these drugs cannot treat it — they cannot undo the cellular damage. To actually address the underlying problems of obesity (and thereby restore health) would require a different kind of health care system — one focused on creating networks of coordinated care: kids would work with a nutritionist, cooking classes, a fitness specialist, a nurse, and a doctor for ongoing monitoring as well as behavioral shifts over time. (They would also have to buy quality produce, ideally locally grown.)

    As I understand the public health problem of obesity, the underlying metabolic mechanisms are controlled by genes; unfortunately, when the hormone disruptors ‘mis-set’ the genes, then the genes within the body’s cells do not correctly function. Until the basic genetic signaling processes are corrected, a child will continue to be at risk of obesity and/or diabetes. This process of restoring health requires time and persistence, whereas our current system responds to crises rather than chronic problems. (This is really an area of molecular genetics, which require ongoing blood tests, rather than simply a checkup annually at the doctor’s where the kids says “aaah”.)

    To reiterate: it’s now clear that there are environmental factors that are translating into increased incidence of pre-diabetes and insulin resistance. These environmental hazards appear to originate in certain kinds of widely used plastics, but the industrial system developed post – WWII to produce and deliver food cheaply is also a powerful factor.

    (The Seattle area has a fair amount of medical research, and between the educators and docs that I know, I hear about a cluster of problems related to insulin resistance, obesity, and (what appear to be a cluster of related) learning disabilities. Hence, my interest and a couple of links and recs.)

    Unfortunately, the public conversation about obesity and diabetes seldom mentions the role of environmental toxins, nor their function as hormone disruptors in setting off the nasty biochemical processes involved in diabetes. To publicly discuss the problem of hormone disruptors would put policy makers up against the oil and chemical industries, which produce all the dangerous plastic containers. Policy makers would have to address pollutants as well as agriculture. (Hormones are heavily involved in metabolic functions).

    One sample research report that discusses the role of BPAs in hormone disruption:
    Bisphenol A at Environmentally Relevant Doses Inhibits Adiponectin Release from Human Adipose Tissue Explants and Adipocytes

    I sometimes buy a product called “Smart Water”. If you look at the product information, they state the type of plastic in which this water is sold — it is ‘safe plastic’. You should always check the type of container for this kind of information.

    Keep an eye out for the word “Obsogen”
    I predict it will be rising to a new level of public attention in coming years.

    Dealing with obesity and pre-diabetes is a huge public health, and therefore public finance, issue… or so I’m told by people who live, breath, and dream this stuff. Our current politics, as well as our current health care system, have not even begun to address the environmental hazards that contribute to widespread public health risks.

    I’m still finishing up a French documentary, “Food Beware: The French Organic Revolution” (2009) about a village in France that began serving organics in the local school canteen. Worth a watch if you have Netflix.

  4. Jonathan says:

    Hey Jared check out the work by Glen Taksler and Brian Elbel. They might have some research that is relevant.

  5. Nhon Tran says:

    Thank you for this very useful posting, and for the comments todate.
    I recall reading a paper saying that corn syrup is a major cause of the problem. Why not reducing its production by phasing in a complete abolition of the subsidy to farmers to grow corn? Regards.

  6. Jill SH says:

    Re: price elasticity. A tax on soft drinks has been debated here in NH. Of course all our libertarians come out with the line about government not meddling with one’s food choices. But it was determined that taxing soft drinks would need to happen at the wholesale level — as cigarettes are taxed — because of the constant price changing sales/specials/bulk purchasing practices at the retail level. The retail purchaser might not even be aware — no additional sales tax at the register. My suspicion is that the profit margin in this stuff is so high that the manufacturers would still be putting the products out at retail price levels that would be very close to pre-tax levels. And no one would want to lose market share.

    One legal problem in this: define soft drink. Anything less that 100% juice? The corn syrup lobby sure won’t want us to define the corn syrup level.

    Of course, folks can always drink (tap) water. NO added sugar. Bring your own container and no plastic out-gases.

    And, since I think in terms of my state, I’d dedicate the money to Medicaid.

    But I constantly think that our federal agricultural subsidy policy, which supports huge agribusiness to produce all that corn/corn syrup/corn-fattened beef, is upside down. We should be subsidizing local farmers of (hopefully organic) fruits and vegetables, and/or grass-feet meat production, even if it is only to guarantee such farmers a minimum income, while they keep land in agricultural use and move toward sustainability and profitability.

    • John says:

      One point I would keep in mind about subsidizing other fruits and vegetables in lieu of corn. I think that when we think about this idea of shifting the support structure to things that are healthier, we assume that this means that apples and lettuce will suddenly become cheaper and everyone will eat more. I’m a bit skeptical of that idea. In theory, subsidizing corn should just make the ears of corn in the supermarket much cheaper; instead, the agricultural industry has found new and novel ways of using corn to make a myriad of other products (obviously, the most infamous these days being corn syrup). I think that we have to worry about what it would mean to start subsidizing things that we think of today as healthy instead of subsidizing corn, because there’s no guarantee that the agricultural industry won’t simply found new and novel ways of using those things to make incredibly unhealthy products.

      The chemists and engineers that work in the food industry are pretty crafty and smart folks; I’d almost actually just assume that the food industry would quickly find a way of converting that head of lettuce or that beet into something wildly divorced from what it started out as. Instead, it might just make sense to stop subsidizing types of food altogether, or change the incentives for making as much food as absolutely possible.

  7. Rima Regas says:

    Cheaply-made, highly sweetened and processed foods are the staple of a low-income diet. Add to that the food-desert issue and you have a recipe for disaster. The food industry is no less prone to the “money in politics” issues. Corn by-products can be found in most food categories, not just soda – from baked goods to deli meats, to soda. There is research that shows a direct correlation between small amounts of high-fructose corn syrup and obesity. There is now new research from UCLA that shows a correlation between HFCS and cognition. There is no point in raising the tax on soda. We need to ban high-fructose corn syrup completely so none of the food industry or pharma can use it.

    UCLA study

    60 minutes did a piece this year on the effects of corn syrup on obesity.

    What we need are FDA, USDA and CDC with teeth and real budgets (we also need to reform the way they operate and stop the revolving door of scientists going to and from private industry), and we need to get money out of politics.

  8. Arthur D. says:


    In nutrition, it is not a good idea to assume that the science is understood.

    Have a look at Gary Taubes book “Why We Get Fat and What to Do About It.” This shows plainly that the science of nutrition is in terrible shape. In short, the official explanations of obesity and what to do about it are demonstrably wrong.

    • Michia says:

      I would add – read the section in Taubes’ Good Calories, Bad Calories (and/or article The Soft Science of Dietary Fat) about the Senate committee (!!) back in the late 70s which issued dietary guidelines that jacked up recommended carbohydrate intake (must avoid teh evil fat!). Look at the graphs of the ‘epidemic’. Look at when it starts. Decades of stubbornly embedded and completely wrongheaded dietary recommendations are literally killing people.

      Obesity is automatically assumed to be the cause of the health problems that tend to accompany it. This has caused a catastrophic cognitive blind spot in research and public policy.

      It’s the process that causes the obesity, not obesity itself, that’s the problem. Obesity results when a person’s metabolism is pushed far beyond its natural capacity by the daily deluge of sugars and starches (and calories, to a lesser extent) that the system was not designed to handle. In the process, other things start to go wrong, as well.

  9. save_the_rustbelt says:

    At a more practical level the obesity epidemic is causing major problems with the practice of medicine, including in nursing and physical therapy.

    I’ve been doing more of the shopping lately (nurse-wife working more) and I watch people roll right past the fresh fruits and vegetables and fill their carts with a lot of junk.

    Arguing personal responsibility is not popular with liberals or the IOM, but come on folks.

  10. Fred Donaldson says:

    Recall mandatory four periods of gym in high school every week, and you really moved for 45 minutes.

    High levels of activity burn off carbs during day (instead of muscle mass) and sleep burns off fat calories while you fast for eight or so hours.

    Sugar and sitting don’t mix, so maybe we need a tax on social media, computer games and televisions.

  11. Harry Minot says:

    Hi, Jared!

    You may recall that we went to Rabbit Hill Farm together, and that I was a fat kid. I became an obese adult. At my peak I was what my Doctor called “morbidly obese”. Now I am at the lower end of what’s called “normal”. So I have some personal experience with this issue, and I’ve been on the receiving end of the bigotry that fat people face.

    My concern over policy responses to the problem is that, even with the best intentions, almost any action can have consequences which were never intended or anticipated.

    I know you’re a thoughtful person. I have long admired your fertile mind and the kindness which imbues your contributions to government.

    • Jared Bernstein says:

      Great to hear from you, old bean, and congrats on your personal journey (though from what I recall re your creativity and artistry, “normal” doesn’t describe you).

      You raise excellent points re bigotry and unintended consequences. Do you have any thoughts about what, if anything, should be done re this epidemic? Do you think it would be better to leave it alone?

      Try as I might, I don’t recall Rabbit Hill Farm, but it sounds so nice…I’d love to be there right now!

      • Harry Minot says:

        RHF was a summer day camp, not far from Great Pond in Ridgefield. Your mother was on the staff there. You were a tiny tyke at the time.

        My own weight loss was quite unintended and unexpected. It was a side effect of intense meditation. So I’ll gently wave off the congratulation even though I know it was well-meant.

        Yes, I think “leave it alone” is the best approach. There’s an awful lot that naturally-thin people just don’t understand about fat people. The oppression visited upon fat people impels them toward repeated attempts to lose weight. And, ironically, those episodes train their bodies to be ever larger, in order to “protect” them against the next “famine”. When I was 21 I went from 230 down to 180 (sheer torture) and then rebounded to 250. And I NEVER did that again. If I had, I almost certainly would have ended up as a much larger person. As it was, I hovered effortlessly around 250-270 until the age of 54.

        Now that I’m thin I have a front-row seat to hear the comments which are made about fat people by those who don’t realize that a fat person (I am truly still that person) is standing right next to them. This new experience has reinforced the activism which always occupied me.

        Public policy has always been tricky, and it always will be. Consequences hide behind consequences. And, just as with other episodes of Adversity, the “obesity epidemic” will eventually be understood as having yielded up a benefit. But we oughtn’t to expect to immediately know what it is.

        Thanks again for your many contributions to rational and compassionate governance. You’re an excellent counterpoint to shrillness.

  12. Misaki says:

    >global warming, where we still have to argue the science with deniers.

    Job creation without government spending, inflation, or trade barriers:

    >as everyone’s paying the price—through higher health insurance premiums and taxes to support the public side of the health system

    Solution: higher coinsurance rates.

    Or in other words, shop around for health insurance instead of buying the first one that’s offered. There are many ways to reform the health care system to reduce these negative externalities from individual diety choices; of course many people might eat better if they had a job and a reliable income.

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