Monday, August 03, 2009

Gary Becker and Richard Posner weigh in on obesity and what to do about it

Posner says:
The economist Tomas Philipson and I have written about the economics of obesity. We have pointed out that the decline in the price of fatty foods, along with the rise in the opportunity cost of physical activity (work is more sedentary than it used to be, so one has to invest extra time to get exercise, and television and video games have increased the utility that people derive from sedentary leisure pursuits), explains the dramatic long-term increase in the percentage of Americans who are seriously overweight.
Obesity is highly correlated with education. Highly educated people are much more likely to be thin than people who are not highly educated. This is partly but not only because highly educated people have on average higher incomes than other people. They can afford more expensive foods, which are low in calories, and the cost of exercise, which can be considerable, as it may require joining a gym or having a personal trainer.
One of the health-care-reform bills pending in the Senate would relax legal limitations on "discrimination" by private group-health insurers; that is a step in the right direction, as are growing efforts by employers to encourage their workers to control weight (the motive is to reduce the cost of health insurance to the employer). Medicare could be modified to reduce fees to thin people. In addition, a calorie-based food tax (which would, for example, fall heavily on sugar-flavored soft drinks), would reduce obesity at negative cost to the public fisc. Such a tax may seem "unfair" to people who consume such foods but are thin, but this is just to say that the tax would be at once a regulatory and a revenue tax, and in the latter aspect would be subject to criticism only if it were an inefficient tax relative to alternative methods of taxation.
I'm thinking that, in a future job interview, I will be asked to step on a scale ... Here is Becker's take, where he breaks to some degree from his co-blogger:
Posner believes that consumer ignorance of the health consequences of their eating and sedentary activities also contributed significantly-particularly since lower educated persons have the highest incidence of obesity. I am doubtful, however, if ignorance of these effects has been important. Poor information is a last resort crutch that economists are increasingly relying on to explain consumer behavior that they fail to explain in other ways. For example, "behavioral economists" are arguing that many consumers run up large credit card debts in good part because these consumers are not aware of the level of interest payments, and that poorer borrowers took out mortgages during the housing boom years of a few years ago because they could not calculate the difficulty of meeting monthly payments. In both these cases, virtually no evidence is presented to support this thesis. In the eating case, most reasonably well-executed studies find quite small effects on eating patterns of providing nutritional and other information about foods.
Since taxpayers finance Medicare and Medicaid, these organizations do not have the same incentives as private insurance companies to penalize overweight persons for their excess weight. The cost imposed by overweight persons on public expenditures has been one of the justifications for taxes on fast foods and soft drinks since these are important inputs into weight gain. However, such a tax would be inefficient, perhaps highly inefficient, because it targets all persons who eat fast foods and drink sodas, yet most of these persons do not become obese. It is akin to taxing the sale of wines and liquor to reduce drunk driving, even though most drinkers do not drive drunk and cause accidents. This distinction between taxing inputs into drunk driving and taxing drunk driving explains the tendency to heavily punish people who are drunk, especially when they cause accidents.

The corresponding approach with regard to weight would be for Medicare to institute surcharges for very overweight persons (or discounts for thinner persons) and for Medicaid to impose various costs on obese persons who use their services, such as requiring them to spend time at educational classes on the control of weight, or to pay a fee for any Medicaid services they receive. Such charges and fees probably would run into strong political opposition, but they point the way to more appropriate ways to discourage obesity that causes medical problems that utilize public funds.

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