Random Variable

I said my calculations were very crude in the previous post, and I was right. Most studies tend to use a linear programming model. In addition, there’s a logarithmic relationship between the energy costs of healthy and unhealthy foods so taxation isn’t very effective unless it’s high(?):

Poverty and obesity: the role of energy density and energy costs

Data from the Bureau of Labor Statistics indicate that income disparities do affect diet quality. Food purchases made by high-income households differed markedly from those made by low-income households (88). In 1992, households in the top quintile by income (mean income: US$77 311/y) spent US$1997/person (2.6% of total expenditures) for food, compared with US$1249 (18.7%) spent by those in the bottom quintile (mean income: US$6669/y). Wealthier households bought higher-quality meats, more fish and seafood, more fruit and vegetables, and more convenience foods. Despite buying lower-cost items, poor households devoted a far greater share of their disposable income to food. Their level of satisfaction with the perceived quality of the diet was not reported. To achieve a healthy diet it may be necessary to spend more money. The UK Women’s Cohort Study is one of the few observational studies to have explored food costs, perceived and actual, in a study cohort of 15,191 women aged 35–69 y. Women in the healthiest diet group spent an additional 617 pounds sterling (US$1000) per year on food relative to the least-healthy diet group, with vegetables and fruit accounting for the largest amount of the cost. Yet almost 71% in the healthiest diet group and 60% in the least-healthy group did not agree that it was more expensive to eat a healthier diet, contrary to evidence obtained from the study itself. Cade et al concluded that the individual assessment of diet costs was, to a large extent, a matter of subjective perception rather than of objective facts.

You’ve got to heavily subsidise healthy foods:

Pricing Effects on Food Choices

Individual dietary choices are primarily influenced by such considerations as taste, cost, convenience and nutritional value of foods. The current obesity epidemic has been linked to excessive consumption of added sugars and fat, as well as to sedentary lifestyles. Fat and sugar provide dietary energy at very low cost. Food pricing and marketing practices are therefore an essential component of the eating environment. Recent studies have applied economic theories to changing dietary behavior. Price reduction strategies promote the choice of targeted foods by lowering their cost relative to alternative food choices. Two community-based intervention studies used price reductions to promote the increased purchase of targeted foods. The first study examined lower prices and point-of-purchase promotion on sales of lower fat vending machine snacks in 12 work sites and 12 secondary schools. Price reductions of 10%, 25% and 50% on lower fat snacks resulted in an increase in sales of 9%, 39% and 93%, respectively, compared with usual price conditions. The second study examined the impact of a 50% price reduction on fresh fruit and baby carrots in two secondary school cafeterias. Compared with usual price conditions, price reductions resulted in a four-fold increase in fresh fruit sales and a two-fold increase in baby carrot sales. Both studies demonstrate that price reductions are an effective strategy to increase the purchase of more healthful foods in community-based settings such as work sites and schools. Results were generalizable across various food types and populations. Reducing prices on healthful foods is a public health strategy that should be implemented through policy initiatives and industry collaborations.

The other factor concerning the preference for high energy density foods is preparation time, in which case subsidising healthy foods would effectively help the rich more than the poor (longer working hours, single parents etc…):

Temporal trends in energy intake in the United States: an ecologic perspective

Aside from eating more meals away from home, Americans appear to be spending less time preparing meals that are consumed at home. In 1987, 43% of all meals included at least one item made from scratch; in 1997, this value dropped to 38%. To meet consumer demands for foods that require minimal preparation time, supermarkets are increasing their selection of prepared foods. Along with offering convenience foods such as frozen dinners, supermarkets are offering precooked meals, such as rotisserie chicken, to better compete with restaurants.

Reducing the trend towards packaged and processed foods is also a sustainability issue, so it’s something that requires some focus.

I think Drewnoski and Spector sum it up best:

If this economic approach is to be successful, we need a better understanding of how food prices affect consumer food choices and the selection of a healthy diet.

Reducing the energy density of the diet is a worthy objective; the question is, can it be achieved without simultaneously increasing the cost and reducing the palatability of the diet? If long-term compliance with recommended diets is to be achieved by persons with a limited food budget, the foods must be affordable and acceptable. More work is needed to explore strategies for systematically shifting taste and food preferences in the direction of less energy-dense foods. A shift to a diet with a greater emphasis on fruit, vegetables, and whole grains would be consistent with the gradual change in consumption from full-to reduced-fat dairy products seen over the past 30 y.

However, perhaps one successful idea we can emulate is to eliminate trans-fats from our diets:

New Scientist: Insight: Out of the trans-fat frying pan…

More encouragingly, evidence from outside North America suggests that neither trans fats nor saturated fats are essential for producing cheap, tasty convenience food. In 2003, Denmark became the first and so far only country to effectively ban trans fats in restaurants and packaged foods, by stipulating that oils could contain no more than 2 per cent of these fats.

“This business with taste is a pseudo-argument,” says Steen Stender, a cardiologist at Gentofte University Hospital in Copenhagen. “In Denmark nobody can tell a difference in taste, even with what you call the Danish pastry.”

According to Stender, the country has seen a 20 per cent fall in deaths from heart disease since the 2003 ban, with companies such as McDonald’s switching to mono-unsaturated fats like canola oil. “We have managed to do it without resorting back to saturated fats,” he says.

Studentmedic writes about a proposal for taxing high-fat/sugar containing foods due to the overwhelming costs to the NHS to treat obesity. The original proposal also suggested taxing labour-saving devices, so that people got more exercise. My knee-jerk reaction was quite libertarian in nature. But after some more time and some very crude mathematics, here are my latest thoughts:

A simple solution – tax processed foods at a level to pay for the cost of treating obesity

To offset the cost of treating obesity, I would figure roughly an 11% VAT on all processed foods. This is lower than the BMA’s recommendation of full VAT, but would raise sufficient funds to treat obesity.

• Total food sales in the UK per annum: £85.8billion (Agriculture and Agri-Food Canada 2006)
• 75% estimated spent on processed foods, using global figures (Box 2005) = £65 billion
• Annual cost of treating obesity (Grice 2006) = £7 billion
• Estimated taxation rate = 7/65 = 11%
  

Complications

(Roberts 2005) writes:

In the United States and other rich countries…it is poverty, not wealth, that is associated with greater weight (Darmon, Ferguson & Briend, 2003; Drewnowski & Specter, 2004). This can be reconciled with the explanation given above if it is assumed that the relationship between cost per calorie and strength of flavor-calorie associations follows the function shown in Figure [1] – that it reaches a maximum and then declines. In the American marketplace, the foods that produce the strongest flavor-calorie associations (and are therefore the most fattening) are not the most expensive but are fast foods and junk foods. In the United States, the poor are relatively well-off, compared to other countries, and consumption varies between foods that are as cheap as fast foods and more expensive foods. In Berkeley, California, for example, a large container of Coke costs about $2.00/1000 kcal; a McDonald’s double cheeseburger, about $2.20/1000 kcal; an apple, at least $6.00/1000 kcal (in February 2004). Drewnowski and Specter (2004) make a detailed connection between poverty in the United States and consumption of more fattening foods.

Figure 1

There are two conclusions to be drawn from this. It is unlikely that taxation will provide a negative signal to consumers. If it does, it will affect the poorest the most, so it is not obvious that the taxation regime would equitably distribute ills.

Conclusion

I would be in favour of a milder taxation regime. This should be accompanied with either a comprehensive ban on the advertising of high fat foods and/or publicity campaigns. Advertising bans would likely be challenged in the WTO, and a comprehensive ban would be required for positive effects (Saffer and Chaloupka 2000). Publicity campaigns have been shown to have a beneficial effect in anti-smoking campaigns (Hu, Sung and Keeler 1995). As food is the main factor in obesity (Roberts 2005), by an order of magnitude, in rich nations, there should be no recommendation for other directly related taxes or other policies.

Further Reading

Agriculture and Agri-Food Canada. “Agri-Food Consumer Profile: United Kingdom.” Agri-Food Trade Service. November, 2006. http://ats.agr.ca/europe/3859_e.pdf (accessed January 5, 2007).

Box, Dan. “How much oil is there in a bottle of tomato ketchup?” Ecologist Online. 10 1, 2005. http://www.theecologist.org/archive_detail.asp?content_id=506 (accessed January 5, 2007).

Grice, Andrew. “Obese may be denied priority NHS care.” The Independent. December 26, 2006. http://news.independent.co.uk/uk/health_medical/article2103722.ece (accessed January 5, 2007).

Hu, T W, H Y Sung, and T E Keeler. “Reducing cigarette consumption in California: tobacco taxes vs an anti-smoking media campaign.” American Journal of Public Health, 1995: 1218-1222.

Roberts, Seth. “What Makes Food Fattening? A Pavlovian Theory of Weight Control.” Freakonomics. February, 2005. http://www.freakonomics.com/pdf/whatmakesfoodfattening.pdf (accessed January 5, 2007).

Saffer, Henry, and Frank Chaloupka. “The effect of tobacco advertising bans on tobacco consumption.” Journal of Health Economics, 2000: 1117-1137.