Markets and Childhood Obesity Policy

Taking an economic approach, this article shows how markets have contributed to the recent increase in childhood obesity in the United States and identifies possible policy solutions. The health risks associated with children obesity, including asthma, hypertension, type 2 diabetes, cardiovascular disease and depression, have led medical authorities to declare its rise a public health crisis.

How markets may have contributed to the rise in childhood obesity

The most obvious contributor to the increasing calorie surplus is falling food price. According to U.S. Bureau of Labour Statistics, between 1989 and 2005, the real price of fats and oils fell 26.5% and that of sugar and sweets fell of 33.1%, while the real price of fruits and vegetables rose 74.6%. Consequently, energy-dense foods are cheaper than low-energy ones (such as fresh fruits and vegetables).
Furthermore the rising wages increased the opportunity costs of food self-preparation, discouraging people to invest time in preparing meals and devoted it to the best available alternative. This assumption is particularly true for college graduates, because on average their salary is higher than the one of less-educated people. At the same time technological changes have reduced the time required to prepare foods and created incentives to use prepackaged meals and processed foods rather than spending time cooking. These innovations contributed to a shift away from home-cooked meals toward processed-food, thus increasing obesity. Scientific evidence demonstrates that people most able to take advantage of technological changes had the greatest increase in weight and, symmetrically, obesity is greatest in countries where people have major access to processed food. Changes in women labour market also contributed to reduce cooking-time. Together with the increasing opportunity-costs of food self preparation, this social change has contributed to the raise in number of people eating away from home. The distinction between food at home and food away is important for two main reasons. Firstly because people do not know calorie content of foods eaten outside, and secondly because the portion sizes have increased during the past three decades.
Children obesity is also related to food advertisement. According to research evidence, if a child consumed only the advertised food, his diet would not be consistent with U.S. dietary recommendations. Plus, advertisement for fruits and vegetables have been replaced by ads for fast-food restaurants, breakfast cereals, soft-drinks and snacks.
Last but not least, agricultural policy may also play a role in obesity growing rates. Farm policy has been criticized for subsiding the production of corn and, thereby, of high-fructose corn syrup, which is now common in soft-drinks, fruit juices, jelly and other foods.

Economic rationales for market intervention and strategies to choose among the policy options

Public policies must intervene in markets in order to contain costs and risks related to obesity. There are several economical reasons that justify public intervention and, each of them, can be translated into a political action.
First, as in free-markets producers generally under-provide information, government may directly intervene to provide consumers with nutrition information and help them make informed choice. It has to be said that the Nutrition Labelling and Education Act (NLEA) of 1990 requires producers to print nutrition labels on packaged foods, but still no law requires the release of nutritional information for restaurant food or fountain drinks. As a matter of evidence, one simple way to improve the food markets’ efficiency is to expand the NLEA standards to require that detailed nutritional information accompany all foods and menu.
The second economic rationale for government intervention is that the cost of obesity are born broadly by society. A 2003 study estimates that through Medicare and Medicaid – the governement’s medical care programs for the elderly and the indigent – taxpayers pay half the total costs of treating obesity-related illnesses.
The third economic rationale concerns specifically childhood obesity. Children are not what economists call “rational consumers”: they cannot evaluate information critically and weigh the future consequences of their actions.
If the government can correct the problem of incomplete information in a relatively straightforward manner, it cannot so easily fix the other two problems and must turn to second-best practice policies. From the economic perspective, the correct way to choose among different interventions is to analyze their cost-effectiveness. The first step should be estimated all the costs and benefits associated with each intervention and the second is to rank the interventions according to how cheaply they achieve the policy goal, thus allowing policymakers to use a fixed budget most efficiently.
Many are second-best practices that can be implemented and analyzed. Policy makers could implement taxes and subsidies that either discourage the consumption of certain food or encourage physical activity. A food tax might sufficiently decrease consumption that obesity would fall, cutting the costs imposed on society. Another major option is to subsidize behaviours that decrease obesity-related society’s costs. For example, in the US, some local governments subsidize public parks, pools and other athletic facilities and also provide free physical activity, nutrition education and sports teams in public schools. Local authorities could also require all school to remove vending machines for soda and candy.
In the United States one particular venue for intervention is in fact the public school system, even if some observers have advocated banning all food advertising to children in all venues. Government should, for example, protect children from advertisements for junk food. The risk connected with food advertising is related to the fact than children who are a captive audience may increase both their consumption of the advertised food and their risk of obesity.
In relation to agricultural policy, Governmenta could promote cost-benefit analysis to assess the net benefit of agricultural production subsidies and price support, in order to identify - and eventually modify or cancel - public programs that contribute to obesity.
Cost-effectiveness analysis of anti-obesity initiative is in short supply. Nevertheless, studies have calculated the cost of saving a quality-adjusted-life-year (QALY) associated with specific interventions. The decision rule for cost-effectiveness analysis is, generally, to implement the policy with the lowest cost per QALY and to continue to implement policies until either the initiative’s budget is exhausted or the cost per QALY saved rises above some threshold. Is interesting to note that this threshold has been recently raised from $ 50,000 to $ 200,000. Recent studies demonstrate that there may be available a variety of cost-effectiveness analysis of cost-effective anti-obesity interventions, some involving prevention, some medical treatments.

Conclusion

Policymakers are invited to evaluate their intervention on the basis of cost-effectiveness studies and, on their side, researchers should address their efforts to conduct such analyses. There is large evidence that even small changes in behaviour today can substantially decrease childhood obesity in future decades.

Bibliography

• Cawley, J. (2006) Markets and Childhood Obesity Policy The future of children, Vol. 16, No 1
• Lakdwalla, D. Philipson, T.J. (2006) Economics of Obesity The Elgar Companion to Health Economics (New York: Edward Elgar)
• Cutler, D.M. Glaeser, E.L. Shapiro, J.M. Why have Americans become more obese? Journal of Economics Perspectives Vol.17 No.3
• Hastings, G. et al. (2003) Review of research on the effects of Food Promtion to Children (Centre for Social Marketing, University of Strathclyde, Glasgow)
• Hirth, R.A. (2000) Willingness to pay for a QALY: in search for standards Medical Decision Making Vol.20 No3