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Dragan Miljkovic, NDSU Agribusiness and Applied Economics Department, Published October 10 2012

Spotlight on Economics: Regulating obesity in America: Food and health politices

I have been doing research on the economics of obesity for almost 10 years.

There are two approaches, short-run and long-run perspectives, to study the

subject.

Although both approaches rely on medical research and other scientific results as their basis, their findings are different. Short-run studies emphasize the strong link between obesity and the deteriorating health of the American population and suggest immediate government intervention of various sorts.

Long-run studies indicate how obesity and being overweight may not be associated with many health problems that short-run studies suggest there are. This scientific uncertainty leads to a difficult policy dilemma: Is obesity a major health problem that demands government attention in terms of health and food policy intervention?

In the short-run perspective, the observed increase in obesity rates in the U.S. stems from technological change occurring in the last century and has resulted in calories becoming relatively cheaper, while exercise has become relatively more expensive. Individuals have maximized their utility, subject to this new budget constraint, which has resulted in higher body mass indexes.

According to the standard economic models, obesity is not necessarily viewed as a bad outcome because people make choices. If they choose to eat more and exercise less in the face of the current environment and circumstances, it must be because it makes them happier than eating less and exercising more. The implication of this simple economic analysis is that there is no reason to intervene with policies to reduce obesity because it is merely the outcome of individuals pursuing their own self-interest.

However, there are several reasons why one should not endorse the standard

economic model's laissez-faire implications when it comes to obesity. First, the standard economic model requires well-informed individuals who are free to make their own choices. We know that a large number of children in the U.S. are obese or overweight. Generally speaking, children rarely purchase their own food or determine what is for lunch or dinner at home or at school.

Second, if overweight and obese people need more medical care, and if much of that medical care is paid for by society rather than the individual, then there is a negative consequence associated with high rates of being overweight or obese. In 2010, the direct costs to society of obesity-related diseases were estimated at $81 billion, while indirect costs to society were estimated at $76 billion.

Direct costs include health-care expenses such as physician visits and

hospitalizations. Indirect costs are the value of lost wages by those who cannot work due to sickness or disability and forgone earnings because of a premature death.

Finally, there might internal costs borne by individuals because of their higher weights. Internal problems can exist in the presence of self-control or addiction problems. In other words, people would like to eat less than they do but have difficulty limiting their consumption. They are similar to external problems because individuals while consuming food are not internalizing the impact on their future happiness.

Economists may care about policy interventions to address obesity for at least one more reason. The government already intervenes in people's lives in many ways that may have intentional or unintentional consequences on their weight. For instance, public spending on transportation or parks may affect the amount of exercise people get. The U.S. Department of Agriculture's MyPlate provides the government's definition of a healthful diet. This, in turn, affects the food that schools serve to children.

Education policies affect physical education requirements in schools. Also,

economic and social policies may have direct or indirect effects on a parent's labor supply, thus potentially affecting the amount of time he or she has to oversee his or her children's diet and exercise.

In the long-run perspective, painting an accurate picture of the health of past populations can help us assess trends in living standards, forecast mortality rates and understand the long-run implications of any new food policy measures. Many of the short-run studies on possible obesity prevention policies presuppose a nonzero, and often large, benefit from reducing obesity rates in the population that stem from improved health and decreased morbidity.

Yet none of these studies look into the long-term health trends and the role that overweight and obesity play in them. A different stream of literature emerged researching this issue. Findings from these studies certainly challenge results and policy suggestions coming from some of the short-term studies.

Several studies have analyzed long-term health trends looking at the age and physical and health characteristics of 23,785 Union soldiers in the 1860s, 1880s and early 1900s. These studies also used comparable data sets from the U.S. Army from the 20th century. The data reveal that past populations were shorter-lived, smaller, lighter in weight and faced a heavier disease burden in old age.

The average body mass index (BMI) of Union soldiers was 23 compared with 26 for modern soldiers. However, these studies focused not only on BMI as a health indicator but on other indicators as well, plus a number of socio-economic and demographic variables. The research found that there have been substantial changes in the human frame during the last 100 years. For example, men have become taller and heavier. Controlling for total body fat, men today have less abdominal fat than the past populations.

What we seem to have learned from the studies is that previous populations,

albeit having significantly lesser BMI than today's population, suffered from the same chronic diseases that are thought to be caused by being overweight or obese. If the government is to be called into action to stop or reverse these trends, it may not be solely to improve the health of the population. It also might be to protect the current standards on how the population should look or because weight reduction and health protection are being equated erroneously.

>From a pure health policy point of view, most of the larger health concerns were handled in the past and obesity seems to be the issue we seem to want to address now. However, just because this issue is on the top of the hierarch, we need to recognize that solving it may not have the kind of impact that was associated with solving some of society's earlier health issues and needs, such as penicillin or the war on malaria.

Even if the motives behind any potential government intervention in this matter may be most noble, it is clear that the entire economy will be greatly affected by these policies. And any government intervention will produce winners and losers with net social gains and losses being plausible outcomes.

For example, current guidelines recommend increased consumption of fruits,

vegetables, fish and whole grains within the context of a diet in which overall calories have been moderately reduced. While this diet, if implemented on a large scale for a sustained period of time, is likely to benefit producers in these industries, reduced consumption of other foods, such as meats, dairy or sugar, would force many producers out of business or greatly reduce their profit margins.