A Soda or Calorie Tax to Reduce Obesity--Posner

Articles in the New England Journal of Medicine on April 30, and in the New York Times on May 19, discuss a proposal now before Congress to impose a tax on sugar-sweetened sodas in order to reduce obesity. Taxes are ordinarily intended to raise revenue, but some taxes, such as taxes on alcohol and tobacco--and on carbon emissions, should such a tax ever be passed--are designed not to raise revenue but to alter behavior, and the more they succeed in altering behavior the less revenue they generate. Sugar-sweetened sodas are high in calories, are drunk in great quantity, and because they have little nutritional value don't substitute for other foods; they are a net addition to caloric intake. The NEJM article estimates that consumption of such sodas adds an average of 125 to 150 calories per day to the average American's diet, and cites studies that estimate that the elasticity of demand for such products is about -1, so that a 10 percent soda tax tax could be expected to reduce consumption by about 10 percent, with the result, according to the author of reducing the average person's weight by about 2 pounds a year. I am skeptical, because the author ignores the possibility of substituting untaxed sugar-sweetened foods or beverages. People who crave sugar will find no dearth of substitutes for sugar-sweetened sodas. Moreover, most consumers of these sodas are not and never will be obese. They may well be overweight, but all that that means is that they are heavier than the "ideal" weight calculated by physicians; if they are only slightly or even moderately heavier, the consequences for health or social or professional success are apparently slight. To the extent that a soda tax would cause substitution of equally sugared foods, it would not only have no effect on obesity; it would yield no revenue--a material consideration because supporters of the tax hope, albeit inconsistently, that it will both reduce obesity significantly and contribute significantly to financing the Administration's ambitious and very costly program of health-care reform. There are many obese Americans, in the sense of ones who are grossly overweight (with some being morbidly obese), and we should consider whether society should be concerned with obesity if not with mere overweight. Obesity impairs health, and, in most segments of the population it diminishes social and professional success as well, and so it can be regarded as self-destructive behavior. Some of it is involuntary--there are people whose genes make it virtually impossible for them to avoid becoming obese--but most obesity could be avoided by careful diet and exercise. The obese are people who by dietary choice and preference for a sedentary style of life have traded off the costs of obesity against the costs of being thin and have decided (at least in a "revealed preference" sense--they may not have consciously chosen a style of life that predisposes them to obesity) that the costs of thinness preponderate over the benefits. And in general we do not try to prevent people from making such tradeoffs. But there are two situations in which preventing people from choosing the style of life that maximizes their utility can be defended (provided certain assumptions are made about cost and efficacy) on economic grounds. One is where consumers are unable to evaluate a product or to act upon their evaluation; another is where a voluntary transaction imposes costs on other people which the transactors do not take into account. The first is a significant factor in the soda market. The sellers advertise very heavily to children, who do not have the knowledge or the self-control that they would need to be able to resist such advertising. In well-ordered households, the parents regulate children's access to television and the Internet and know they should limit the children's consumption of sugar-flavored drinks and do limit it. But in many modern American households, especially but not only those in which there is only one parent, children's access to soda and soda advertising is not restricted. The solution, though, is not a tax on sodas, as such a tax would have only a small effect. A ban on advertising would be preferable; it would probably impose only slight costs on adult consumers of such drinks, because the advertising of such drinks contains little information. It is true that such a ban would reduce new entry into the soda market and that this might lead to higher prices, but if so that would reinforce the effect on sales of the ban on advertising. As to whether by increasing obesity the sale of sugar-flavored sodas imposes costs on other people besides the buyers, the evidence is mixed. Obese people have more health problems than the non-obese and hence higher annual medical costs; they also lose more time at work because of illness. Their poorer health increases the medical costs of other people in their insurance pools and reduces the productivity of their employers, assuming realistically that employers cannot selectively reduce the wages or health benefits of their obese employees. Cutting the other way, obese people have a reduced life expectancy, and the shorter a person's life, the less an above-average annual cost of medical care translates into an above-average total (lifetime) cost. But assuming nevertheless that the net social costs of obesity are positive, this would be a ground for arguing for taxing obesity, but such a tax would be unacceptable as well as cruel. The alternative of a soda tax would be unlikely to have much effect, for the reasons stated earlier. Are there better ways of fighting obesity, assuming it is worth fighting? Probably not. Education would probably have very little effect, because almost all people know that being fat has bad consequences and that eating foods rich in sugar and butter and not exercising increase the likelihood of becoming obese. Obesity is concentrated in the lower middle class, which contains a high proportion of people who have very high discount rates, which prevents them from giving significant weight to the future consequences of present behavior. Children may be ignorant about the costs of obesity and the effects on it of sugar, but because of lack of self-control and children's inability to imagine themselves as middle-aged adults, I doubt that trying to educate them in the dangers of drinking sugar-sweetened beverages would be effective. A tax on calories, or on high-calorie foods or ingredients, would be difficult to design and administer and would impose welfare losses, without significant offsetting wealth gains, on thin people. A further problem is that fattening foods, including sugar-flavored sodas, have fallen in price over time relative to fruits and vegetables and other healthful foods, so that a tax on calories would be highly regressive. A modest measure would be to bar the sale or other provision of sugar-flavored sodas and other fattening foods in schools, and the substitution of nutritious low-calorie school lunches for the present fare. In addition, more school time could be allotted to physical education, which in recent years has diminished in most schools. The cost of these measures would be modest and they would have some effect in reducing obesity.

Comments

[Anonymous]

testing

[Anonymous]

In several years of watching this blog, until this pair of posts by Becker and Posner on (not) taxing soft drinks, I've not seen them post anything that elicited zero comments as in the present case.

Consensus by silence?

[Anonymous]

It is because the comments section crashed after the posts a few weeks ago. There are now well over a thousand comments down there.

[Anonymous]

'Twas my -- M. David Peterson's -- fault for the lack of comments. Problem is now fixed, but again, 'twas my fault for not getting it fixed sooner. Sorry everyone!

[Anonymous]

This topic struck me as being fairly silly as FEW would think that a small tax would do anything to change soda slurping habits. The lack of effect would be as Posner states, as ineffectual as a small increase in gasoline prices are in dampening demand.

Posner is on the right track in suggesting getting rid of pop machines in schools; in most districts they got there by corporate bribery, that of splitting a tiny fraction of the gleanings with the sports coaches for uniforms and the like that the district itself often does not want to fund.

For our minor children I would not see it as overly intrusive for our public schools to teach and practice good nutrition.

Today, we see minors lining up at the Coke machine for a good jolt of caffeine combined with an amount of sugar few would pile on a bowl of cereal. Should be just great for balancing out blood sugar and providing our teachers with an attentive group of kids to teach.

I'd favor more research into the theory that HFCs DO screw up our metabolism as the levels of obesity seem unexplained by simply overeating or a sedentary lifestyle.

Thanks "Pete" for getting it fixed! Musta been a tough one!

[Anonymous]

Three things:

One, does anyone know the exact definition of soda in this context? For instance, as a member of the youth demographic, I just drank an energy drink that has 87 grams of sugar in it. Energy drinks, from this perspective, are just as, if not more harmful for today's youth consumers because they sell them advertising the vitamin content and the dramatic energy boost found within the beverage.

The second thing that I wanted to point out is that the Texas Education Agency and the state legislature banned the sale of soft drinks in Texas public schools some time ago. However one negative side effect is that Texas public schools can no longer derive any profit from the sales of soda and candy in their schools. At first this may sound mercenary on the part of the schools, but the money they earned inevitably went back to the students in some form or fashion (probably physical resources).

Lastly, alternatives to soda that are sold in convenience stores and supermarkets seem to cost, on average, significantly more. I don't see that a 10% tax on sodas would raise their price enough to make them less appealing than, say, healthier sports drinks.

[Anonymous]

Obesity is a major health issue for our nation interested in promoting genuine good health of its citizens.

The soda tax, no doubt, knowing little can be done seeks revenue that would be assured directing a false positive.

Thatguy

[Anonymous]

Three things: Good points and reason that taxing or banning would be impractical. "Natural only?" Corpies would find a way!

For schools what they serve seems one for democratic action; a "commish" made up of school nurse, perhaps district nutritionist, a few parents etc who'd meet rarely when something new was proposed.

Ha! as for the school "profiting" from the sale of pop, I know the game well, a few cents out of the pricey and profitable sugar water kicked back to the Physical EDUCATION coaches.

Surely it is better to teach kids (and parents?) that if they want activities they are much more efficiently funded by passing the hat than what amounts to corporate bribery to put Coke machines in the aisles. Good for Texas! where schools aren't doing so well, perhaps this will help!

[Anonymous]

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[Anonymous]

I would not see it as overly intrusive for our public schools to teach and practice good nutrition.

[Anonymous]

YA! LETS TAX THE SHIT OUTTA THAT SODA!

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[Anonymous]

I wanted to point out is that the Texas Education Agency and the state legislature banned the sale of soft drinks in Texas public schools some time ago.

[Anonymous]

For schools what they serve seems one for democratic action; a "commish" made up of school nurse, perhaps district nutritionist, a few parents etc who'd meet rarely when something new was proposed.

[Anonymous]

Today, we see minors lining up at the Coke machine for a good jolt of caffeine combined with an amount of sugar few would pile on a bowl of cereal.

[Anonymous]

I've not seen them post anything that elicited zero comments as in the present case.

[Anonymous]

Classic exposition, I have also mentioned it in my blog article. But it is a pity that almost no friend discussed it with me. I am very happy to see your article.

[Anonymous]

I recommend the introduction of substitute goods, such as soy milk juices. In south-america they are very popular, taste good and producers (ex. Unilever) are making a lot of money with them.

[Anonymous]

I was drunk when I read this article and I love it. Posner - please know that you have an avid following of drunk blog readers out there who are adamant admirers of your wonderfully straightforward logic and devilishly subtle wit.

[Anonymous]

Great work! Thank you!

[Anonymous]

It is because the comments section crashed after the posts a few weeks ago.

[Anonymous]

There are now well over a thousand comments down there.

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[Anonymous]

The problem is not categorically "soda", but instead the high sugar content of the drinks/candy sold in the vending machines, backed by weak labeling laws.

The drink "manufacturers" (or whatever you want to call them) sell drinks with 4-5 grams of sugar per fluid ounce. The result is that a 12 ounce can has 50-60 grams of sugar and the 20 ounce bottles have nearly 100 grams. Of course, the "manufacturers" hide behind the fact that a 20 ounce bottle is 2.5 "servings".

If you really want reform, standardize the serving sizes, and require labeling to disclose milligrams for anything under 1 gram (regardless of whether it's sodium or anything else). Food processors have been gaming the trans fat regulation for years -- that is, if there's less than .5 grams in one "serving," they can claim the product has 0 grams trans fats, and then they reduce the serving size so that there's less than .5 grams in one "serving". Some packaged cookies and crackers will say 1 piece is a serving and that there's 60-100 servings per package. For years, soda companies claimed there were 2 servings in a can, even though everyone finished the whole can in one sitting. It's a categorical abuse of labeling.

But we don't have to go the Euro route (there, food manufacturers are required to use exactly 100g or 100mL, but no one uses 100mL of tabasco or salad dressing). However, we do need better regulation of the labels. The bottom line is that the serving sizes should be based on average normal consumption for a category of foods, not a ridiculously unrealistic amount the manufacturer picks so it can round down.