By Simon Grey, on October 14th, 2011
Things are never so simple, of course. The tax has already been received by many Danish firms as a ‘bureaucratic nightmare’, piling on additional costs to firms in an already tough period. Once more, any tax such as this is going to be inherently regressive; those least able to afford any price increases will be hit the hardest. But what does it matter? The French ‘fat tax’ is expected to raise an estimated €120,000,000 p.a.. A nice little earner.
Fat taxes are politically convenient in countries where obesity is a sizeable problem. There is presumably plenty of revenue to be had because fat people aren’t going to change their eating habits overnight, nor are they the type to be particularly cost-conscious, in terms of both direct and indirect costs.
Furthermore, defending fatties is political suicide for most, since fat people are generally reviled. Thus, a fat tax is politically brilliant because it will raise revenue easily and enjoy widespread support (or, at the least, it won’t face much political opposition).
Most are in agreement that obesity is a society-wide problem. The more rotund we become, the more our healthcare costs increase. So what’s the solution? Surely not pricing poor people out of the market for fatty foods. We must seek a solution other than ‘more taxes’ – the default position of any government. Perhaps our BMIs could be helped by making it easier for people to help out at sport clubs without undergoing a raft of CRB checks, or by reforming our health system which currently permits the cost of atrocious health habits to be picked up by someone else.
Sadly the precedent has already been set. When we already allow the government to dictate what we may and may not consume in the form of innumerable drugs, letting them control what we eat is a logical advancement. And it will all be done for our ‘own good’.
Actually, once you expect the government to provide free universal health care for every citizen (and all non-citizen residents), the natural consequence is for the government to enact some sort of cost-cutting measure, like rationing or queuing. Alternatively, the government can enact a tax on unhealthy things in order to make providing health more reasonable. If fat people ignore the increased prices, the government will at least have enough money to defray future health care costs that inevitably arise as a result of unhealthy diet. Alternatively, if fat people decide to respond to the tax rationally, then the government will have to pay less for health care later on, thus negating the effect of less-than-projected revenue.
In many ways, a fat tax mimics the natural workings of the free market. If there were no governmental guarantees of health care, people would more inclined to take care of themselves and eat properly. Thus, the fat tax serves as a replacement market mechanism.
Now, this is not to say that I support a fat tax. I simply view it as the rational response to the current conditions in Europe, with regards to how health care is provided over there. Personally, I think the best solution would be to have the government completely deregulate and desubsidize the entire health industry, and get out of providing and paying for health care in its entirety. But if the government is going to be involved in health care, it is going to have to find a way to manage costs. That much is certain.
By Simon Grey, on September 1st, 2011
The justification for pushing people around like this is the NHS. Shouldn’t people have to pay for their own illnesses? Well, yes – that’s how personal responsibility works. But having an NHS removes the personal responsibility, and artificial attempts to inject it into the system are doubly illiberal and wrong.
The government (and the electorate, for that matter) forces people to be in the NHS. You have no choice in the matter, and you can’t opt out of it. Jamie Whyte put it well: “first the do-gooders conjure up the external costs by insisting that no one should have to pay for his own medical care, then they tell us that they must interfere with behavior that damages our health because it imposes costs on others.” This is perverse and illiberal. The tax would only affect the poor – rich people’s spending habits wouldn’t be dented. How easy it must be for doctors to pontificate about the need for a fat tax, knowing that such a tax would hardly affect them at all.
This creepy, controlling paternalism has plenty of fans in politics on both sides of the partisan divide. Doctors are the politicians’ enablers, lending the weight of their “expertise” to the nanny instinct of the political class in exchange for the feeling of being important. No amount of expertise – medical or otherwise – should give somebody the right to interfere with another adult’s choices. Nor should democracy be used as an excuse to violate the sovereignty of the individual. If fat people are costing the NHS money, that’s a mark against having an NHS, not against having fat people.
Sam Bowman is perfectly correct in noting that the problem with obesity is a mark against the NHS. The NHS has essentially reduced people’s incentive to avoid unhealthy behavior and, unsurprisingly, people have engaged in unhealthy behavior. If the NHS were abolished, people would revert to more healthy behaviors. This is the basic economics.
However, regulating people’s diets and behaviors is the natural consequence of having the NHS. If a government is going to dispense “free” health care, the only way to control costs is to limit health care and control individuals’ behavior. If the government is going to provide something for you, it is eventually going to have to control you. Government benefits and government control go hand in hand.
Therefore, if people do not wish to be controlled by their government, they must give up their benefits (and in this case pity can be offered to those in Britain because NHS is not opt-out, so there are likely some in Britain who are part of system they simply want no part of). And if people desire certain benefits from the government, they must be prepared to cede control of themselves to the state. Those are simply the natural consequences.
By B.P.T., on February 13th, 2011
By Rok Spruk, on June 10th, 2010
Greg Mankiw (link) and David Leonhardt (link) have opened a debate on whether govenrment policymakers should levy a tax on soda and other soft drinks as an attempt to reverse the growing trend of obesity among the U.S. population. The idea of taxing soda has become popular as governments around the world have recorded high budget deficits and revenue shortfall. The real question is what would be the effects of taxing soda and, if so, would the introduction of the tax contribute to the reversal of the obesity pattern, especially among the child population.
There is a decent amount of empirical studies and health policy analyses on the patterns and causes of obesity. Obesity and the risk of premature death resulted from high blood pressure and the potential heart attack is the most individual cost of fast-food consumption. For a long period of time, we assumed that these costs at the individual level could be internalizied and, thus, raise no cost to the society. In the article published in Sunday’s edition of NY Times Greg Mankiw drew parallels between soda and tobacco tax. If individuals consume a lot of cigarettes at home, there is, presumably, no negative externality shifted onto the society. The logic could be applied to soda taxation. However, there is a flip side to the argument. Taxing soda, tobacco and other goods with a negative impact on bystanders is an answer to the growing cost of health care delivery to the individuals who consume these goods. The adverse impact levied on other individuals is seen through higher health insurance premiums and total cost of health care.
John Cawley published an extensive analysis of the causes of early childhood obesity (link), suggesting greater government intervention and various cost-effectiveness measures to mitigate the adverse impact of childhood obesity on other members of the society. A study by Jason M. Fletcher, Daniel Frisvold and Nathan Tefft (link) has been one of the first attempts to measure the effect of vending machines restriction on childhood obesity. The authors concluded by suggesting higher tax rates and soft drink access restrictions in schools to fight the on-going increase in childhood obesity.
As Kelly Brownell of Yale Rudd Center for Food Policy and Obesity mentioned, the link between sugary drinks and obesity is stronger than the link between obesity and any other kind of food (link). The evidence suggests that distance from fast-food restaurant is a significant feature of childhood obesity. A study conducted by Janet Currie et. al (2009) has shown that among children in the 9th grade, a fast-food restaurant within 1/10 of the mile in school is associated with at least 5.2 percent increase in obesity rates (link). The study found that the direct impact of distance from the fast-food restaurant is significantly larger for less educated African-American and less educated women.
The question is whether taxing soda and other kinds of fizzy drinks could potentially reduce and/or reverse the growing trend of obesity. The basic question to start with, is what is the elasticity of demand for soda drinks. The estimates suggests that price elasticity of demand for the majority of soda drinks ranges from -0.8 to -1.0. For example, -1.0 elasticity coefficient suggests that a 10 percent increase in the price of soda would – ceteris paribus – lead to 10 percent decrease in soda drink consumption. The price elasticity of demand for soda drink is relatively high considering that coefficients of price elasticity of demand for other kinds of food ranges from -0.2 to -0.5. If policymakers considered the introduction of a tax on soda consumption, the relevant question is who would bear the burden of the tax? Given elastic demand, the tax would be beared by consumers. However, high price elasticity of demand suggests that there is a widely availible range of close substitutes with potentially negative adverse effects for the individuals. So it is not unlikely that children would switch to other kinds of fast food with equally negative impact on obesity, blood pressure and quality of living.
Given the lack of experiments and availibility of household surveys, it is difficult to estimate the consumer response to the introduction of tax on soda. The estimate of price elasticity of demand suggests that part of the tax would be beared by the consumer. However, it also suggests that a change in the relative price of soda would induce children to consume other varieties of fizzy drinks. Experimental studies by health policy experts suggests different approaches to tackling the adverse impact of soda drinks and other kinds of fast food. The most notable approach is the restriction of vending machines in school districts. However, restricting the access to vending machines would encourage the consumption of fast food outside school districts. A general tax on soda would be preferable to the restrictions of access of vending machines. There is absolutely no doubt that a tax would discourage consumption of soda and other kinds of fast food. Estimates suggest that soda and other kinds of fast food such as hamburgers, donuts and cakes are complementary. Assume, the cross-price elasticity of demand for burgers is -0.9 Thus, if the price per unit os soda increases by 10 percent, the demand for donuts, burgers and cakes decreases by 9 percent (0.9×10 percent). Since a tax on soda would raise the relative price of soda, the consumption of these kinds of fast food would diminish, resulting in less adverse impact of fast food consumption on the individuals. I would disagree with the statement that negative externalities from soda and fast food consumption are internalized by the individual. For example, an article by Trasande, Liu, Fryer and Weitzman (2009) published in Health Affairs (link) investigated the annual cost of childhood obesity in the U.S. between 2001 and 2005, based on the nationally representative data from U.S. hospitals admissions. The authors found that from 1999 to 2005, obesity-related hospitalizations doubled. In addition, costs related to hospitalization, treatment and diagnosis of obesity increased from $125.9 to $237.6 million, an 88.7 percent increase. The cost is partly beared by Medicare while the rest of the total cost is beared by the private insurance premiums.
Given the perverse system of employer-provided health care and implicit subsidizing of health insurance suppliers by the federal government, the periodic increase in obesity-related health care costs indicates a further rise in Medicare expenditures and health insurance premiums. In such conditions, there is little incentive for children and parents to reverse the consumption of soda drinks and fast food. Taxing soda and complementary fast food is a step in the right direction. But it should be noted that the introduction of a tax on soda should be compensated by a corresponding decrease in personal income tax. However, without the parent-guided awareness of the adverse impact of fast food on obesity, it would be difficult to reverse the increasing pattern and cost of childhood and adult obesity. Therefore, much of the obesity-related health care risk in childhood can be solved within the household. It would be irrational and foolish to believe that a tax on soda and government paternalism could solve the obesity puzzle and mitigate its neighborhood effects on bystanders.
By R. C. Anderson, on July 30th, 2008
Stroke affects men and women around the world in a devastating manner. Although some strokes are more severe than others, they almost always lead to a change in the patient’s lifestyle. Recently, two articles have found interesting links to stroke, what may cause it and easy ways to attempt to prevent it.
When many adults were children, a frequent refrain they may have heard was “go outside and play”. Now, however, it seems this refrain is rarely used which has led to an increase in childhood obesity over the past several decades. Adults are often the ones setting such an example by lying on the couch watching random television programs, rarely going outside or exercising. In fact, the obesity of the U.S. population has increased dramatically since the 1970s. While only 47% of the population was considered obese in the 1970s, this number jumped to 56% in the 1990s and to 65% in 2000.
Is it possible that this type of stagnant, indoor-based behavior has other consequences? According to two studies on stroke and its predictive factors, the answer is most probably yes. In a July 17 issue of Stroke, Dr. Stefan Pilz and associates published data from approximately 3,300 patients who had been referred for coronary angiography. Vitamin D levels were measured in these patients and their health was then monitored for eight years. Pilz believes this study showed low levels of vitamin D to be an independent predictor of fatal stroke with low levels equaling an increased risk of stroke. If this is true, one simple way to curtail stroke could be easy: get outside.
The Role of Vitamin D
Vitamin D is made by the body upon exposure to the sun. If, however, one stays indoors too much, it could be difficult for the body to generate the necessary amount of this vitamin. This is not to say people should spend inordinate amounts of time outdoors. Too much time in the sun, especially without sunscreen, could lead to problems of its own, such as skin cancer. According to Pilz, vitamin D supplementation in stroke patients has reduced many problems related to bone strength and could offer a protective measure against stroke. Unfortunately, it is now estimated that as much as 50% of those in the U.S. and Europe could be deficient in vitamin D.
A second study, authored by Dr. Jiu-Chiuan Chen and published in the same issue of Stroke, explored the possible link between stroke and sleep. Over 93,000 women were enrolled in a study to assess if the duration of their sleep could be correlated to their risk of stroke. These women were followed for almost eight years and the results were interesting, if not disturbing. Using seven hours of sleep per night as a baseline, women who slept six, eight and nine hours were tracked.
Women who slept six hours suffered 14% more strokes than those who slept seven hours each night. The answer, however, is not to sleep more. Women who slept eight hours experienced 24% more incidence of stroke. While these numbers may not sound too frightening, the true jump occurred in women who slept nine hours each night. This group of women increased their stroke risk by 70%. Unfortunately for those considering simply setting the alarm clock, Chen stated that he did not believe the solution of artificially reducing ones sleep duration to lower the risk of stroke could be supported by their data. On the other hand, it often seems the more active an individual is, the more optimal their sleep conditions become. If this is true, it may be possible for those sleeping too long at night to naturally change their sleep patterns by changing what they do during the day.
Costs to the Nation
Stroke has become a serious problem in the U.S. In 2007, strokes cost the U.S. $62.7 billion. The American Heart Association has calculated that every 45 seconds someone has a stroke and every three to four minutes someone dies. In fact, stroke accounted for one in every 16 deaths in 2004 making it the third leading cause of death. Perhaps surprisingly, women made up 61% of the 5.7 million stroke victims in 2004. While only 58,700 men died as a result, almost twice as many women, or 91,400, did. While Caucasians have one of the lowest percentages of strokes at 2.5%, native Hawaiians or Pacific Islanders have the highest at 8.1%.
With more people sitting indoors, the numbers of people affected by disease and infirmities are bound to increase. The increased sedentary lifestyle of today, along with other factors, seems to have led to an increase in obesity, and it seems it will lead to an increase in stroke risk. The solution of simply getting outside and exercising seems so simple, and yet many don’t apply it. In 2005, it was found that Japanese men reduced their risk of stroke by 29% and women reduced it 20% merely by walking and participating in some kind of sport. With so much expense, both financially and in terms of human suffering being expended, putting effort into preventing such a disease seems only logical.
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