Efficacy of Fat Taxes and Thin Subsidies

Science News reported the following results from a recent study:

Taxes on soft drinks and foods high in saturated fats and subsidies for fruit and vegetables could lead to beneficial dietary changes and potentially improve health, according to a study by experts from New Zealand published in this week's PLOS Medicine.

and

The authors say: "Based on modelling studies, taxes on carbonated drinks and saturated fat and subsidies on fruits and vegetables are associated with beneficial dietary change, with the potential for improved health. "

My first reaction was "duh."  Clearly if you raise prices of (say sugar or fat) high enough, you will get people to eat less.  In fact, one way researchers often model a ban on a substance is by simulating what happens when the price gets high enough that no one buys the product.  

Thus, the key question isn't whether one can change consumption and nutrient intake with sufficiently high taxes or subsidies.  The better questions are by how much? and at what cost?  An even better question still: where is the market failure that would justify the tax or subsidy?  The answer to that last question is actually much less obvious than most public health professionals presume (see here or here).

On the former question of how much?, let's turn to the original study mentioned at the first of this post.  The study is actually a literature review, pulling together the findings of previously published papers (including one that I co-authored).  Below is a graph showing some of the key results from different studies simulating how much change in consumption (or energy intake) would occur from a change in the price of a good. Pay attention to the scale of the vertical axis.  My take (see the middle chart) is that it would take very large price changes to get energy consumption to change by much (a 20-40% increase in price results in a 0.2-0.4% reduction in calories consumed).  

Stated differently, these sorts of policies are likely very costly in achieving the desired health outcomes.  Moreover, we must ask why - if these health changes are really so inexpensive and beneficial - people are not already voluntarily making them?

The Need for Agricultural Research

Five agricultural economists published an article in the latest issue of Science on the effects of public and private R&D spending on agricultural research.   

Here is the summary:

Most of the increase in global agricultural production over the past half-century has come from raising crop and livestock yields rather than through area expansion. This growth in productivity is attributed largely to investments in research and innovation (1). Since around 1990, there has been a decline in the rate of growth in yield per area harvested for several important crops (2). In parallel, the rate of growth in public spending on agricultural research and development (R&D) has also fallen, which may account for declining crop yield growth and may be contributing to rising food prices (3).

To this, I would add that a deluge of books and documentaries on food have demonized precisely those research developments responsible for yield growth.  It's hard to know exactly what effect these cultural influences have had on firm and government decisions to invest in agricultural research.  

However, many in the food community haven't connected the dots.  Mark Bittman wrote just two days ago about hunger, saying:

It seems absurd to have to say it, but no one in this country should go hungry.

His answer for the problem was more government spending on food stamps and food banks.  Yet, he has repeatedly denounced modern agricultural technologies and has called for food policies that will ultimately increase food prices.  

There is the old saying that if you give a man a fish, you feed him for a day; If you teach him how to fish, you can feed him for a lifetime.  Food stamps give people fish for the day.  Developments in agricultural R&D are the gifts that keep on giving.   

The Food Movement that Failed

The Wall Street Journal will publish an op-ed I wrote in tomorrow's paper (it is already up online).  

Here are some snippets:

Before the election, author Michael Pollan wrote in the New York Times Magazine that “One of the more interesting things we will learn on Nov. 6 is whether or not there is a ‘food movement’ in America worthy of the name—that is, an organized force in our politics capable of demanding change in the food system.” By Mr. Pollan’s own standard, we must conclude that there is no viable food movement worth its sea salt. Right?

That depends on which food movement we are talking about. There is the food movement that has caught fire over the past decade—encouraging consumers to use the power of their wallets to prompt farmers and retailers to grow and sell better-tasting, more-nutritious produce. It is the movement that has led to a surge in farmers markets, an explosion of niche producers of jams and salsas in exotic flavors, the rise of craft brewers in strip malls and backyard garages all across the U.S. Wal-Mart is now the country’s largest seller of organic produce. That food movement is alive and well.

So, what was the food movement that failed earlier this month? The one that wants the coercive power of the state to strong-arm Americans into eating fashionably. It is the movement that refuses to acknowledge the hard work of the vast majority of American farmers—Urvashi Rangan of the Consumers Union says that farmers’ fertilizers “rape the soil”—simply because they cannot make a living selling the stuff that the food elite think we all should eat. It is a movement that uses scare tactics and misrepresents the ­consensus scientific opinion about food technologies in an effort to demonize agribusiness. It is the movement that distrusts consumers to pick the right soda size.

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The failing movement is one that, in pursuit of higher-quality, better-tasting food, forgot that most Americans can’t afford to shop at Whole Foods. We all can celebrate a good heirloom tomato, but something is rotten about the one forced upon us.

How will we feed 9 billion people?

That's the question asked in a great video by Evan Fraser at the University of Guelph.  I don't agree with all of this solutions but he provides some good food for thought on an important question that often gets overlooked in food discussions.

By 2050 there will be 9 billion people on the planet - but will there be enough food for everyone? Food security expert Dr Evan Fraser guides you through a whiteboard presentation of his solution to the Global Food Crisis. See www.feedingninebillion.com for more details

Does 1 lb = 3500kcal?

Researchers studying the effect of various food policies on changes in weight often use the simple saying that a change of 3500 kcal via diet or exercise results in a 1 lb change in weight (it is a claim we repeated in our paper in the Journal of Health Economics, which studied the efficacy of fat taxes).

I ran across this interesting post by a Mike Gibney, a public health and nutrition expert, who points out some problems with the 1 lb = 3500 kcal calculation.  Here's what he has to say:

Firstly, a 1lb weight loss will not be 100% fat but will also involve the loss of some lean tissue (muscle and protein elements of adipose tissue and its metabolism). Whereas fat has an energy value of 9 kcal/g, lean tissue has a value of 4 kcal/g. The exact ratio of the loss of lean and fat in weight reduction depends largely on the level of fat in the body at the outset.

and:

The second criticism of this rule is that it ignores time. If you shed 3,500kcal per week every week, that would differ from a deficit of 3,500 kcal per month every month. The former leads to a daily deficit of 500 kcal while the latter is just 117 kcal.

and:

Thirdly, the 3,500 kcal rule assumes complete linearity – in other words the rule equally applies, pound after pound of weight loss. We saw above that progressive weight loss will progressively increase the % of that weight loss as lean tissue but more importantly, the 3,500kcal rule ignores a major adaptation in energy expenditure

and on this topic, he concludes:

Clearly, the continued use of the 3,500 kcal rule in predicting weight loss should cease and the recommendations of the consensus statement of the ASN and ILSI should apply: “Every permanent 10 kcal change in energy intake per day will lead to an eventual weight change of 1lb when the body reaches a new steady state.  It will take nearly a year to achieve 50% and about 3 years to achieve 95%”.

Finally, I'll point out the importance of taking into account these kinds of issues when calculating the effects of fat taxes.  He says that according to one study, a 20% soda tax would lead to;

 a reduction of energy intake of 34-47 kcal per day for adults. Using the 3,500 kcal rule, an average weight loss of 1.60kg would be predicted for year 1 rising to 8kg in year 5 and to 16kg in year 10. However, when the dynamic mathematical model is used, the corresponding figures for years 1, 5 and 10 are, respectively, 0.97, 1.78 and 1.84 kg loss. The % of US citizens that are over-weight is predicted to fall from existing levels of 66.9% over-weight to 51.5% over-weight in 5 years time using the 3,500 kcal rate but using the dynamic mathematical model, the 5-year figure for the over-weight population in the US would be just 62.3%.