Should the government regulate unhealthy foods?

That was the question asked in a long piece by the Congressional Quarterly Researcher a few days ago.  I had several nice conversations with Robert Kiener, the author of the piece, and was pleased he included a few of my thoughts.  

The article had a page (pg. 833) with alternative viewpoints responding to the question: "should the government tax sugary soda?"  Writing in favor was Michael Jacobson with the Center for Science in the Public Interest.  Writing in opposition was yours truly.  Jacobson repeatedly refers to "big soda's" talking points, but my views are my own and I have no financial ties to the soda or sugar industries.  I began by writing:

“Should the government tax sugared soda? It already does. Farm policies make U.S. sugar prices two to three times higher than elsewhere. Moreover, ethanol policies have led to a more than doubling of the price of high fructose corn syrup since 2005. Its no wonder that per capita sugar consumption has fallen precipitously over the last decade.”

You can read the rest for my other thoughts.  

On the sugar policy issue, I'll note this paper just released by Beghin and Elobeid in the journal Applied Economic Perspectives and Policy on the effects of sugar policy.  They write on the effects of the removal of US sugar policy.  They estimate the removal of the sugar program would lead to a roughly 30% reduction in the US price of refined sugar.  They write: 

“The removal of the sugar program would increase U.S. consumers’ welfare by $2.9 to $3.5 billion each year and generate a modest job creation of 17,000 to 20,000 new jobs in food manufacturing and related industries. Imports of sugar containing products would fall dramatically, especially confectioneries substituting for domestic inputs under the sugar program. Sugar imports would rise substantially to 5–6 million short tons raw sugar equivalent. World sugar price increases would be minor, equivalent to about 1 cent per pound.”

The interesting dichotomy (dare I say, irony) is that the ~$3 billion in consumer benefits estimated from the above study come about because of lower sugar prices that would arise if US sugar policy were eliminated. But, it seems sugar price advocates think just the opposite: rising sugar prices will somehow benefit consumers.  We can't have it both ways.  Either falling sugar prices help or hurt consumers.  I don't know about you, but I prefer paying lower prices.  

On Crop Insurance

The UC Berkeley economist Brian Wright provocatively begins an article in Choices Magazine as follows

“Consider a deal where, for about 200,000 farmers, every dollar they can pay to the government in crop insurance premiums will give them an expected return of $1.90 as J.W. Glauber reported was the case for 1990 to 2011. Imagine that it costs the taxpayers at least $1.10 to get farmers paid that expected a 90-cent profit (Glauber, 2013). Imagine that this deal has just been sweetened further with a new set of giveaways in the legislation that is widely called the 2014 Farm Bill, at the end of a half-decade called the “great recession” when farm families’ wealth has soared to over eight times that of the average American family (Bricker et al., 2012; and U.S. Department of Agriculture (USDA), 2014). In an ingenious and successful political marketing campaign, farmers continue to promote public support for this deal as crop “insurance.””

Price responsiveness to unhealthy food taxes and healthy food subsidies

I recently ran across this article published in Current Obesity Reports calling for more rigorous methods to assess the effects of soda and fat taxes.  The article makes a number of good points, but it also misses many more complications that should be included for a rigorous evaluation - for example, how do firms respond when subjected to new food policies?

Another example comes to us via this paper in the Journal of Marketing by Debabrata Talukdar  and Charles Lindsey.  If you want to tax unhealthy foods and subsidize healthy ones, the authors suggest regulators may face an up hill battle because consumers are less sensitive to rising prices for unhealthy foods and falling prices for healthy foods than the reverse.

A portion of the abstract:

“The results from multiple studies confirm that consumers exhibit undesirable asymmetric patterns of demand sensitivity to price changes for healthy and unhealthy food. For healthy food, demand sensitivity is greater for a price increase than for a price decrease. For unhealthy food, the opposite holds true. The research further shows that the undesirable patterns are attenuated or magnified for key policy-relevant factors that have been shown to decrease or increase impulsive purchase behavior, respectively. As the rising obesity trend brings American consumers’ food consumption behavior under increased scrutiny, the focal findings hold significant implications for both public policy makers and food marketers. ”

They conclude:

“For public policy makers, our findings imply that the efficacy of economic policy interventions in inducing healthier food consumption behavior will be much more limited than what is expected under the conventional premise of symmetric patterns of demand response. This may warrant that public policy officials lower their level of expectations regarding the effectiveness of so-called sin tax initiatives in curbing demand for unhealthy food.”

Impacts of Dietary Recommendations

Following the government's dietary recommendations may lead to . . . climate change?

New research suggests the following:

“if Americans adopted the recommendations in USDA’s “Dietary Guidelines for Americans, 2010,” while keeping caloric intake constant, diet-related greenhouse gas emissions would increase 12 percent.”

Rather than trying to anticipate the unintended consequences of such recommendations, the study authors want to add another layer on top of the nutritional recommendations

“The take-home message is that health and environmental agendas are not aligned in the current dietary recommendations,” Heller said.

The paper’s findings are especially relevant now because the USDA Dietary Guidelines Advisory Committee is for the first time considering food sustainability within the context of dietary recommendations, he said.”

As I've pointed out before, trying to integrate nutritional and environmental objectives into recommendations involves value judgement that go beyond scientific evidence. Moreover, focusing just on C02 emissions or nutritional composition (as if that's easy to characterize) ignores many other factors.  On a per-acre basis, which crops are the biggest users of pesticides or water? You might be surprised to find out that it is not corn, soybeans, or wheat but rather many fruits and veggies like lemons, strawberries, etc. 

Rather than trying to add layer upon layer to the dietary recommendations, why not respect people's choices?  The price of food reflects the resources used and the demands on those resources.  If the problem is that prices don't fully reflect water use or C02 emissions, then the idea is to think about assigning property rights in a way that that information-aggregating markets help allocate those resources.  But, I suppose it's less fun to let markets allocate resources.  That would take away our power to tell others what to eat.  

Reducing Food Insecurity

Last week, I mentioned the new USDA report on food insecurity.  I also mentioned a WSJ editorial by James Bovard arguing that food stamps don't reduce food insecurity because the number of people enrolled in food stamps has risen dramatically while food insecurity remains essentially unchanged.

I noted that we don't know the counterfactual (i.e., how much food insecurity would have changed had enrollment in food stamps not increased).  And, I also noted that there is some good academic research on the relationship on food insecurity and food stamp participation.

One of the big problems with trying to tease out the link between these two is that they are jointly determined.  That is, I may enroll in food stamps precisely because I'm food insecure. This sort of selection effect will make it look like being on food stamps is associated with food insecurity, but clearly this is just correlation, not causation.

Here is a careful paper published in the Journal of the American Statistical Association that tries to get at the issue:

“Under the weakest restrictions, there is substantial ambiguity; we cannot rule out the possibility that SNAP increases or decreases poor health. Under stronger but plausible assumptions used to address the selection and classification error problems, we find that commonly cited relationships between SNAP and poor health outcomes provide a misleading picture about the true impacts of the program. Our tightest bounds identify favorable impacts of SNAP on child health.”

One of the measures of "child health" is food insecurity, and this research seems to suggest null to positive effects of food stamp participation and child food insecurity.  

A lot of the discussion on the web related to the USDA report seems to be wrapped up in ideological baggage associated with beliefs about the desirability of cutting or expanding the food stamp program (or, for example, utilizing work requirements).  Those who would like to reduce the size and scope of the food stamp program often try to argue that food stamps do not reduce food insecurity and may actually increase it.  My view is that the best analysis doesn't support such an argument.  There may be other good reasons for reducing the size of the food stamp program, but the food security argument isn't one of them.  

Another argument I made in my previous post was that technological development that leads to lower food prices seems a comparatively good strategy for reducing food insecurity.  

As such, I was intrigued to see this white paper by Graig Gundersen at the University of Illinois on food insecurity.  One of the five drivers he discusses to reduce food insecurity is to focus on the importance of low food prices.  

He also writes, when discussing, what food groups can do (or perhaps what they shouldn't do):

“Third, they can view proposals encouraging organic foods and local foods with skepticism. While proposals to encourage, say, local food procurement by supermarkets can have ancillary benefits, these benefits do not generally extend to low-income households because they cannot afford these items. Instead, the benefits are more likely to extend to upper-income households that can afford these items. Moreover, by devoting scarce resources to encouraging the entrance of these into the food supply chain, this diverts resources away from factors that would help low-income households. ”