In 2003, U.S. Surgeon General Richard Carmona said in
testimony before the House of Representatives: "I welcome this
chance to talk with you about a health crisis affecting every State,
every city, every community, and every school across our great Nation.
The crisis is obesity. It's the fastest growing cause of death in
America."
In 1943, Metropolitan Life Insurance Company declared "Overweight
is so common that it constitutes a national health problem of the
first order."
One thing is clear: The obesity problem didn't occur
overnight. In fact, it has been emerging for decades but only recently
has it reached crisis proportions and grabbed national headlines.
While Americans at the turn of the 20th century may have aspired
to be plump, by now most people are aware of the health problems
associated with excess weight. Diet books top the bestseller list,
the electronic and print media overwhelm us with nutrition do's
and don'ts, but progress is slow or even nonexistent. The reality
is that we eat too much and move too little.
Americans are indeed among the heaviest people on earth. Not only
are we getting fatter, but we're doing it at a younger age. How
we got to this point is a complex story with genetic, physiologic,
psychologic, sociologic, and economic subplots. Here, we look at
the economic plot line. But be forewarned. Economics does not provide
all the answers. Even so, examining the past under an economist's
lens may help us unearth and evaluate potential solutions.
Technological Advances Have Lowered the Price
of Food . . .
Our story hinges on prices and income. When the price of something
preferred falls, people acquire more of it by giving up things that
have remained firm or risen in price. Conversely, when the price
of something goes up, money is reallocated from it to alternatives.
And when incomes rise, things that were formerly unaffordable—be
it a second car or a second helping—are suddenly attainable.
While the money required to buy a product (market price) is usually
the major component of price, its "full" price includes
other costs like time costs and information costs. For example,
the full price of a home-prepared meal includes the cost of ingredients
bought at the store, travel costs to the store and back, the cost
of time spent preparing the food, and information costs related
to nutrition knowledge and cooking techniques. A change in any component
of the price will change the incentive for consuming that product,
as well as its closely related alternatives.
Prices change over time due to a variety of reasons, including availability
of resources, but the prime mover of prices is technology. Better
production and distribution technologies generate more and better
goods, driving prices down. The market for computers in the past
20 years exemplifies this phenomenon.
Food prices, whether at the store or at a restaurant,
have been declining relative to prices of all other items. Between
1952 and 2003, the ratio of food prices to the price of all other
goods has fallen by 12 percent. But the drop is more dramatic if
we factor in "quality" improvements—the reduced
time cost of acquiring and preparing food (convenience), greater
variety, and omnipresent restaurants and vending machines. Foods
that once were available only seasonally are now available year-round.
Advances in food processing and packaging have introduced a multitude
of ready-to-eat foods, available virtually anywhere and at any time.
Harvard University's David Cutler, Edward Glaser, and Jesse Shapiro
have suggested that the increase in food consumption prompted by
the falling time cost of food is the major cause behind the surge
in obesity since 1980. They note: "Technological innovations—including
vacuum packing, improved preservatives, deep freezing, artificial
flavors, and microwaves—have enabled food manufacturers to
cook food centrally and ship it to consumers for rapid consumption.
In 1965, a married woman who didn't work spent over two hours per
day cooking and cleaning up from meals. In 1995, the same tasks
took less than half the time."
Although greater convenience, growing portion sizes,
and increased accessibility of restaurant meals have been blamed
for contributing to the rise in obesity, in economic terms, these
are quality attributes that are valued by consumers. As a matter
of fact, an increasing share of our food dollars are going toward
such value-added attributes rather than the food itself. ERS's marketing
bill data show that, between 1953 and 2000, the share of total consumer
food expenditures that pays for such marketing components has gone
up from 63 percent to 81 percent, with the bulk of this growth occurring
since 1980.
. . . and Raised the Price of Physical Activity
Technology-driven changes in the price of physical activity and
price of leisure activities have greatly altered the incentives
for energy expenditure. The full price of physical activity is the
opportunity cost of allotted time—the value of the most preferable
alternative given up by allotting time for a walk in the neighborhood
or a run in the park. For some, there is the additional cost of
joining a gym or health club or the cost of information from subscribing
to a health or fitness magazine.
As health economists Darius Lakdawalla and Tomas Philipson
have noted, in earlier agricultural and industrial times, the opportunity
cost of physical activity was virtually zero. Energy expenditure
came with one's work, which was strenuous—essentially, people
were paid to exercise. With increased mechanization and the shift
of jobs into service industries, the opportunity cost of physical
activity began to rise. In today's post-industrial society, physical
labor is rarer and people must pay to—and budget time for—exercise.
As with jobs, technological changes have reduced the amount of physical
activity required for a host of other daily activities, from routine
household work to transportation. We no longer use a push mower
to cut our grass or carry laundry back and forth from the clothesline
in the backyard. These forgone energy expenditures now have to come
from voluntary physical activity involving the conscious allocation
of time, effort, and sometimes money, as when people join a gym
or sports club.
Although job-related changes in physical activity may
partly explain the longrun trend in weight gain, they cannot account
for the post-1980 surge in obesity, especially since this uptrend
has affected children as well. One trend that has sapped physical
activity from all age groups in the last few decades is technological
advances in the entertainment and electronics sectors. The supply
and variety of passive entertainment options—from cable TV
to video games, DVDs, and the Internet—has exploded. Since
time is finite, this creates an incentive to forgo physical activity
for more plentiful passive entertainment. The net effect of technological
advances in the work place, at home, in transportation, and in leisure-time
choices is a reduction in daily energy expenditure, leaving individuals
with a stark choice: whether or not to fill the gap through voluntary
physical activity.
Body
Size Has Been Increasing Historically
click chart to
enlarge
Courtesy of Special Collections,
Vassar College Libraries
U.S. and Western European populations have experienced
steady gains in both weight and height since the late 19th
century. These trends were triggered by an increased food
supply that drastically reduced chronic malnutrition and
accelerated the accumulation of what Nobel Laureate economist
Robert Fogel has called physiological capital: enhanced
body size and capacity of vital organs resulting from improved
nutrition. The gain in physiological capital improved our
capability to withstand disease and increased longevity.
Between 1900 and 2000, life expectancy at birth in the U.S.
increased by 65 percent for women and by 60 percent for
men.
During the 18th and early 19th centuries, the Western European
population was much shorter and thinner than today. Limited
availability and access to food supply not only stunted
physiological growth but also prevented many from obtaining
the extra calories needed to perform work. One out of five
people had such poor diets that they lacked energy to do
sustained work and were excluded from the labor force. Improvements
in food production and transportation enabled more people
to enter the labor force and increased overall productivity,
fueling further expansions in food supply.
In the U.S., statistics for students ages 18-20 entering
New England colleges show a remarkable gain in body size
from one century to the next. The average height of men
entering Amherst College increased from 66.8 inches in 1861
to 70.5 inches in 1957. (The share of freshmen 6 feet or
taller increased from 4 percent to 33 percent.) For women
entering Vassar College, average height increased from 63.5
inches in 1884 to 65.1 inches in 1957. For the Amherst men,
gains in weight outpaced gains in height during 1910-57.
These distinctive trends in body size among U.S. men and
women are confirmed by weight-for-height charts compiled
by life insurance companies nearly 50 years apart (1885-1908
and 1940). These charts show that White men's weights for
given levels of heights increased during this period, while
the weight-for-height of White women fell slightly. Still,
both men and women were gaining in body size—both
weight and height—up through the middle of the 20th
century.
Unfortunately, while gains in height among U.S. adults
have leveled off, weight has continued to increase, and
markedly so since the beginning of the 1980s. Economic historian
John Komlos has noted a striking contrast between the trends
in body size of Americans and Northern Europeans. In the
second half of the 19th century, Americans were the tallest
people in the world and relatively underweight compared
with Northern Europeans. Americans, however, lost the height
advantage in the second half of the 20th century and today
are shorter than Northern Europeans while becoming among
the heaviest people in the world.
U.S. obesity rates since 1960 show a slight increase up
to 1976-80, then a rapid rise. More than twice as many U.S.
men and women were classified as obese in 1999-2000 as in
1960. Today, 3 out of 10 Americans are obese and close to
two-thirds are overweight or obese. Alarmingly, since 1980,
a similar increase in overweight has been witnessed among
children and adolescents as well.
Rising Incomes Reinforce Price Effects
At subsistence income levels, people spend most of their income
on food and choice is determined mainly by price and availability.
As incomes grow, preferences exert a greater role—people buy
less coarse grains, cereals, and potatoes, for example, and buy
more meats and prepared foods. Demand rises for foods that supply
additional quality attributes beyond basic nutrients, such as tastiness,
convenience, and ease of preparation.
Nowhere is this effect of rising incomes more visible than Americans'
habit of dining out. As income increases, people tend to spend a
greater share of additional income on dining out than on foods prepared
at home. ERS studies show a 10-percent increase in income leads
to a 4.6-percent increase in a household's away-from-home food expenditures
compared with a 1.3-percent increase in at-home food expenditures.
With the foodservice industry offering more choices—from fast
food to a growing array of ethnic restaurants—the share of
total food expenditure that Americans spend on dining out has risen
from 28 percent in 1962 to 47 percent in 2003.
Other ERS research shows that, ounce for ounce, foods eaten away
from home are more calorie-dense than foods prepared at home, and
thus could be a factor in the obesity surge. Health economists Shin-Yi
Chou, Michael Grossman, and Henry Saffer have linked higher restaurant
density with greater obesity rates over time and across geographical
areas. But the growing demand for dining out suggests that our preference
for convenience, time savings, and variety is outweighing concerns
about obesity.
The technological changes driving modern economic growth have raised
household incomes, reduced the price of food, and increased the
price of physical activity. The resulting increase in energy consumption
and flattening of energy expenditure has tilted the weight equation
in favor of a steady weight gain across all segments of U.S. society.
Is There a Role for Government Intervention?
Changing economic incentives have contributed to the rise in obesity
in the U.S. For the tide of obesity to reverse, therefore, the incentives
to eat healthfully and be physically active have to change. One
way to achieve this is through government intervention, including
taxes and/or subsidies. For example, a tax on fatty foods can increase
the price of calories and thus decrease energy consumption. A tax
break promoting employer subsidies for health club memberships can
reduce the price of physical activity and thus increase energy expenditure.
Should the government alter incentives so as to reduce obesity?
In general, government intervention is economically justified when
the costs of someone's actions are borne by others (social costs
or externalities), as in the case of industrial pollution, drunk
driving, or secondhand smoke. Economists do not take the private
costs of behaviors—that is, costs borne by the individuals
themselves—into account when determining whether government
intervention is justified. While there is some evidence to suggest
that not all costs of obesity are private and that obesity-related
costs are burdening Medicare and Medicaid, the jury is still out
on the magnitude of these costs and whether they justify government
intervention.
Still, the magnitude of improvements in private health and productivity
from reducing obesity may be enough to justify government action,
in the public health view. Disparities in obesity across income
and racial/ethnic groups—low-income and Black/Hispanic groups
are disproportionately obese—may justify government intervention
on social equity grounds.
Although economics can help explain the rise in obesity and evaluate
potential interventions, it is largely silent on why people have
the preferences they do. Economists take preferences as they exist
and then predict how outcomes or choices change as prices and incomes—or
more generally, incentives—change. Other disciplines, however,
study how preferences are formed and shaped. Biological research,
for example, suggests that strong tastes for fat, sugar, and salt
in foods are hard-wired into humans. Psychological research has
questioned whether people have the sophisticated decisionmaking
powers—accurately weighing future costs of current choices,
for example—that economic models typically assume.
Economists are increasingly recognizing that such biological and
psychological factors may prevent some people from making decisions
in their long-term best interests. If obesity-related choices are
influenced by such factors, interventions to reduce obesity that
do not pass the conventional economic tests may be justified. The
challenge would be to devise cost-effective policies that help people
make decisions in their best interests without punishing those that
are content with their choices.
Several studies are underway at ERS to help evaluate specific policies
meant to address obesity. For example, a recent study suggests that
taxing snack foods such as potato chips and cheese puffs—one
of the interventions suggested by public health advocates—will
have only a small impact on the amount of snacks consumed, and thus
on caloric intake. The economic effects of such a tax and other
public interventions to reduce obesity will be explored in greater
detail in a forthcoming Amber Waves article.
"Role of Food Prepared Away from Home in the American Diet,
1977-78 versus 1994-96: Changes and Consequences," by Joanne
F. Guthrie, Biing-Hwan Lin, and Elizabeth Frazão, Journal
of Nutrition Education and Behavior, Vol. 34, 2002, pp.140-150.
"Societal Costs of Obesity: How Can We Assess When Federal
Interventions Will Pay?" by Fred Kuchler and Nicole Ballenger,
in FoodReview, Vol. 25, Issue 3, USDA/ERS, Winter 2002.