In a new 580-page report, a government advisory panel calls for “bold actions” to “transform the food system” and bring about a fundamental shift in people’s diets and lifestyles. The 2015 Dietary Guidelines Advisory Committee advocates “a diet higher in plant-based foods, such as vegetables, fruits, whole grains, legumes, nuts, and seeds.” It wants people to eat fewer “burgers, sandwiches, [and] mixed dishes,” instructs them to use less salt, recommends more exercise, and suggests placing “limits on sweets and desserts.”
The committee members clearly are displeased with the general public and impatient for change.
“The dietary patterns of the American public are suboptimal… Unfortunately, few improvements in consumers’ food choices have occurred in recent decades… [T]he Nation’s adverse dietary pattern and physical activity trends must be reversed.”
In addition to believing the changes are for people’s one good, the panel members are troubled by the nation’s high health care costs and mention those costs frequently in their report. They see modifications in people’s behavior as a way to lower those costs.
The panel sees many opportunities for intervention, such as educating people about good dietary habits and asking suppliers to offer more of the foods that nutritionists recommend.
The committee members think part of the solution may also lie in coercive government action, such as taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es and bans, “to encourage the production and consumption of healthy foods and to reduce unhealthy foods.” For example, the new report talks of imposing taxes on “sugar-sweetened beverages, snack foods and desserts high in calories, added sugars, or sodium, and other less healthy foods” and using some of the new tax revenue “for nutrition education initiatives and obesity prevention programs.”
It will be left to others to decide whether burgers, flavored milk, and dessert should be relegated to a hall of shame. Economics, however, does offer some guidance on whether the special food taxes that the federal panel mentions are warranted.
A basic economic principle is that a good or service may be overproduced or produced inefficiently if it imposes costs on third parties who are outside the market place and unrelated to buyers or sellers. (Conversely, something may be underproduced if it confers external benefits outside the market on unrelated third parties.) A classic example of a harmful externalityAn externality, in economics terms, is a side effect or consequence of an activity that is not reflected in the cost of that activity, and not primarily borne by those directly involved in said activity. Externalities can be caused by either production or consumption of a good or service and can be positive or negative. used by the English economist A.C. Pigou nearly a century ago is “uncompensated damage done to surrounding woods by sparks from railway engines.”
A so-called Pigouvian taxA Pigouvian tax, named after 1920 British economist Arthur C. Pigou, is a tax on a market transaction that creates a negative externality, or an additional cost, borne by individuals not directly involved in the transaction. Examples include tobacco taxes, sugar taxes, and carbon taxes. could correct this market failure by internalizing the cost, provided the tax is set equal to the external damage caused by the last unit of the offending product. In Pigou’s example, such a tax could have induced railroads to take account of the fires on neighboring land. (Because of difficulties in measuring external costs and concerns about the political process when it comes to taxation, a more practical alternative in many cases is internalizing the cost through clearly defined property rights, such as by making railroads in Pigou’s example legally responsible if they cause fires on adjoining land.)
For an example related to eating habits, suppose that eating an extra brownie somehow causes one-tenth of a cent of harm to unrelated third parties. The externality-based tax would be one-tenth of a cent. It is important, however, not to impose a higher tax than the external damage, say 10 cents per brownie, or it would reduce both private and social welfare rather than increasing them. (If eating the brownie doesn’t harm third parties or somehow generates external benefits, the externality argument would call for either no tax or a small subsidy.)
A point Pigou and later economists emphasized is that the externality argument regarding market failure and corrective taxation only applies to costs that are truly external. For instance, suppose a train ride is bumpier than passengers would like or a person biting into a brownie anticipates a tinge of remorse when stepping on the bathroom scale the next morning. These are internal costs that buyers already factor into their market decisions. Hence, they do not lead to allocative inefficiency. If the government imposes taxes to “correct” for these internal costs, the effect is to double charge buyers for the same (internal) costs, leading to inefficiently low production and consumption.
Although the federal nutrition report says repeatedly that its recommended dietary and lifestyle choices would reduce “health care costs” and “economic and social costs,” the report never distinguishes between internal and external costs or even once alludes to the concept of externalities. Nor does the report note that the biggest gainers or losers from people’s diet and exercise choices are the people themselves, which means most of the costs the committee refers to are internal costs and are already accounted for in the decisions we make.
In short, the committee’s tax proposal is not based on an analysis of externalities and market failure.
More likely, the committee members feel they know how people should behave, and largely attribute people’s failure to comply to reasons like poor information, poor discipline, and lack of commitment. The committee may view taxes as a means of pressuring people to do what the people would do willingly if only they were smarter and more mature.
To be fair, the report never articulates this paternalistic, authoritarian rationale for taxation. If the panel members are thinking along this line, however, three counterpoints should be made.
First, because of a constant stream of news stories, most people are already aware of many basic diet-related do’s and don’ts. The majority of Americans have made some dietary adjustments, and a minority have undertaken major changes. However, the degree to which people adjust their diets and lifestyles depends importantly on personal preferences. A person may make choices that nutritionists deplore but that are rational given the person’s likes and dislikes. For instance, one individual may skip bacon because of health warnings while another, who has heard the same warnings, may find bacon too satisfying to forsake (although the person may eat a little less than otherwise.)
Second, while people do give weight to dietary advice, they may be hesitant to accord it greater weight, especially when it strongly conflicts with their preferences, because it is not always reliable. For example, after a generation of government advice to go easy on eggs, the new dietary report informs us that, based on accumulating evidence, eggs are not so harmful after all.
Third, the people whose eating and exercise habits seem most self-destructive tend to be the ones least likely to respond to tax penalties. Meanwhile, the taxes would punish everyone else too, which is unfair.
Although it is never articulated in the report, the numerous references to health care costs suggest the committee members may also feel that people’s eating and lifestyle preferences should be overridden to some extent by taxes and other prods in order to economize on government health program expenditures. The panel should have explained what role, if any, government budget considerations played in its recommendations.
In summary, while it is in people’s self-interest to make reasonable dietary and exercise choices, the taxes recommended in the 2015 Dietary Guidelines Advisory Committee should probably be taken with a grain of salt.Share