"From an economic viewpoint, a relevant policy question is whether public intervention that would reduce obesity can be justified on the basis of equity or efficiency considerations. Consider equity first. Both Baum and Ruhm (2009) and Brunello, Michaud and Sanz-de-Galdeano (2009) provide evidence that individuals’ BMI is generally inversely related to their mothers’ educational attainment in the US and in Europe; BMI is higher among those with less educated mothers. However, establishing whether such correlation purely reflects causality, which would imply that individuals’ BMI is at least partly determined by circumstances beyond their control, is a complex empirical task that remains on the research agenda.
The second rationale for public intervention on economic grounds is efficiency. Cawley (2004) rightly argues that if individuals were perfectly rational and their decisions about food and weight imposed no costs on others in society, if information about the consequences of obesity were accurate and readily available and if markets were perfectly competitive, there would be no market failure and no reason for government intervention. In Brunello, Michaud and Sanz-de-Galdeano (2009), we provide cross-country evidence on the relevance of the inefficiencies related to obesity and we organise them around four categories of market failures:
- productive inefficiencies,
- limited information,
- limited rationality, and
- health insurance externalities."
Net Accumulation = Input - Output!
Where did these guys come from? It is still 3500 kcal per pound and if your BMI is 2000 and you consume 2500 than every 7 days you gain a pound! Your mother could have been a flea! Just stop eating.
The authors continue:
"We estimate the difference in lifetime expenditures using a micro-simulation approach both in the US and Europe. We find that an obese American at age 55 faces, on average, an additional $22,251 in health expenditures, which represents 10% of a non-obese person’s lifetime health expenditures. Since a 55 year old can expect to live approximately 29 years, the expected loss in income/consumption (using a 3% real interest rate) is close to $1166 per year. In Europe, the difference in lifetime health expenditures is slightly lower, at $13,840 or 11.1% of a non-obese person’s lifetime expenditures, reflecting mostly the differences in average costs across countries but also better baseline health in Europe.
Given that in both the US and Europe obese individuals face larger lifetime health expenditures, the next question is whether a subsidy exists or these additional expenditures are born by individuals themselves. The fraction of individuals covered by a public health scheme is likely to be a good proxy for the degree of risk pooling. This is because public insurance schemes seldom allow for risk rating of premiums for equity reasons but also because expenses are financed either through a flat contribution rate or through taxation. Except for the US, public health schemes are predominant in OECD countries. In the US, about a fourth of the population, mostly the elderly, is covered by public insurance. Only 44% of total health expenditures are financed through the public system and 60% of the population rely solely on private health insurance."
This statement contains several good nuggets. First, it is not clear what the basis of this assertion is, but they state that the lifetime costs of health care to an individual is $225,000 in current dollars. If that is correct, then many interesting statistics flow from it. One is that half of that is spent from birth to 65 and the remaining half from 65 to death. The second observation that make is regards to the costs of the European system but if one looks at OECD data on obesity in Europe it is lower than the US except for the UK.
The authors conclude:
"But the existence of a subsidy is not necessarily inefficient. If one thinks of obesity as a trait that individuals inherit, then there is nothing inefficient about risk pooling, i.e. the subsidy is a pure transfer that can be undone, if desired, on equity grounds. It is the change in behaviour induced by the subsidy that may be inefficient. In other words, the subsidy must affect the propensity of individuals to gain more weight. There is little evidence in the literature that this behavioural response is important.
In fact, one can make the conservative assumption that the behavioural response to the subsidy is similar across countries. In that case, despite being small, one would expect the insurance externality to be higher in Northern European countries than in the US The fact that obesity is higher in the US provides a rough indication that the behavioural response ought to be small; i.e. Europeans are not fatter in spite of the fact that they face a larger insurance subsidy. Hence, a conclusion from our study is that the obesity externality, although more likely to be important in Europe than in the US, is unlikely to be a good reason for public intervention."
The first paragraph makes no sense. Individuals do not inherit weight. The accumulate it by individual choice. They eat! It is a free choice, in all except a very few rare circumstances. Thus the taxing of weight due to the costs associated with its negative health benefits and costs to those not obese if not only a worthy disincentive it is an imperative.
When one reads articles of this type one wonders if anyone has had a thought of rationality or is this the result of some social mind meld to excuse those who have made negative and costly choices.
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