Health Economics Applications and Policy

Lecture 6 – Obesity and other challenges: Insights
from Behavioural Economics
Health Economics Applications and Policy
EFN423
Health Economics Applications and Policy
EFN423
Recap of Market Failure and Government Intervention:
Last week we learned a bit about Behavioural Economics in
general, and some cool Nudges to correct behavioural biases
of individuals.
This week we are focusing on Obesity (and health issues of
similar nature); and on some policy interventions based on
behavioural economics insights.
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Introduction
• Calorie deprivation (in moderation) can make you
healthier

• Cuba after the collapse of the USSR
• The starvation experiment at the University of Minnesota
  during WWII
  • Obesity is a growing problem in the US and
  worldwide
  o Why? What is causing this epidemic?
  o Is it a public health crisis?
  o What government responses are appropriate?
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  When is a person obese?
  • Q: Is a man who weighs 180 pounds obese?
  • That depends on whether the person is 5 feet tall or 7.
  o Clearly, some accounting must be made for height in defining
  obesity.
  o The canonical way to do this is calculate the body mass index or
  BMI:
  • A person is considered clinically obese if his or her BMI is
  30 or greater.
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  Average BMI by education level in the US
  (source: National Health Interview Survey
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  Obesity rates are rising…
  • Body weight in the U.S. has been rising in fits and starts
  for at least the past 150 years.
  • The proportion of adult Americans who are obese has
  more than doubled between 1977 and 2006.
  • Body weight has been increasing for decades in every
  developed country in the world.
  o The heaviest countries are all in the Anglosphere.
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  What explains increasing obesity?
   Theory 1: Genetics
  • Evidence suggests that genetics plays a key role in
  determining body weight for both children and adults.
  • While genetics may predispose some to being heavy,
  they cannot be the reason for the rise in body weight.
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   Theory 2: The food industry
  • One popular theory for explaining obesity levels is
  that fast food restaurants and agricultural
  corporations push unhealthy, fattening foods and
  large serving sizes on an unwary populace.
  o There is evidence that living close to fast food
  restaurants increases bodyweight, especially among
  children.
  o But even if the popularity of fast food restaurants has
  contributed to rising obesity since World War II,
  bodyweight has been increasing since at least the
  mid 19th-century.
  What explains increasing obesity?
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  Estimated average BMI of American males in various age-cohorts
  (Source: Costa and Steckel, 1997)
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  1890
   Theory 3: Food price trends
  • Since WWII, improvements in the technology of agriculture
  have made food production substantially cheaper and
  driven down its price.
  • The law of demand says that a decline in the price of a
  normal good will be met with an increase in the quantity
  consumed of that good—and people have responded to
  these price decreases just as expected.
  • While some have pointed to rising portion sizes at meals as
  a cause of rising body weight, those rising portions are
  themselves a consequence of falling food prices.
  What explains increasing obesity?
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   Theory 4: Changing lifestyles
  • Sedentary Jobs: The labor economy in the developed world, which
  previously consisted largely of agricultural jobs, has become
  dominated by service and manufacturing jobs, which require less
  physical activity.
  • Heating and AC: Bodies expend energy to cope with hot and cold
  temperatures, so air conditioning and central heating may be
  contributing to fat staying on bodies rather than being burned off.
  • Automobile use: The automobile is credited with dramatically
  reducing average daily walking exercise in developed countries.
  What explains increasing obesity?
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