Obesity: An Economic Problem

by Mike Walker

March 26, 2014

Cover Photo Credits

According to the Centers for Disease Control and Prevention, in 2009 and 2010 35.7% of U.S. adults were considered ‘obese’. Four years later, obesity remains a chief policy agenda item. Given the increasing coverage the obesity problem has received in the United States, this comes as no surprise. What is less evident, though, is the solution to the problem at hand. Many experts—such as National Bureau of Economic Research reporter, John Cawley—have made tireless efforts to exploit the issue in hopes to break ground on concrete solutions.

Cawley’s research initially examined the economics, or causes and consequences, of the issue. Specifically, he found that obesity affected two major facets of life: healthcare and labor market outcomes. According his study, about 20% of health expenditures in 2005 consisted of obesity related treatment. Furthermore, he found that the medical expenses of an obese patient increased by approximately $2741. In addition to the increased medical expenses, some groups of obese individuals were subject to lower wages. Interestingly, men were less affected by this process than women. White women saw the biggest discrepancy of all groups observed. Cawley admits that while work productivity can be hindered by obesity, some studies suggest that employers also discriminate.

Cawley delves into further analysis as he peers deeper into three methods of attaching obesity: extra physical education programs, offering financial rewards, and various over the counter products on the market aimed at weight loss. While these methods have varying levels of success, none has been empirically proven to work. Cawley’s research provides, “that increasing PE requirements increases physical activity among girls (not boys) but has no detectable effect on weight.” While financial incentives have the potential to be successful, their implementation poses more obstacles, such as the determination of optimal measurements of success and the preventionof incentives that lead to negative weight loss strategies. As for over the counter products, these have the potential to be more detrimental than helpful. As with the PE classes, there is no evidence that these products are affective.

These methods range from marginally effective at best, to potentially fatal at worst. So, how do we fight obesity? Cawley has the right idea—the answer is in economics. However, I believe that, while environmental and genetic factors do play their roles, obesity is overwhelmingly shaped by personal diet—specifically a diet of inferior goods.

In economics, inferior goods are those that experience decreasing demand as the disposable incomes of consumers increase. A classic example of this is the demand for fast food. Fast food is popular among those of low (and often middle) incomes. However, as you move up into wealthier economic classes, you will often see a drop off in the consumption of fast food because those who have more money to spend will opt to eat more expensive food.

This concept explains the correlation between low incomes and obesity.  Inferior goods in the food industry are commonly the cheaper, more processed products. Fast food, frozen dinners, and shelved pastry products are three common inferior goods that contribute to unhealthy diets and subsequent weight gain. These products are popular among the lower economic classes because they are more affordable and easier to access than healthier options. Moreover, the diets of lower income citizens are often not a choice—they are a life style. As Daniel Engber states in his article, “sickness, poverty, and obesity are spun together in a dense web of reciprocal causality. Anyone who’s fat is more likely to be poor and sick. Anyone who’s poor is more likely to be fat and sick.  And anyone who’s sick is more likely to be poor and fat.” Engber illustrates the point that, for the lower income Americans, unhealthy living conditions comprise a vicious cycle.

As the poor are trapped in a cycle of obesity, the income effect provides higher income Americans with access to healthier foods. Not only do wealthier citizens have better access to healthy food stuffs, they also have access to more effective medical care and information on healthy living.

When obesity is framed as an economic problem, women fall on both extremes of the scale. As such, they perfectly highlight the effects that income has on unhealthy diet. According to a recent Pew Research Center study, the middle income category contained the highest percentage of obese men at 34.6%; just about 5% higher than the poor category, which comprised of the lowest percentage of obese men (29.2%). While these numbers clearly do not support the income effect argument, keep in mind that this study measures obesity in body mass index (BMI). BMI is a less effective measure for men because their muscle mass—which BMI does not account for—can vary more than women. Women, on the other hand, showed a far greater disparity of obesity among the income levels. Among the wealthiest women, 29% were obese. This number pales in comparison to the 42% of women in the lowest income category who were obese.

While it is hard to decipher whether income level has a profound effect on obesity incidents among men, the comparison between rich and poor women is night and day. This comparison underscores two factors. It highlights a possible biological susceptibility to obesity, but also it emphasizes that, while poor women live in a culture in which poverty begets unhealthy diets, wealthier women live in a culture in which wealth begets healthy diets.

If we success in our attempt to reverse and prevent the effects of obesity in the United States, we have to view it from economic lenses. Physical Education classes are a good start, but Americans need to be better educated on healthy lifestyles. Additionally, the poor needs enhanced agency to act on information about healthy dieting. In order for Americans to be more healthy, their budget lines must allow them to purchase healthier items. If we can increase education and agency, then we can surely decrease obesity.

Mike Walker is a sophomore Public Policy major at the College of William & Mary. Mike was born and raised in Northeast Philadelphia.