The economics of obesity

Public Interest, Summer, 2004 by Inas Rashad, Michael Grossman

HARDLY a day goes by that we do not read about the dire consequences of the increase in obesity. In March, the Centers for Disease Control and Prevention predicted that obesity will overtake smoking as the leading cause of preventable deaths in the United States by next year if current trends continue. "This is a tragedy," Julie Gerberding, director of the Centers, told the Washington Post. "We're looking at this as a wakeup call." The obesity problem is real, Gerberding's melodrama notwithstanding, and seems to be worsening each year. The percentage of adults who are obese has doubled since the late 1970s, and tripled among children. From increases in the size of coffins, to increases in the size of pets, to the appearance of new diets and new surgical techniques to lose weight, and to a patent for an in-car system for dieters that weighs them and tells them when they have strayed, the evidence of America's obesity problem is everywhere.

Obesity and sedentary lifestyles accounted for approximately 400,000 deaths in 2000 compared to 435,000 from cigarette smoking, 100,000 from alcohol abuse, and 20,000 from illegal drug use. Obesity costs more in annual medical care expenditures than cigarette smoking--around $75 billion in 2003--because of the long and costly treatments for its complications. A large percentage of these costs are borne by Medicare, Medicaid, private health-insurance companies, and ultimately by the population at large rather than by the obese. The so-called "cheeseburger bill" to curb lawsuits against the fast-food industry, which passed the House of Representatives in March, might fend off at least some new costs to the non-obese for the obesity problem, but these costs have grown by more than 3 percent per year during the past few years and show no signs of stopping. To make matters worse, Americans spend $33 billion annually on weight reduction products. There are often serious health risks associated with some of these products, which can further increase the costs of obesity.

Obesity is measured by the body mass index (BMI), defined as weight in kilograms divided by height in meters squared (kg/[m.sup.2]). To calculate body mass index using pounds and inches, multiply weight in pounds by 704.5, then divide the result by height in inches, and divide that result by height in inches a second time. According to the World Health Organization and the National Heart, Lung, and Blood Institute, a BMI value of between 20 and 22 is "ideal" for adults regardless of gender in the sense that mortality and morbidity risks are minimized in this range. Persons with a BMI greater than or equal to 30 are classified as obese. An overweight child (the term "obese" is reserved for adults) is defined as having a BMI above the 95th percentile based on growth charts for children and adolescents in the first National Health and Nutrition Examination Survey (NHANES I), conducted between 1971 and 1975.

As shown by the data in Table 1 for adults and in Table 2 for children, obesity and overweight rates remained steady from approximately 1960 until about 1980. Since then they have spiraled almost out of control. Between 1980 and 2000, the percentage of obese adults grew from 14 percent to 30 percent, and the percentage of overweight children rose from 5 percent to 14 percent. If we are to grapple effectively with today's obesity problem we need to understand how and why obesity became a problem in the first place.

Some possible causes

Obesity has a large genetic component, and this plays an important role in explaining why a given individual is obese. But genetic characteristics in the population change very slowly, and so they clearly cannot explain why obesity has increased so rapidly in recent decades. Researchers have instead sought to explain obesity by looking at technological changes, changes in taste and consumer habits, and at changes in the social environment. Economists have taken the lead in these efforts. Not surprisingly, they have emphasized the role of prices.

According to the economists Darius Lakdawalla and Tomas Philipson, declines in the real prices of grocery food items caused a surge in caloric intake that can account for as much as 40 percent of the increase in the body mass index of adults since 1980. Technological advances in agriculture caused grocery prices to fall, the authors show, and these declines caused consumers to demand more groceries. Government policy only heightened the effect by encouraging overproduction. Journalist Michael Pollan points to a shift in the early 1970s toward direct farming subsidies as another source of the rise in caloric intake. The old system, an agricultural-support arrangement designed to discourage overproduction of corn and other storable commodities, had much smaller effects on producers' decisions. But the new system "free[d] them to dump their harvests on the market no matter what the price."

Important technological changes in the home kitchen seem to have fostered more caloric intake, too. Economists David M. Cutler, Edward L. Glaeser, and Jessie M. Shapiro present evidence that the tools responsible for reductions in the time we spend preparing meals at home--at least for certain groups in the population--have contributed to an increase in caloric consumption. Microwaveable meals and other foods that are easy to cook are desirable because they are quicker to prepare; they are also fattier and higher in caloric content.