Behavioral Economics, Food Assistance, and Obesity

Agricultural and Resource Economics Review,  Oct 2006  by Just, David R

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Basic economic principles tell us that allowing price discrimination in this manner would lower the price for FSP participants, nominally increase the price to others, and increase the profits of the food marketers. By increasing the number who can consume foods designed to be eaten in healthy quantities, this clearly increases overall welfare (Hausman and MacKie-Mason 1988). A more aggressive policy might negotiate the discount received by participants on healthy packaged items, seeking to maximize total welfare. This process could operate similarly to that currently employed to negotiate discounts on formula for the Special Supplemental Nutrition Program for Women, Infants and Children (WIC).

Finally, allowing participants to use benefits to purchase ready-to-eat meals, or even restaurant meals, certified to contain a reasonable portion, could decrease the amount of food consumed. Such a policy would increase the options available to food stamp participants, as well as offer additional incentives to control the food environment and potentially the eating environment. The USDA could establish guidelines for portion sizes or caloric content for ready-to-eat meals and certify the products, allowing FSP participants to buy meals that meet these guidelines. A more aggressive policy could allow the use of benefits at restaurants whose eating environment meets a minimum set of standards. The purchasing power of food stamp benefits is attractive to food retailers. Extending the benefits in the right way could have tremendous impacts on the types of foods available in the marketplace. Further, by making the right meals easily available to FSP participants, the program can encourage better eating habits with little added expense and no additional prohibitions for participants.

The Special Supplemental Nutrition Program for Women, Infants and Children

The WIC program is a major provider of food and nutrition assistance. It is estimated that WIC serves nearly half of all infants in the United States, and a quarter of all children ages one to four (Oliveira and Prell 2004). WIC provides food and nutritional education, advice, and health care referrals to pregnant women, mothers of infants, and children under 5 who qualify. To qualify, a household must earn less than 185 percent of poverty and reside in a participating state, and a health care professional must determine that the individual is at nutritional risk. Typically, participants receive vouchers for specific foods (cheese, milk, cereal, etc.) that they can redeem at retail outlets. Food packages are determined by the age of the children participants and by whether the mother is pregnant, breastfeeding, or bottle-feeding.

While entrance to the WIC program is contingent on finding a specific health risk due to nutrition, food packages have little connection to the actual risk identified. In this case it seems reasonable to prescribe different food packages for those at risk because of obesity and those at risk because of under-nutrition. In particular, it seems that overweight individuals ought to be given less calorie-dense foods than other individuals. Specifically, it may be important to put convenient yet low energy foods in the hands of overweight participants (e.g., snack-sized packages of baby carrots). Increasing the convenience of foods can disproportionately increase consumption of them.