The idea is simple in theory: Entice the public to change their eating habits by making junk food more expensive and healthier foods cheaper. In practice, however, such taxes and subsidies may not be an effective solution to the nation’s obesity problem.
A post yesterday on Obesity Panacea examined the cost of food as a factor in rising obesity rates – and the post surveys some recent research (subscription required) on the subject. Travis Saunders writes:
Epstein and colleagues point out that food prices have a strong influence on purchases, which makes it seem very reasonable that the relative changes in the cost of healthy and unhealthy foods over the past 25 years could be influencing food purchases, and therefore obesity rates. For this reason, changing the cost of food through the use of taxes and/or subsidies are obvious targets to curb caloric consumption at the societal level. But they also point out that intentionally manipulating the price of food could have unintended consequences, especially with respect to subsidies for health foods. For example, if health foods are subsidized, it is likely that people will buy more of them, which seems like a good thing. But it is also very possible that people may use the money they save on subsidized health foods to buy even more junk food—an unintended consequence that I had never really considered.
The entire post is worth a read, especially the discussion on Giffen Goods.
Photo by Brady Wahl