Lardynomics:a new discipline

Freakonomics is yesterday’s thing. The new fashion is lardynomics – the economics of obesity. Research on this is expanding even faster than Americans’ waistlines.

Economists have tried to answer three questions here: why is obesity rising? What are its consequences? And what, if anything, can be done about it?

One perhaps curious finding is that rising obesity in the US is largely an economic phenomenon. This paper (pdf) by Henry Saffer and colleagues has found that it is due mainly to standard economic forces: a rising supply of fast-food restaurants (which may be a consequence of the lack of time to prepare meals as a result of increased numbers of women working); a fall in the relative price of calories; and a rising relative price of cigarettes, which has led to less smoking.

There is, however, a paradox here. Climent Quintana-Domeque has found that among European women – and especially southern European women - lower incomes are associated with higher obesity. This would suggest that, as incomes rise over time, obesity would fall. But it hasn’t. In the cross-section, poverty causes obesity (in some countries). But in the time series it doesn’t.

Whatever the cause of obesity, most economists agree that obesity causes low wages. Why?

Here, another paradox arises. Some studies have found that lardiness lowers women’s earnings more than it does men’s; none, to my knowledge have found that it's much bigger for men. This means lardiness is different from ugliness. The ugly penalty is often bigger for men than women. But the lardy penalty is often bigger for women than men.

Why? One early paper by John Cawley suggests an explanation. He found that, in the US, lardiness only really reduces wages for white women, not for Afro-Caribbeans. This suggests some form of statistical discrimination. Obesity in Afro-Caribbean women (and white men) is regarded as culturally acceptable, in a way that it isn’t among white women. A fat white women therefore signals that she lacks self-discipline, whereas a black woman (or white man) doesn’t. Employers therefore, at the margin, prefer not to hire fat white women.

However, a recent paper by Giorgio Brunello suggests another reason. He’s found that, in Europe, the effect of obesity upon wages is greatest in hotter southern countries. He says: “being overweight in Madrid carries a penalty, but is an asset in Dublin.” This suggests a simple human capital explanation for lardies’ lower wages. Being fat reduces your productivity in hot weather, but not in cold. And, he found, this is as true for men as women.

This matters. If obesity reduces productivity – even leaving aside pathological cases – then the economic costs of obesity are significant. And this is on top of the healthcare costs of obesity; Mr Quintana-Domeque estimates that these are worth over 0.3% of GDP in European countries – equivalent to almost £4 billion in the UK.

Which raises the question: what is to be done?

One possibility, says Mr Quintana-Domeque, might be to redistribute income. If relative poverty causes obesity – perhaps redistribution to poorer women would reduce lardiness.

Another possibility is to impose taxes on fatty food. This paper (pdf) by Ted O’Donoghue and Matthew Rabin discusses the case.

The problem, they say, is that some people lack self-control; we eat more crisps and burgers than is good for us.

If this is the case, the orthodox case for taxes comes into play. People who eat too much today impose a negative externality onto their future selves – because lardiness reduces their wages as well as their health. And a good case for taxes is to internalize such externalities.

O’Donoghue and Rabin calculate that such taxes might, optimally, be very large – possibly over 40 per cent on a bag of crisps. And this is without considering the other external costs lardies’ impose upon us: litter, lack of space on public transport and plain eyesoreness.

There will, of course, be much more research in this area. So, don’t be surprised if the case for fat taxes doesn’t increase.

Comments

[angry economist]

Will it be a flat fat tax system? (groan, sigh, I know...)

[Andrew Duffin]

Obesity _causes_ lower wages?

Really?

Fat people earn less; I could easily accept that.

But cause and effect is a bit more than that, surely.

One can think of so many possible confounding effects that I must assume you're just being lazy in the use of English.

Maybe your laziness will cause you get fat, who knows?

[chris]

How would a fat tax play with the junk food manufacturers and sellers, who must be a significant lobby? It was a generation between the lethal effects of smoking being documented and penal taxation on tobacco being accepted.

[chris]

Andrew: I was being lazy. There are three different links between obesity and low wages:
1. Causality. Obesity either lowers productivity or is the subject of employer (taste or statistical) discrimination.
2. Reverse causality. Low wages cause obesity, by creating low self-esteem, or by causing a switch to cheap, high calory food.
3. Correlation. The things that cause obesity - short time horizons, lack of self-discipline - also cause low wages.
Most studies, however, control for education - which means they partly control for 3. And one of the studies I cited found that obesity is associated with low wages several years later. So 1, I think, does hold - which is not to deny that 2 and 3 do not.

[Katie Bartleby]

My, my, look how Mr. Levitt has jumped on your bandwagon. "Fat is Money" from the NYT:

He had by now come to embrace the theory that our bodies are regulated by a "set point," a sort of Stone Age thermostat that sets an optimal weight for each person. This thermostat, however, works the opposite of the one in your home. When your home gets cold, the thermostat turns on the furnace. But according to Roberts's interpretation of the set-point theory, when food is scarcer, you become less hungry; and you get hungrier when there's a lot of food around.

This may sound backward, like telling your home's furnace to run only in the summer. But there is a key difference between home heat and calories: while there is no good way to store the warm air in your home for the next winter, there is a way to store today's calories for future use. It's called fat. In this regard, fat is like money: you can earn it today, put it in the bank and withdraw it later when needed.

[Rob Read]

The only answer is to get rid of beurocrat rationed healthcare and thus stop subsidising people who get fat.

[Andrew Spark]

I think obesity is a very good topic to be writing about, there needs to be more information to the public about obesity. Even though there are programmes which show people how to diet safely it obviously isn't enough to cut down the obesity rate.