Tuesday, September 22, 2009
When should we tax consumption choices we don't like?
Over the past 30 years, Americans have gotten a lot heavier thanks primarily to technological progress in the food industry, which has provided an abundance of tasty, caloric treats. The champions of public health are now fighting fat with the same tools that helped turn the smoky city of the Mad Men-era into the clean-aired boroughs of Bloomberg.
New York City is running anti-soda ads where a brown liquid streaming out of a bottle turns into fat in a glass. The New York Times editorial page wants sterner stuff. They suggest that these ads are distinctly inferior to “the best move when it comes to soft drinks — a tax on sodas and other sugary beverages.”
Many public interventions can be readily dismissed because they are costly and ineffective. Yet the battle against cigarettes has taught us that taxes and advertising can together dramatically reduce an unhealthy habit. The public sector could indeed dramatically drive down the consumption of sugary sodas, but should it? Is public paternalism appropriate? If the state wants to champion health, should it use stomach-churning public service messages or sin taxes?
The economist’s perspective differs from the perspective of the public health advocate.Public health advocates champion health. Economists don’t exactly champion illness, but they don’t usually think that health trumps all. For die-hard cola lovers, the pleasure of sugary soda may just be more important than the health consequences of a few extra calories. That perspective, combined with a respect for individual decision-making, leads many economists to question the merits of public paternalism.
I prefer the billboards with the fat soda. it helps the consumer make a more rational choice by reminding them how bad it is for their health. But if they LOVE soda so much that they don't care about obesity, then let them drink their soda! (maybe make them pay more for their medicaid)
I would stray away from taxing if the purpose is to subsidize health care. There are far more solutions to the health debate than throwing in government money to subsidize health care for all. If we want a proactive, uncontroversial approach to reducing obesity levels, perhaps an advertisement campaign for a lower-cost alternative in water. (Assuming that water and soda are substitutes).
Isn't there a problem when bottled water costs the same as a delicious sugary drink? Half jokingly, perhaps the solution is having drinking fountains in populated areas.
Based upon the assumptions that a) legislative paternalism is to protect the health of the consumer, b) the at risk group's demand for this product is quite inelastic and c) i could not stop them from taking action (i like soda sometimes) my recommendation to impose the tax. The tax creates revenue or the state, while the advertisements are a loss of the legislatures' coffers.
However, i do agree with the libertarians in this circumstance. The government should not have an extensive reach into the choices citizen consumption. The government has allowed the product to be sold on the open market as an unregulated product because it was not an overly dangerous. If the government has conducted research and found extensive dangers of use, then they should regulate distribution (a parallel would be the pharmaceutical companies requiring scripts) or outlaw consumption and production in the US. Taxes and advertisements force consumers on the margin from the market, while doing little to stop the abuse of the product from those with a much higher WTP. Therefore the government fails in two ways: first it fails to benefit those who are at risk and secondly it creates DWL in the soda market from those individuals who would have enjoyed a tasty sugary beverage.
If Obama wants to provide health care for everyone in the country and the majority of the population is obese and/or has type 2 diabetes, it would be much more expensive, maybe even impossible.
It seems much smarter economically for the government to care about the health of its population.
In response to the comments about the billboards being more effective: it doesn't seem like cigarette cartons with warning labels on them do much to deter smoking. If someone is already an avid soda drinker, a billboard probably won't change their habit. On the other hand, I do support informing people more about where their food comes from and what they are putting in their bodies, because an uninformed public is partially the cause of so many of our health issues.
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