Can Behavioral Economics Combat Obesity?

Michael L. Marlow (of CPSU) and Sherzod Abdukadirov (of GMU) write this nice note.

They argue that there is little reason to think that govt. nudges will shrink Americans’ waistlines.

Obesity is one of the major concerns  for both US public and policymakers:

Obesity, often defined as having a body mass index 20 percent or more above what is considered “healthy” for a person’s height, has recently become our nation’s public health obsession. Obesity prevalence in 2007–2008 was 33.8 percent, which represents a 50 percent increase from 1988–1994. Encouragingly, the growth in obesity prevalence appears to be slowing, but a recent article in the American Journal of Preventive Medicine predicts that by 2030 42 percent of Americans will be obese and 11 percent will be severely obese, or 100 pounds overweight. The same report, conducted by Duke University and the Centers for Disease Control, estimates an extra $550 billion in health-related costs, along with declining workforce productivity, if that prediction holds true.

A recent report looks at beh eco for solutions:

Dire predictions often lead to ambitious public policy proposals. The Institute of Medicine (IOM) recently released its 462-page report Accelerating Progress in Obesity Prevention: Solving the  Weight of the Nation. The IOM, part of the National Academy of Sciences, argues that wide-ranging and systemic changes are required to solve the nation’s complex, stubborn obesity problem.

The IOM offers an extensive list of policies that would effectively steer individuals toward their leaner selves. These include tax preferences for housing developers to build sidewalks and trails, reduction in farm subsidies, changes to zoning laws that make outside exercise easier, requiring primary and secondary schools to provide a daily minimum of 60 minutes of physical activity, banning sugary drinks at schools, and perhaps even taxing soda and other sugar-sweetened beverages.

The IOM’s motivation for calling upon government is clearly stated on page 117 of the report: 

Theory and empirical data from the field of behavioral economics suggest that the majority of physical activity and eating behaviors are routine rather than choices made after deliberation about a set of options…. In such cases, changing the environmental cues or “default choices” to routinely prompt healthier choices could cause favorable (from a public health perspective) shifts in population behavior.

The rise of beh eco needs closer examinations:

This view reflects the growing influence of behavioral economics— a rapidly growing discipline that studies systematic biases of individuals—to justify paternalistic policies. Rising obesity prevalence is viewed as a symptom of individuals pursuing behaviors that conflict with their own best interests. Obesity is considered a reflection of irrational behavior by individuals. Behavioral economists devise “nudges” (soft paternalism) or “shoves” (hard paternalism) that steer individuals toward choices that are more in sync with their best interests. In effect, policymakers are believed able and ready to correct individual departures from rationality. 

We believe this paternalistic view warrants closer examination. In particular, we examine the pitfalls of the growing use of behavioral economics to justify government intervention into obesity. Policies are too easy to justify under assumptions that government officials are better informed than the individuals they seek to guide. Our examination of the obesity issue demonstrates that government intervention is often ineffective in dealing with individual failures, and in some cases is counterproductive. 

The authors then expand on the issue. Beh eco looks at two central problems of humans.

Systematic biases in human behavior fall into two broad categories. The first includes cognitive biases that prevent people from pursuing actions that improve their welfare. For example, a default option or status-quo bias leads individuals to stick with what they have rather than search for a better alternative.

In the second category, behavioral economists believe individuals suffer from persistent self-control problems. In economic jargon, such individuals are said to suffer from “hyperbolic discounting.” That leads them to exhibit time inconsistency about discounting future tradeoffs between the present self and the future self.

In the first the beh eco solution is changing the default and in second tying them to a plan which fixes the inconsistency bit.

Coming to the obesity bit, beh eco says:

Traditionally, government intervention has been reserved for correcting market failures. The traditional policy toolkit for this is outfitted with two approaches. The first mandates information disclosure to counter information asymmetry. Requiring drug companies to go through testing processes and food companies to disclose calorie counts are examples of such interventions. The second approach increases the costs of “bad” behavior often associated with negative externalities, either through command-and-control regulation, penalties, or taxes. Cigarette taxes and mandatory pollution control devices are examples of this form of intervention.

Paternalists concerned about obesity have proposed using both approaches. Governments have required food producers
and servers to disclose calorie counts, sugar and fat contents, and other information to steer consumers toward healthier choices. In doing this, policymakers assume consumers are poorly informed and that fuller disclosure of nutritional information will remedy the problem.

The authors argue that neither consumers lack info nor they lack motivation to cut weight. Hence, using nudges does not help. Instead private market has offered solutions for cutting weight without govt. intervention:

The demand for solutions to America’s obesity problem is evidenced by the market for diet books, health foods, weight loss centers, exercise equipment, athletic clubs, and other methods people use to control their weight. Many hotel chains offer memberships to their fitness facilities to non-residents for a monthly fee. Diet sodas and low-calorie meals can be purchased at countless independent and chain eateries. Between 1987 and 2004, 35,272 new food products labeled “low fat” or “no fat” were introduced into the U.S. food market, leading U.S. Department of Agriculture researchers to conclude that there is no market failure in healthy food and beverage choices. Sales of Diet Coke overtook those of Pepsi-Cola for the first time in 2010, making it the second most popular carbonated soft drink in the United States.

The Subway sandwich chain, known for healthier fare,recently surpassed McDonalds Corp. as the world’s largest restaurant chain measured in number of locations. 

An active private market in providing healthy choices again suggests that paternalists overstate their case for intervention. By ignoring the market’s attempts to deal with obesity, paternalists gain great latitude to overstate the effectiveness of their interventions as they apparently believe that without government we are unlikely to see any improvement in obesity prevalence.

And then beh eco guys are imperfect as well. These nudges will be framed by bureaucrats as well:

Paternalists ignore the market attempts to deal with obesity since it offers them great latitude to overstate the effectiveness of their interventions. They apparently believe that, without government, we are unlikely to see any improvement in obesity prevalence. Unfortunately, regulators are tempted to turn to “harder” paternalism when they realize past interventions were ineffective. Substituting government responsibility for personal responsibility over weight has other downsides. Regulators choose one-size-fits-all interventions that ignore the fact that not all obese individuals suffer from the same problems.

Regulators also cannot differentiate between those with and without weight problems, as they impose regulations on all citizens. Interventions also crowd out market solutions that arise as firms compete with each other by innovating and providing customers a wide variety of products and services that best serve their needs. Regulation involves government officials picking one strategy over others without having to win customers within a competitive marketplace. Regulation thus can retard innovation in the search for better solutions. Of course, even if paternalists knew what the “right” policies are, it is unlikely that these policies would make it through the political process unscathed, as special interests and lawmakers become involved.

Well, not convinced. First, no one really says beh eco is perfect. It surely has issues like much of neoclassical/rational school. It is an alternative to mainstream rational thinking. When years of rational solutions  has not provided the desired results, beh eco is trying to change things.

What beh eco instead offers is to look at problems differently. And as people are anyways given a default choice to make, can we change the setting to help them make better (default) decisions. And we have seen the benefits in pensions and organ donation cases. Recent research shows even alcoholism can be limited using beh eco.

The problem essentially has been the continued separation of the two schools. The rational guys still think behavioral thinking to be trivial. What is needed is a complimentary approach where the two thoughts work together and plug the deficiencies in each.

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