Food and Diet: How Can Economics Contribute to Better Outcomes?

Food And Diet: How Can Economics

Contribute to Improved Outcomes?Laurian Unnevehr

Senior Research Fellow, IFPRIProfessor Emerita, University of Illinois

Presentation to the Global Food Scholars RTG ProgramGoettingen University

September 19, 2013

Introduction

• Rising rates of obesity and associated medical costs bring policy debate

• “Food environment” approach has driven policy debate

• Economists have much to offer but are late to debate

• Lessons from high income countries for developing countries

Do we have an “Obeso-genic” Food Environment?Illustration by Meredith Nelson

Three Economic Perspectives

• Health Economics: Value of improved health and extended life is large

• Neo-classical Economics: Seeks market failure and weighs benefits against costs

• Behavioral Economics: Altruistic paternalism to “nudge” people towards better decisions

Overview

• Costs and causes of obesity• Public health policy recommendations• Economic evidence and research needs– Prices– Information– Access– Standards

THE COSTS OF DIET RELATED DISEASE

How much does rising obesity cost?

U.S. Body Mass Index Distribution is Shifting Up

Rising U.S. Childhood Obesity

All 2-5 yrs 6-11 yrs 12-19 yrs0

5

10

15

20

25

198020002008

% of children

U.S. Obesity and Overweight Direct Costs

• Healthcare direct costs estimated at $210 billion in 2008$– Half are paid through Medicare or Medicaid– One-fifth of total health care costs

• Combined dynamic of rising health care costs and chronic disease incidence is theme– $550 billion by 2030

Sources: Cawley and Meyerhoefer, 2012; Finkelstein et al., 2012

Global Burden

• 1.5 billion people overweight or obese• WHO estimates deaths from overnutrition

exceed those from undernutrition• Diet related disease has a global cost

estimated at $1.4 billion

Source: WHO, World Economic Forum and Harvard School of Public Health, 2011

CAUSES OF OBESITY

What are the causes and what do they suggest about interventions?

Why are We Getting Fatter? Official Reasons from the U.S.

Surgeon General• Eating too many calories and not getting

enough physical activity. • Body weight is the result of genes,

metabolism, behavior, environment, culture, and socioeconomic status

• Behavior and environment play a large role causing people to be overweight and obese.

U.S. Calorie Intake Increased 20% over 20 years

19701972

19741976

19781980

19821984

19861988

19901992

19941996

19982000

20022004

20062008

0

500

1,000

1,500

2,000

2,500

3,000

U.S. per capita loss-adjusted food availability: Total Daily Calories

Source: USDA/ERS

2,195

2,717

Meat, Eggs, and Nuts

Dairy

FruitVegetables

Flour and Cereal Products

Added Fats and Oils and Dairy Fats

Caloric Sweeteners

Less than HALF the recommendedamount

TWICE the recommended amount

U.S. Percent of Daily Calories from Different Food Groups

Source: USDA/ERS

Will Income Driven Trends Follow the U.S.?

2005

87

38 52

5

5385

130

24

Bangladesh

1596

10056

515

75

285

63

468

90

China

Starchy staples

Starchystaples

NutrientRich Foods

NutrientRich Foods

Fats and SugarsFats and Sugars

Data Source: FAO Food Balance Sheets, 2009

Food Away from Home

0

5

10

15

20

25

30

35

1980

2005

Percent Calories

Every meal away from home adds 134 calories compared witha meal at home.

Sources: USDA/ERS from NHANES data; Todd et al. (2010)

FoodAway FromHome

FastFood

Food Market Development Follows Same Path

Highest Income

Other High Income

Middle Income Low Income

Share of food expenditures in modern retail outlets

77 60 58 32

Share of food expenditures for packaged food

52 33 40 26

Source: Regmi, Takeshima, and Unnevehr, ERS, 2008.

0 10 20 30 40 50 60 70 801500

2000

2500

3000

3500

4000

% Overweight Adults Follows Caloric Intake Per Capita Across Countries

High Income

Middle Income

Low Income

% Adults Overweight (BMI ≥ 25)

Calo

ric In

take

(Kca

l/Pe

rson

/Day

)

Sources: FAO; WHO

Indonesia

Egypt

Zambia

Nicaragua

Summary: Obesity Causes

• Obesity rates are increasing• Energy imbalance is a simple explanation– Too many calories– Too little activity– Many structural reinforcements

• But difference in country paths suggests much we do not understand

PROPOSED POLICIES

What are the recommendations for action from the public health community?

What are the Proposed Solutions?

Major Reports• National Academies 2012• World Bank 2011 • OECD 2010• World Economic Forum

2011

Common Themes• Nutrition labels• Advertising controls• Public information• Regulation of school /

workplace meals• Tax unhealthy/ subsidize

healthy foods

US National Academies Childhood Obesity Report 2009

• Attract supermarkets to underserved neighborhoods

• Calorie labeling in chain restaurants• Nutrition standards for foods served to

children• Tax to discourage foods of little value• Media campaign

Now FederalPolicy

Michelle Obama’s “Let’s Move” campaign

• Four Pillars– Physical Activity– Healthy Choices– Healthier Schools– Access to Affordable Healthy Food

What is the Economic Evidence for Interventions?

• Prices of foods• Information in restaurants

• Access to retail outlets • Standards in school lunch

Influence individual choice

Influence choice architecture

FOOD PRICES

How do consumers respond to changes in food prices?

Tax and Subsidy Policies

• Some U.S. states tax soda– 13 states have tax of 5-7%

• SNAP (Food Stamp) Healthy Incentives– SNAP experiment shows 30% price incentive leads

to 25% increase in F&V consumption• Danish fat tax– Flat rate of $1.29 per lb of saturated fat

Soda

10% price drop 20% tax5% more

consumed

16% less consumed

Sources: Dong and Lin (2009); Andreyeva et al. (2010); Dharmasena and Capps (2012)

Very modesteffects on caloriesor weight.

Fruits and Vegetables

Evidence: Demand Simulations

Evidence: Simulations of Alternative Tax Policies

Tax Inputs Rather than Products

• Tax sweeteners at processing stage or tax sweet products at retail

• Input tax consumer surplus loss is 1/5 that from retail tax

Tax Calories rather than Foods

• Tax on calories more efficient way to address obesity than either sugar or fat tax or F&V subsidy

• Net social gain with reduction in health care costs

Source: Miao, Beghin, and Jensen, 2011 Source: Okrent and Alston, 2012

Evidence: Prices Explain Health Outcomes

• Recent studies suggest that relative prices explain variation in weight and disease outcomes

Dark Green Vegetables Price PercentAbove Starchy Vegetables

Higher prices for vegetables increases diabetes incidence and medical expenditures (Meyerhoefer and Leibtag 2010)

Green Vegetables Relative Price to Starchy Vegetables Varies Across U.S.

Source: USDA/ERS

Low-fat milk cheaper than soda in some US regions

Source: USDA/ERS

Higher prices forsoda lead to reduced BMIin children. (Wendt and Todd2011)

Price of low-fat milk relative to soda

International Examples of Long Run Price Impacts on Diets

• Real pulse prices rising over time in India associated with lower consumption of pulses for all income groups (Kadiyala, 2011)

• Lower real prices for edible oils after WTO accession in China associated with greater energy density in diets and higher calorie consumption (Ng et al., 2008)

• Countries with lower food prices have faster increase in obesity (Huffman et al)

Research Needs

• How do prices shape long run demand?• What would reduce the relative prices of

healthy alternatives?• Could agricultural research investments be

altered to support healthy diets?

INFORMATION

How will consumers respond to new calorie information in restaurants?

Nutrition Labels

• US packaged food mandatory since 1993

• EU guidelines• Private sector symbols

Calories on Menu Policies

• Some U.S. cities• Affordable Care Act mandate• FDA proposed rule in 2011– Chain restaurants with 20+ locations– Menus to have calories; reference to daily intake– Benefits exceed costs even if limited use by

consumers

Evidence: Consumer Response to Menu Calorie Labels

• Only modest calorie reductions• “Framing”, defaults, and type of signal matter• Can alter competitive position in market• Results echo those for food product labels

Sources: Downs et al. (2009); Bollinger et al. (2011); Nelson and McCluskey (2010); Ellison, et al. (2011)

Evidence: Information Influences Supply

• Mandatory labeling motivates food producers to change product formulation– Trans fat label in 2006 led to rapid substitutions in

major brands – Benefits all consumers whether they read the

label or not– CDC reports reduction in trans fat in blood in 2009

• Menu labels likely to lead to reformulation in restaurant offerings

Sources: Golan and Unnevehr 2009; CDC 2012.

International Label Practices Need Improvement

• Access to Nutrition Index rates multi-national food companies for their nutrition practices in developing countries

• Companies score lowest on labeling practices out of all categories rated– Companies do not disclose sufficient detail about their policies

on labeling or on health and nutrition claims.– Few companies commit to follow Codex guidance on the use of

health and nutrition claims in markets where the use of such claims is not regulated.

– Many companies with international operations do not apply their policies globally.

Source: http://www.accesstonutrition.org/labeling

Research Needs

• How will consumers and firms respond to new disclosure requirements in high income countries?

• How would stricter enforcement of labeling norms in emerging markets shape food offerings?

ACCESS

What is the role of food access and the local food environment in food choices and health outcomes?

Policy to Address Access

• Local efforts– Philadelphia: Tax incentives

for new grocery stores

– Los Angeles: Limits on new fast food outlets in low income neighborhoods

• U.S. farm bill funds ($400 M) to improve access

Evidence: Food Access• 4% of US population at risk of inadequate

access (ERS 2009)

• Fast food access close to schools increases child obesity (Currie 2010)

• Retailer commitments to Let’s Move initiative

Spatial Retail Access and Diet Quality in Developing Countries

• Indonesian households that spend more at modern outlets more likely to increase fresh fruit, fresh vegetables, oils, sweets and processed snacks. (Toiba et al., 2011)

• Benin households with better market access tend to have greater diet diversity but also more overweight adults (Bellon and Ntandou, 2012)

• Access costs influence Chinese dietary diversity (Liu et al., 2013)

Research Needs

• What determines food retailer decisions about locations? About quality and scope of healthy foods offered?

• How does access shape purchases? For what kinds of households is access important?

STANDARDS

Will changes in standards for school lunch programs succeed in changing children’s diets?

Policies for School Lunch Standards

• 22 million children in USDA school lunch program

• New U.S. school lunch standards in Jan 2012• 13 EU countries have school lunch standards

New standards increase fruits, vegs, whole grains and low fat milk; reduce sodium and saturated fat.

Evidence: School Lunch Standards

• Longstanding evidence regarding benefits for student performance

• Mixed evidence about role of school lunch in childhood obesity

• Healthier lunches may cost 5 to 7% more

Sources: Meyerhoefer and Yang (2011); Newman, et. al (2009); Newman, 2011.

Behavioral Cues Show Potential

Experiments conducted by Cornell researchers reveal behavioral psychology can be used to encourage children to eat more healthy food.

Source: Wansink, Just, and McKendry, Lunch Line Redesign, New York Times Op-Chart, 2010.

Home Grown School Feeding Programs

• Promote healthy school meals sourced from local farmers. Seen as “win-win” for nutrition and market development.

• Ghana program evaluation underway (Imperial College/IFPRI)

• Will the old questions have different answers?

Research Needs

• Does offering healthier school meals change children’s overall diet quality? Will it change their long run eating habits?

• How does institutional demand for healthier foods influence the overall food supply?

CONCLUSIONS

What evidence does economic research provide?

Expected Policy Impacts

• Access, information, standards interventions:– Likely modest positive effects on energy imbalance– Likely benefits > costs

• Limitations for addressing obesity are clear, so further debate on appropriate public role

Three Economic Perspectives

• Health Economics: Current trends project high potential value of improving diet

• Neo-classical Economics: Can be more efficient in achieving any target; benefits and limits to price & information policies

• Behavioral Economics: Choice architecture approach suggests new interventions but scope unclear

Economists Needed to Answer Important Questions

• How ag / food system contributes to health outcomes– How to reduce relative prices of healthy foods– Ag research portfolio to support better diets, more

nutritious food• Understanding firm behavior– Product offerings– space and quality– Opportunities, limits for self-regulation

• New data expands our abilities

Lessons for Countries Passing Through the Dietary Transition?

• All economic and structural forces point towards the same path for diet and health.– But understanding international variation could inform policy

• Limited impact of current recommended policies provides little guidance.

• Potential to “nudge” early:– Relative prices and market development for nutrient-dense

foods.– Regulation of labels to international norms.– Avoid in-kind transfers that encourage calories over diet

quality.

Illustration by Meredith Nelson

Is this a healthy food environment?

Illustration by Meredith Nelson

THANK YOU!

Drawn from: Unnevehr, L. J. “Food and Health: Can Economics Contribute to Improved Outcomes?”, American Journal of Agricultural Economics, 95(2), 2013, 220-227. AAEA Fellows Address, 2012.