Food prices and public health

09/10/2013 § 8 Comments

The University of Otago announced the results of some research in which I’ve been involved.  The relevant blog post is here. What I really like about the post is the moderate tone:

In the first paper from the SPEND Project, we found that across 20-odd food groups, low-income people and Māori tended to change their consumption of foods more in response to price changes, using New Zealand data.  This is entirely consistent with economic theory – and data about price impacts for other consumer goods such as tobacco.

This suggests – but does not prove for reasons we outline below – that taxes on ‘unhealthy’ foods like those high in saturated fat, salt, and sugar; and subsidies on ‘good’ foods like fruit and vegetables should not only improve diets across the board, but more so among socially disadvantaged groups with worse diets and health to start with.

But the proof is in the pudding, which in this case is the health and economic modelling to see what effect taxes and subsidies will actually have on disease rates.  And due to data limitations our modelling is still only half-baked, no matter which research group’s findings you look at.

The post goes on from there and explains more about the different bits of research.

Of course, there are all the problems with implementing such tax/subsidy programmes, and the philosophical issues with ‘nudges’ and individual welfare. But importantly, we now have better estimates of prices elasticities in order to make better calculations about gains and losses.

Fat tax lax facts

31/07/2013 § 6 Comments

Today’s fat tax news:

A fat tax is being suggested as a possible way to improve the health of New Zealanders by encouraging people to replace some saturated fats with polyunsaturated fats.

Some butter could be replaced with grapeseed or safflower oil, meat with omega-3 rich fish, and potato chips with nuts or seeds, while the tax could add $1 to a pack of butter.

Rachel Foster and Associate Professor Nick Wilson from Otago University in Wellington looked at five meta-analyses to estimate how the risk of cardiovascular disease could be reduced by eating less saturated fats.

They also used data from the New Zealand Adult Nutrition Survey 2008/09 to determine whether a change to the amount of fat eaten would be warranted and feasible.

Their conclusion was that replacing 5 per cent of daily energy consumed as saturated fat with polyunsaturated fats would be expected to reduce cardiovascular events by about 10 per cent.

This news report, and others on the newly published article from the Australian and New Zealand Journal of Public Health (paywall), makes two statements:

  • the tax adds $1 to a pack of butter
  • changing the fats would reduce cardiovascular (CV) events by 10%.

Now, if you aren’t careful, you might think these two statements are related. They aren’t. The article, by the way, is the same. It says that a Danish-style tax would add $1 to a 500-g pack of butter. Then, later on, it focuses on switching out the type of fat for 5% of energy consumed.

Let’s connect those two statements.

One way is to go from prices to impacts. Assuming everything works mechanistically, what is the CV events effect of a Danish-style tax?

  • Price of butter: $5 (range on-line: $4-$6)
  • Tax: $1
  • Proportional change in price: 20%
  • Elasticity: assume -0.5 (see here, Table 1)
  • Proportional change in butter consumed: -10%
  • Energy as saturated fats: 13% (from Foster and Wilson)
  • Reduction in energy from saturated fats: 1.3%
  • CV events effect: 2.6%.

Yes, this assumes that the decreased butter is replaced by the required poly-unsaturated fats, but I’m assuming that for the sake of argument. My point is that the $1 tax wouldn’t lead to a 10% drop in CV events, but something closer to 2.6%, even if it worked as advertised.

We can also do the exercise in the other direction:

  • CV events effect: 10%
  • Change in butter consumed: -38% (that is, 5%/13%)
  • Tax: 77%
  • Price of butter: $8.85.

There’s a headline for you: Public Health Academics Propose $9 Butter.

UPDATE: The Manawatu Standard talked to me about the Foster and Wilson article, and shared my estimate of the price impact.

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