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


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Seminar to Goettingen Global Food RTG, September 19, 2013. An overview of U.S. anti-obesity policies and the lessons for countries now going through the dietary transition.

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  • “The prevalence of obesity is so high that it may reduce the life expectancy of today’s generation of children and diminish the overall quality of their lives.” (IOM 2009, p 1-2) The prevalence of obesity is so high that it may reduce the life expectancy of today’s generation of children and diminish the overall quality of their lives. Obese children and adolescents are more likely than their lower-weight counterparts to develop hypertension, high cholesterol, and type 2 diabetes when they are young, and they are more likely to be obese as adults.
  • Finkelstein: 9% is up from 6% in 1998; about half is covered by medicare/medicaid.Cawley and Meyerhoefer: our point estimate of the impact of obesity on medical expenditures is higher for Medicaid recipients ($3674) and the uninsured ($3153) than those with private insurance coverage ($2568); it would be useful to know whether this is due to differences in the health impact of obesity across the three groups or due to differences in the ways that the groups use medical care Tsai, Williamson, and Glick (2010) attempted to systematically and quantitatively summarize the growing literature on the direct medical cost of overweight and obesity. They conducted an informal (no variance estimates) meta-analysis. Although they could draw on a substantial literature, only four studies met their demands for comparability and relevance to US projections: nationally representative samples, analysis of adults of all ages, use of standard BMI cut-offs, and reporting cost or expenditure (not charges). The meta-analysis yielded an estimate of $113.9B ($2008).  One recent study (Cawley and Meyerhoefer (2011)) uses data from the Medical Expenditures Panel Survey (MEPS) and an improved approach that helps distinguish between mere associations or correlations between obesity and medical costs and actual causal costs of obesity. They find that the annual cost of treating obesity in the U.S. adult non-institutionalized population is $210 billion (in adjusted 2008 dollars) or 20.6% of national spending on medical care. These results imply that the previous literature has somewhat underestimated the direct medical costs of obesity.
  • Total cal/day are around 2500 and 3200. Starchy staples are grains, roots, and tubers. These are 80 and 50 % of calories. Nutrient rich foods includes dairy, eggs, meats and fish, legumes and nuts. These are 10 and 32 %. Fats and sugars are unhealthy dietary diversity– 10 and 18 %.
  • Sweetener consumption rising everywhereNo country consumes recommended F&V“Globalization” of diets through food retailing and packaged food expansionBUT, substantial variation in trends suggests not all factors universal
  • Funded by RWJF and CDC, following earlier reports and focusing on what local govts can do. (Economists on committee were Finkelstein and Rose) “The places in which people live, work, study, and play have a strong influence on their ability to consume healthy foods and beverages and engage in regular physical activity. Local governments make decisions every day that affect these environments.”NINE healthy eating and SIX physical activity strategies. “most promising” for healthy eating are those on this slide. Other suggestions included promoting community access to fresh fruits and vegetables; breastfeeding, drinking fountains; use of social media to reach children. A long list of policies to promote physical activity.
  • Price of fresh/frozen dark green vegetables, relative to fresh/frozen starchy vegetables, 2006. expressed as percent above price of starch vegetables.
  • This suggests two important questions for future research: First, how do food prices shape long run food consumption habits? Meyerhoefer and Leibtag (2010) exploited the surprisingly large regional variation in U.S. food prices to test impacts on health outcomes. Changes in relative prices during the recent recession provide another natural experiment. Increases in commodity prices served as a good proxy for a tax on calories, as prices for snack foods rose relative to those for fruits and vegetables. At the same time, income losses led consumers to reduce expenditures on food away from home for the first time in two decades (Kumcu and Kaufman 2011). National food disappearance data show a leveling off of calories per capita in the last few years and a decline in 2009. It will be interesting to test the importance of prices and income in explaining these changes, to see how they may manifest themselves in obesity trends, and finally to monitor how consumption trends resume with economic growth. Given the different ways that price volatility has played out in markets around the world, there may also be interesting comparisons from other countries. An equally important question is: What would reduce the relative prices of healthy alternatives? Quality changes make it difficult to sort out trends in the prices of fruits and vegetables, but underconsumed vegetables are more expensive than overconsumed starchy ones, and this is particularly true in some U.S. regions with higher rates of obesity (Todd, Leibtag, and Penberthy 2011). Milk is higher priced that soda in some regions and lower in others. What would alter these relative prices? The policy dialogue about how the food supply shapes food choices badly needs answers to these questions. Okrent and Alston (2012) have made a start in examining how farm subsidies influence food supply and better diets. Equally important is how research to improve fruit and vegetable productivity might result in better diets. And since diet diversity is strongly related to better nutritional outcomes in low income countries (Arimond and Ruel 2004), the importance of this question extends beyond the United States. Does the investment in staple food productivity indirectly give us more dietary diversity through freeing up resources at the margin? What kind of direct investments in under-consumed foods are needed to enhance demand through improved quality, availability, and price? Recent commodity price spikes have spurred concern about whether research investments are adequate to boost long run trends in staple food crop productivity. But global trends in diet and health point to the importance of also asking how agricultural research can support better nutrition.  
  • New York, Seattle, San Francisco, standards in San AntonioProposed rule: on menus and menu boards: (1) the number of calories for each standard menu item; (2) a succinct statement concerning daily caloric intake; and (3) a statement indicating that additional nutrition information is available upon request;
  • McCluskey– Substitution to lower, but not lowest calorie alternative, suggesting that information most useful to those who did not already seek lower calories.Lusk – Traffic light signal reduced calories more than just numbers, but also reduced profits most for restaurant.Bollinger et al found a 6% decline in calorie cons; decline came in food purchases, not drinks. No impact on profits on avg and increases revenues for stores near Dunkin donuts.Loewenstein and Downs conducted an experiment with different menu formats for Subway. Calorie content information, incl daily calorie recomm had no impact on sandwich choice. But making low calorie sandwiches the featured items (and higher calorie offerings more difficult to find on the menu) made it significantly more likely for customers to choose the low calorie sandwich.
  • The natural experiment afforded by the restaurant calorie labeling regulation will provide the profession with many potential research projects to understand both consumer and restaurant firm behavior, all of which will be interesting to pursue. But a larger research agenda would be more creative in thinking about where information would be most useful. That is, where would it increase consumer utility? Where would information spark the kinds of changes in nutrient supply (firm response) that would improve diets? What kinds of agricultural research investments will support improved nutrient content in foods, and ultimately in diets?
  • Add HFFI details: $400 million through existing authorities; most ($275M) through Treasury programs such as New Markets Tax Credit program and Community Development Finance Institutions.
  • Farm Bill defined a food desert as a low income community with limited access to affordable and nutritious food. Charged USDA with carrying out a national assessment of the extent of limited access.Census tract where poverty rate at least 20% AND at least 33% are more than 1 mile from a supermarket (10 miles in rural areas). Nationwide, these tracts tend to be areas of persistent poverty and disadvantage– higher percent minority and higher percent vacant housing.About 4% of the US population are at risk of having inadequate access– ERS looked at low income neighborhoods where households are more than a mile from a supermarket. About 2% of US. Population are in low income households have no car and are more than a mile from a supermarket.
  • These limited findings are intriguing but much more could be done to understand how proximity and retail markets shape food choices, especially with the many local experiments underway. How the spatial interaction of transactions costs, availability, quality, and price shapes choices by different consumers is a question that deserves our attention. Food retailer firm behavior is understudied, and there will be new questions arising from recent changes to store formats and marketing of perishable foods in urban areas.
  • Requires schools to increase the availability of fruits, vegetables, whole grains, and low fat milk; reduce sodium, sat fat, and meet nutrition within calorie limits.
  • most schools meet requirements for vitamins, protein, calcium, and iron, only one in five schools served lunches that met the standard for total fat, set at 30 percent of calories or less. These schools tended to be ones that don’t serve french fries or dessert, provide only low fat milk, promote fresh F&V, use more up to date methods of meal planning. Also regional differences– eg., SE more likely to serve high fat meals.
  • Simple changes in the lunch room may “nudge” students to healthier choices. Salads next to checkout, hiding ice cream, etc.
  • Evaluating changes in the school environment is difficult for many reasons, including the obvious potential for children to eat differently outside the school environment, as well as the challenge of measuring whether such policies have any long term impact on dietary habits. Economic research on children and their food choices is very limited, because of course most of our focus is on adult individuals or households as decision makers. While the literature on school lunch programs is extensive, this program is only one part of our children’s food environment. Given the concerns about childhood obesity trends and their implications for future health care costs, understanding how children’s habits are shaped by schools, family, peers, environment, and standard economic variables is an important area for future work. In FY11, USDA spend $32M on NSLP; $9M on WIC, and $3M on CACFP.
  • The three economic sub-field perspectives have all provided useful evidence for current policy debates. Health economics has shown that the potential value of addressing diet and health is large, and that future cost trends are ominous. Neo-classical economics research has shown how to make taxes or subsidies more efficient in achieving any particular target, and has also provided insights into market adjustments in both supply and demand. Neo-classical market and demand analysis has demonstrated the significant distortions that would arise from taxes or subsidies, and has found consistent modest net benefits from mandatory labeling. Behavioral economics aligns most closely with the food environment paradigm in public health, through the focus on choice architecture. Behavioral economics experiments have allowed for creativity in testing potential interventions, and such research has already shown that behavioral cues can lead to changes in food choices in limited settings. Whether such changes can alter long run dietary habits has yet to be explored.
  • Agricultural economists, drawing on all of these subfields, are uniquely positioned to understand how the agricultural and food system contributes to diet and health outcomes. The research questions identified in the discussion above all point to the need for understanding the determinants of food choices in a larger market and policy context, taking into account both consumer and firm behavior. Such research would include understanding the long run determinants of relative prices of under-consumed versus over-consumed foods, identifying the agricultural research investments needed to support healthy diets, and analyzing the determinants of food firm behavior with respect to product formulation and spatial delivery. Answers to these kinds of questions are needed to better inform the food and agricultural sector response to public health concerns.
  • Food and Diet: How Can Economics Contribute to Better Outcomes?

    1. 1. Food And Diet: How Can Economics Contribute to Improved Outcomes? Laurian Unnevehr Senior Research Fellow, IFPRI Professor Emerita, University of Illinois Presentation to the Global Food Scholars RTG Program Goettingen University September 19, 2013
    2. 2. 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
    3. 3. Do we have an “Obeso-genic” Food Environment? Illustration by Meredith Nelson
    4. 4. 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
    5. 5. Overview • Costs and causes of obesity • Public health policy recommendations • Economic evidence and research needs – Prices – Information – Access – Standards
    6. 6. THE COSTS OF DIET RELATED DISEASE How much does rising obesity cost?
    7. 7. U.S. Body Mass Index Distribution is Shifting Up
    8. 8. Rising U.S. Childhood Obesity 0 5 10 15 20 25 All 2-5 yrs 6-11 yrs 12-19 yrs 1980 2000 2008 % of children
    9. 9. 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
    10. 10. 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
    11. 11. CAUSES OF OBESITY What are the causes and what do they suggest about interventions?
    12. 12. 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, cu lture, and socioeconomic status • Behavior and environment play a large role causing people to be overweight and obese.
    13. 13. U.S. Calorie Intake Increased 20% over 20 years 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
    14. 14. Meat, Eggs, and Nuts Dairy Fruit Vegetables Flour and Cereal Products Added Fats and Oils and Dairy Fats Caloric Sweeteners Less than HALF the recommended amount TWICE the recommended amount U.S. Percent of Daily Calories from Different Food Groups Source: USDA/ERS
    15. 15. Food Away from Home 1980 2005 0 5 10 15 20 25 30 35 Percent Calories Every meal away from home adds 134 calories compared with a meal at home. Sources: USDA/ERS from NHANES data; Todd et al. (2010) Food Away From Home Fast Food
    16. 16. 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.
    17. 17. 1500 2000 2500 3000 3500 4000 0 10 20 30 40 50 60 70 80 CaloricIntake(Kcal/Person/Day) % Adults Overweight (BMI ≥ 25) % Overweight Adults Follows Caloric Intake Per Capita Across Countries High Income Middle Income Low Income Sources: FAO; WHO Indonesia Egypt Zambia Nicaragua
    18. 18. 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
    19. 19. PROPOSED POLICIES What are the recommendations for action from the public health community?
    20. 20. 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
    21. 21. 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 Federal Policy
    22. 22. Michelle Obama’s “Let’s Move” campaign • Four Pillars – Physical Activity – Healthy Choices – Healthier Schools – Access to Affordable Healthy Food
    23. 23. 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
    24. 24. FOOD PRICES How do consumers respond to changes in food prices?
    25. 25. 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
    26. 26. 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 modest effects on calories or weight. Fruits and Vegetables Evidence: Demand Simulations
    27. 27. 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
    28. 28. Evidence: Prices Explain Health Outcomes • Recent studies suggest that relative prices explain variation in weight and disease outcomes
    29. 29. Dark Green Vegetables Price Percent Above 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
    30. 30. Low-fat milk cheaper than soda in some US regions Source: USDA/ERS Higher prices for soda lead to reduced BMI in children. (Wendt and Todd 2011) Price of low-fat milk relative to soda
    31. 31. 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)
    32. 32. 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?
    33. 33. INFORMATION How will consumers respond to new calorie information in restaurants?
    34. 34. Nutrition Labels • US packaged food mandatory since 1993 • EU guidelines • Private sector symbols
    35. 35. 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
    36. 36. 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)
    37. 37. 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.
    38. 38. 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:
    39. 39. 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?
    40. 40. ACCESS What is the role of food access and the local food environment in food choices and health outcomes?
    41. 41. 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
    42. 42. 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
    43. 43. 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)
    44. 44. 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?
    45. 45. STANDARDS Will changes in standards for school lunch programs succeed in changing children’s diets?
    46. 46. 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.
    47. 47. 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.
    48. 48. 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.
    49. 49. 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?
    50. 50. 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?
    51. 51. CONCLUSIONS What evidence does economic research provide?
    52. 52. 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
    53. 53. 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
    54. 54. 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
    55. 55. 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.
    56. 56. Illustration by Meredith Nelson
    57. 57. Is this a healthy food environment? Illustration by Meredith Nelson
    58. 58. 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.