Thursday, June 27, 2013

Two by Four: Round 1

The costs of obesity in America. Ah, what a cherished topic. Here's an example, from HuffPo. A generic Web search will return plenty of results, and many of them sing a similar tune: obesity is an epidemic and it's headed to be a remarkably pricey one.

There's a lot to unpack there. Let's start with the definition of "epidemic". Maybe I'm just an old-fashioned coot who doesn't appreciate newfangled turns of phrase, but I tend to associate "epidemic" with "contagious". Now, it could very well be that the medical community decided that this feature is irrelevant in the epidemiology, and they might well be right. It might also be that they've done a better job communicating this nuance to the public than I've recognized, and if that's the case, then the fault is entirely my own. So if I'm a stick in the muck, it's because I am of the opinion that if an obese person coughs on me, my own risk of obesity will have more to do with the giant burrito I'm wolfing down than El Paco Gordo's neglect in covering his mouth.

Don't get me wrong though. I do agree that there is a problem with folks packing on the pounds. I don't pretend to know the reasons behind the relevant margins (or even where to find the relevant margins). But what I can offer is a way to think about the common-sense morality that underpins the median voter's approach to policy remedies. I'll get to some of those in follow-up posts, but I'd like to start here with another definition.


Economists think about cost a little bit differently than other folks. Money is but a subset of cost. Cost is what you give up to get something else. And economists apply this notion pretty widely. When Mungo and I comment on Sandel's notion of queuing to allocate resources, it's because we are acutely aware that time and inconvenience doesn't come free. The same applies here. All that foregone productivity, all those bariatric toilets, all the medical care, none of this stuff descends like manna from heaven. The relevant question for euvoluntary exchange is who bears the cost. If the costs are external to the transaction (or transactions as the case may be, plural) and uncompensated, we've plausibly crossed one of a battery of thresholds that might justify coercive intervention.

Of the candidates that stand out, two strike me as actual costs and not mere transfers (I'll leave it to the reader to estimate what some of the benefits might be; they're relevant, but a bit of a digression). The medical costs are fiscal externalities, born of the odd chimera that is employer-provided health "insurance", a slew of regulations, and a quivering load of regime uncertainty. Price discrimination is tough in some insurance markets, mostly for public choice reasons. More to come on that. For the time being, please note that health care cost issues surrounding obesity are an artifact of the method by which our society allocates medical care and not from some innate feature of corpulence. The other candidate is foregone productivity. This one kind of irks me, because it's so plainly obvious that it's not an external cost. One person's contribution to GDP is not a public good. Its value is captured by the worker in the form of wages. If anyone for any (expected) reason takes time off from work, the cost is reflected in reduced wages. To make a public good claim, you might reference worker's compensation programs, but that's the same issue as with the insurance oddities: a result of political decisions, irrespective of the actual composition of the market.

My point here is that "who bears the cost?" is but the first question. You've also got to ask. "why do they bear the cost?" to get at the correct moral and analytical position. Only then can you start pointing in the right policy directions. Skipping over this step is lazy and imprudent.

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Do you have suggestions on where we could find more examples of this phenomenon?