Negative Externalities – Information Failure and Obesity

ObesityOne of the biggest threats to world health is that of obesity and sugar is the source of the weight gain amongst many people. It is ironic that sugar consumption was accelerated in the 1980’s after it were introduced into processed foods to deal with the health scare concerning saturated fats. Governments are now becoming more aware of this issue as it starts to absorb their health budget – UK spends £4bn on obesity related health issues. Norway, Mexico and the states of California and Illinois have introduced a tax on full-calorie soft drinks. Taxing sugar drinks does increase the cost of consumption and generates revenue to pay for the health costs that the overweight impose on society. But are there other options that they should be trying? Taxation might reduce some consumption but information about public awareness could be a more efficient option.

Information about sugar – a better solution?

A simple solution to obesity is to eat less and take more exercise. The World Health Organisation recently halved its recommended daily allowance, saying we should have no more than six teaspoons a day – less than one fizzy drink. However much of the sugar we consume is hidden within processed foods – high-fructose corn syrup which is a cheaper alternative to sugar. Food needs to be properly labelled and it is interesting to see the UK government are changing the way foods are labeled to assist shoppers to monitor their intake of harmful food using a simple traffic light system. But it doesn’t help that the US and EU governments still subsidise sugar production. However the real aim of focusing on sugar is that we start to lead healthier lives.

One thought on “Negative Externalities – Information Failure and Obesity

  1. andy May 30, 2014 / 4:22 am

    Good article thanks.
    Information cannot be the only solution especially if the product has addictive properties such as containing sugar and caffeine.

    These ingredients at levels encountered reduce individual responsibly so that the consumer has less freedom to choose. In the case of children this is even more apparent as a 6 year old cannot interpret and rationalise what the parent poor food choices are having. .essentially an innocent victim.

    This is a real moral issue not nanny state.

    The most efficient way is to introduce externality charging on products with negative consequences not directly associated with the transaction.

    For example increased risk of a 6 year old innocent child getting tooth decay, becoming overweight, losing self esteem, developing diabetes and heart disease later in life, adding extra cost burden to health services, innocently causing increased taxes to treat these effects.

    The best way is to prevent rather than cure. Fence at the top of the cliff not literally ambulance at the bottom.

    Tax junk food by at least 20% and stop gsugar subsidies which make the sugar so cheap for junk food manufacturers to buy so they can sell cheap and still make a profit.

    This is wrong and is a market failure as it distorts the market just like health externalities.

    Use the money raised from taxes on junk food and money not used for subsidising vested industries who do not care about the public health of your kids for something useful such as reducing taxes on vegetables and promoting exercise and education programs especially in schools.

    We and our governments have a duty of care for children and we are failing to protect them. This must change.

    The true costs of junk food must be paid for by the companies promoting them.

    Externality charging is the most efficient way via a tax to fund a better society… not happy now very unhappy later on meals and soft drinks.

    Choice does not come into it when the food is addictive..especially when children are involved.


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