Over here in the States the debate is raging about how to pay for healthcare overhaul. And, here in New York, one suggestion to generate revenue is to implement a “soda tax” on sugary beverages. New York governor (for now) David Patterson has proposed a soda tax and a recent study in the New England Journal of Medicine backs him up. The study argues that a penny-per-ounce tax on sugary beverages would simultaneously raise revenue and reduce consumption. They compare the tax and its projected impact to a tax on tobacco which has had such results. The beverage industry, however, counters that the two indulgences are not comparable. Both sides have their advocates and talking points, but what can psychology tell us about why soda taxes and other taxes aimed at “junk food” can be effective?
Behavioral economics (BE) is a fascinating field that blends psychology and economics to explain human consumer behavior and suggest ways of encouraging consumers to make better choices. It has gained particular prominence in understanding how individuals approach their retirement savings. Many in the field assume that individuals operate from a stance of “bounded rationality” — meaning we “make biased decisions that sometimes run counter to [our] best interests” (see this article for more information). With regard to the soda tax a basic argument from the BE standpoint would be:
- we humans love sugar –>
- sugar contributes greatly to obesity –>
- we have an obesity epidemic –>
- therefore we should reduce consumption of sugar –>
- we like sugar too much to make the right choice based purely on health reasons –>
- but if you hit us in our pockets we’ll reduce our consumption –>
- therefore the overall consumption of sugary drinks will decrease –>
- this will open the market up for other types of drinks to be more readily available –>
- as these drinks gain more market share our dependence on soda will decrease and we’ll “naturally” change our behavior to consume more healthy alternatives –>
- sugar consumption will decrease –>
- rates of obesity will likewise decrease –>
- healthcare costs associated with obesity will decrease.
You got that? At each little point of that equation there are of course many variables that can correlate, conflate, confound, and moderate the outcomes, but this is the general idea and essentially what was found with tobacco consumption. (If you want to know more about the research behind each step the Rudd Center for Food Policy and Obesity at Yale University has tons of information here.) A review of relevant articles and their key points is available here. One interesting point that has been brought up that extends beyond the realm of individual behavior is the notion of “shared economic consequences” in which the mass consumption of sugary beverages contributes greatly to the obesity epidemic and we all share the burden of this through elevated healthcare costs. The field of BE and the current legislation efforts show how influencing health-related public policy is more complicated than just providing information on healthy behaviors. It also shows how simple choices (such as drinking soda vs. water) — when scaled to the level of a population — have drastic economic ramifications.
Sidenote, while researching for this article I came across an alternative method of behavioral modification…your own personal 5 lb glob of fat (“My Pet Fat”) that you can place near your junk food to deter you from eating it. Just had to share.
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