Should we tax and subsidise foods?

I’ve been thinking a lot about diet. A doctor changed my regimen just recently and I won’t go into details, except to say that I may have had my last pasta carbonara. Ever.

pork belly sandwich
farewell to you too, pork belly sandwich.

Along with all the time I’ve spent reading labels in the health-food aisle, I’ve been spending time reading about how food affects the human body.

I’ve always considered myself a pretty well-read and savvy guy. I think about food. But there have really only been two things I thought about.

  1. Eating the right number of calories.
  2. Eating fruit and vegetables.

You can see a little example of what I was eating in 2010 at this link:  Lots of fruit, some vegetables, but also lots of chocolate and chips and booze.

tomakin parma
I look at this photo, I see salad.

My diet today is pretty different. One of the things I’ve been reading a lot about is gut bacteria. There is a big link from the bacteria that live in your gut to your overall health. The bacteria do a heap of really important work (like protecting against allergies), and can cause major health problems, not limited to gut problems. They may be involved in a lot of mental illnesses and multiple sclerosis. 

The gut bacteria also respond strongly to diet, so you can change the populations in there by eating differently. But that’s not all. They also help change your dietary choices! So you could potentially create a cycle where you start feeding bugs in your gut, instead of feeding your own body.

The big point I’m going to make in this post is that science keeps moving on. It’s amazing how little we understand about nutrition. Some vitamins were discovered within the last century. And the science remains sketchy on whether vitamin supplements help or hurt people.

If I were designing a tax and subsidy scheme for food, and it was 1990, I’d probably have subsidised low-calorie cola, following the principle that fewer calories are better.

But in 2014 science has found evidence that diet coke changes your gut bacteria in a way that induces glucose intolerance. And advice has changed on wine, chocolate, cholesterol, coffee, bread, etc. The history of nutrition advice is a turbulent one.

I increasingly believe that eating better is a good idea. But I’m also aware that trying to fine-tune people’s diets leads to a risk of making a scientific mistake.

And that’s even before you look at the chance of making a policy mistake. Even for foods that are clearly and unambiguously unhealthy, you need to understand why people eat them before you can succesfully make policy that helps people not to choose them.

This great story from the Atlantic The Inconvenience of Salad covers off on a few of the traps that policy makers fall into.

For example, the idea that the problem is availability of healthy foods – the ‘food desert’ concept. That idea did not get support from a study in Philadelphia, where scientists eagerly tracked fruit and vegetable consumption after the opening of a local store. They found it had no impact.

The Inconvenience of Salad is a really nice feature that follows around a young guy who has opened a business putting salads in mason jars, putting the mason jars in vending machines, and putting the vending machines out in public.

salad vending

The vending machines have to be stocked every single day and I fear the nice young dude who has ploughed his life savings into this venture will be broke soon. In the article he appears to be mortally shocked when someone describes salad like this

“It’s just nasty to me; it doesn’t agree with my taste buds.”

While I was reading the article I kept thinking that the US should subsidise this guy. But then I tried to take a step back. How sure am I the science won’t change? How sure am I the subsidy will make a difference to behaviour?

The answer in both cases is I’m fairly sure. But not certain.

There is a big natural experiment in Australia. We actually do tax (most) processed food but fresh foods are not subject to the GST.

Despite this, I am yet to see a single study showing that the 10 per cent tax difference between the two has led to any change in diet, or in health. Has the study not been done for lack of data? Or because obesity has been rising so fast researchers fear what they might discover? If anyone is aware of such a study, please bring it to my attention!

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thomasthethinkengine

Thomas the Think Engine is the blog of a trained economist. It comes to you from Melbourne Australia.

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