Economics of Obesity

Since the 1970s, obesity in the United States has dramatically increased, with nearly two out of every three adult Americans currently classified as obese or overweight. The prevalence of overweight children has increased from 5 percent in 1970 to 15 percent in 2000.

The mechanisms driving this trend are unclear, multivariate, and controversial. At a basic level, however, the trend is a product of decisions made by the individual over the course of a lifetime. Economists study these decisions made by individuals under constraints of cost, time, income, and other resources. Because weight gain can be viewed as a product of such decisions, economic analysis can provide unique insights as such constrained choices are decomposed and analyzed.

At the same time, obesity has health consequences and, in turn, economic sequelae that should be understood and considered. Only through understanding the causes and effects of obesity can we effectively hope to design appropriate interventions to stem the growth in obesity.

Driving Factors

While popular media might place blame on a multitude of factors such as the fast-food industry, economists have attempted to build basic models to understand the weight trends. In simple terms, weight gain is the result of an increase in calories ingested over calories expended. An increase in calories can result from greater food intake at each meal, more meals of equal caloric intake, or changes in food preparation to include more calories.

However, a decrease in calorie expenditure can be the product of a more sedentary lifestyle through a [Page 222]decrease in energy expenditure at work or even in leisure activities. The challenge lies not in just documenting the changes in the above in relation to the changes in weight, but to pin down the causal link between these myriad factors in the observed trend in increased obesity. Despite the paucity of necessary data tracking the daily caloric intake and expenditure values for large groups of individuals over long periods of time, economists have used clever models with limited data to uncover some of these underlying relationships.

Role of Technology

Technological change has impacted both the supply and demand for obesity. On the supply side, technology has made the agricultural production process more efficient, such that the price per calorie has become much cheaper, increasing the demand for calories. On the demand side, technology has made the time spent at work more sedentary. For example, because work was more strenuous in more agrarian and early industrial societies, laborers were essentially paid to exercise. However, post-Industrial Revolution, the nature of work itself has changed; individuals are essentially paid in terms of foregone leisure. In essence, individuals are paid to substitute out-of-work leisure exercise for exercise typically undertaken at work. Empirical estimates by RAND economist Darius Lakdawalla and University of Chicago economist Tomas Philipson show that 40 percent of the recent increase in weight is due to the lower food prices from agricultural innovation, while 60 percent is a product of declining physical activity due to technological improvements in home and market production.

While this model does explain the long-run changes in obesity trends, it falls short of explaining the large increase in obesity in the United States starting in the 1980s, a time during which commensurate changes in technology do not exist. Therefore, Harvard economists David Cutler, Edward Glaeser, and Jesse Shapiro study the role of technology in increasing caloric intake, as it has decreased the time costs of food preparation. Economists use a broad definition of price that includes the monetary amount paid in addition to the time needed to use the product. In 1965, nonworking woman spent two hours preparing a meal and cleaning thereafter, while 30 years later, the same tasks require less than an hour. This causes a fall in price paid in terms of time, thereby, increasing both the quantity and variety of food prepared and consumed. Cutler, et al., observe that the increased calories were primarily attributable to higher consumption of snacks, driven by technology improvements in the making of prepared foods. They also find that technology lowered the fixed and variable costs of meal preparation and led to greater variety and frequency of meals. This was especially true for women because they experienced the largest savings of time and energy; and therefore as expected, women showed the most rapid average weight gain.

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