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Commentary

Big Brother Declares War on Consumption


     
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Doctors routinely advise patients to avoid a wide range of unhealthy behavior, such as smoking, excessive alcohol consumption, a poor diet, and lack of exercise. Beyond these salutary suggestions, however, there is also a growing paternalistic trend to prohibit activities like smoking—and through targeted taxation, governments are taking aim at food deemed unhealthy for having too much fat, preservatives, salt, or sugar. New York City Mayor Michael Bloomberg’s ban on large, sugary drinks was just ruled unconstitutional in a unanimous decision by the state Supreme Court’s Appellate Division—but this ruling isn’t likely to discourage hardened advocates.

Research in the new field of “behavioral economics” generally supports such policies, but what scholars often overlook is the impact taxes and regulations have on the poorest members of society. The simple fact is that poverty reduces the scope of choice. If an added tax drives up the cost of a Big Mac, it doesn’t necessarily make economic sense for someone on a limited budget to spend the time and money to travel to the nearest “organic” grocery store and then prepare a meal at home. Many will pay the penalty for their dietary choice because it’s still the most viable option available. They’ll have to spend more to buy the same unhealthy meal. The only one benefiting is the tax collector.

When healthy alternatives are harder to find, the tax burden on the poor is compounded, and social policy that seeks to engineer consumer choice often ignores the ease of access—or lack thereof—for the poor. So, according to a new study, among the most important advice doctors could prescribe for patients is to avoid poverty.

A recent study by Dr. Hallam Hurt suggests that poverty is even more harmful than crack cocaine. Following a group of cocaine-exposed babies born during the height of the crack epidemic in Philadelphia between 1989 and 1992, researchers observed no significant difference between cocaine-exposed fetuses and controls when it came to markers such as average IQ and school readiness. However, they found both groups lagging when compared to children in the same age group on a national scale. When the researchers looked for the cause, they observed other environmental factors that revealed poverty as the common link and “a more powerful influence on the outcome of inner-city children than gestational exposure to cocaine.“

This confirms a point-of-view expressed consistently by economists for the last 250 years: The most important thing we can do for a society is to move people out of poverty. Since Adam Smith consolidated economic thinking in 1776, the main issue became one of explaining the causes and documenting the dramatic consequences of economic growth. And restrictions on choice impede the mechanism of growth.

The historical record is nothing less than astonishing. Poverty has fallen dramatically on a global scale. According to Census data, the number of U.S. families earning more than $100,000 (when adjusted for inflation) increased by 34 percent between 1990 and 2009. Those gains are most noteworthy among black families (a 47 percent increase) and families of Hispanic origin (up 51 percent). The economic engine of growth is breaking down society’s long-entrenched barriers to success. While this is great news for the middle class, the poorest of the poor continue to comprise about 11 percent of the population. The push to engineer consumer choice continues despite knowledge of the benefits of vigorous economic growth. When people become wealthy, they start eating healthy—because they can afford to. Diets, exercise programs, and even the knowledge of healthy alternatives are more readily available when one has the flexibly that affluence provides.

Due to the limited choices already embedded in the geographic clusters of poverty, society’s poorest people do not have suitable alternatives like the middle and upper classes might pursue. Somehow policy makers assume that taxing high-fat and sugary foods will create the infrastructure missing in the urban food desert where there are fewer fresh vegetables or health-conscious alternatives.

Because America’s poor are mired in miserable circumstances, the solution is not to increase taxes and raise prices on their relatively few options. Instead, the solution should be to make it easier to escape poverty altogether. The economic engine of growth is the best friend the impoverished have for escaping their plight, and the recipe is no mystery: well-defined and enforced private property rights and limited government. Public policy priorities should accomplish these ends first. Perhaps the best place for political elites to debate the benefits of paternalism is at the country club, not in the government corridors where policy is made.

The mania for selectively taxing, banning, or regulating the consumption of “bad” foods should be re-examined by considering the impact on the poorest citizens. To the extent that options are available, taxing food choices might help promote a healthier middle-class diet, but it merely reduces the already meager income of the poorest among us.


William F. Shughart II is a Research Director and Senior Fellow at The Independent Institute, J. Fish Smith Professor in Public Choice in the Jon M. Huntsman School of Business at Utah State University, and editor of the Independent Institute book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.

Adam J. Hoffer is an assistant professor of Economics at the University of Wisconsin–La Crosse specializing in political economy, public choice, and public finance.

Michael D. Thomas is Clinical Assistant Professor at Utah State University specializing in transportation economics, regulation policy, and welfare economics.






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