Lecture 10 - Case Study Obesity PDF

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Lecture 10 - Behavioural Economics - Prof. Ed Hopkins...

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Case Study: Obesity Trends in BMI (Body Mass Index = kg/m2)

Weight Distribution Trend in the US

UK is second only to the US…

The Obesity Epidemic: Scotland 

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There has been a steady upward trend in the prevalence of overweightness and obesity among both sexes aged 16 to 64 since 1995. 55.6% of men aged 16-64 were overweight or obese in 1995, compared with 66.3% in 2008. The equivalent increase for women was from 47.2% to 59.6% Mean BMI has also increased over time from 26.0 kg/m 2 in 1995 to 27.2 kg/m2 in 2008 among men, and from 25.7 kg/m 2 in 1995 to 27.3 kg/m2 in 2008 among women

Medical Consequences Obesity is a major risk factor for many chronic conditions, including type-2 diabetes, cardiovascular disease (CVD), hypertension, hypercholesterolemia, certain types of cancer (mainly colon, breast, endometrial, liver, esophageal and kidney), stroke, asthma, sleep apnea, musculoskeletal diseases (arthritis and chronic back problems), stomach ulcer, gallbladder diseases (gallstones) and chronic liver disease. Obesity is associated with increased risks of gallbladder diseases, diabetes, heart disease and hypertension, of eightfold, six-fold, threefold, and one-half respectively.

Is Fat an Economic Issue?   

Is it not thus a medical question? Obesity has been increasing in response to economic growth. Again, one might ask is economic growth really making us better off? Economic circumstances influence obesity in two apparent ways - Status gradient in obesity – higher economic status (as is greater education) tends to be negatively correlated with obesity - Obesity increasing in economic inequality in society

Scotland: Obesity and Social Status

The age-standardised prevalence of obesity did not vary greatly between men according to their socio-economic classification, but it did for women. 24.0% of women in managerial and professional households were obese, this rose significantly to 34.7% and 28.5% among those in lower supervisory and technical, and semi-routine and routine households, respectively. 

Men and women in the most deprived areas had the highest age-standardised prevalence of obesity

Two Provocative Books 

The Challenge of Affluence - Offer: Self-control problems increase with affluence

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The Spirit Level - Wilkinson & Pickett: Inequality worsens individual health, welfare and happiness

The Spirit Level - More Adults are Obese in More Unequal Rich Countries

The Challenge of Affluence – Avner Offer

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Economic growth may not have made us better off The problem is that the expansion of choices and greater flow of novelty has led to an explosion of self-control problems Further, advertising exploits, and therefore diminishes, our trust of other people

Self-Control vs. Rational Choice o o o o

Let’s focus on self-control and within that one problem also highlighted by The Spirit Level, obesity Offer – “In the rational choice approach, there is no such thing as “overweight”” Indeed, there are economists who see increasing obesity as a rational response to cheaper, better food and improved medical care The only problem with rational agents would be the moral hazard from subsidised healthcare

Economic Analysis of Obesity Increase Cutler et al. (2003)  

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Greater ease of food consumption Reduction in the fixed cost of meals so more meals are consumed; consider the real cost of food – having to cook everything yourself, compare with the contemporary proliferation of convenience food, from fast-food to ready meals Calorie-intensive food is more readily available Major reduction in calories expended in work and in travel happened in the US already by the 1960s i.e. car ownership was already very high. Thus, this is not a factor in recent increases in obesity.

Increase in Calories Consumed

Growth in number of meals – Cutler et al.

Unnecessary consumption, or luxury consumption, is perhaps what we can view as snacks nowadays, at least in comparison to previous generations Cutler et al. – Welfare o

Though they do admit the possibility of selfcontrol

o o

problems, they argue that on balance consumers are better off from the change in food technology From 1965-95, on average, food preparation time went down by 20 minutes, and weight increased by 10lbs They argue: “The typical person must be better off from the reduction in time costs. Of the 20 minutes saved in food preparation, people could spend 15 minutes exercising, lose the weight gained, and still have five minutes left over”.

Self-Control      

We have already looked at self-control and the related topic of hyperbolic discounting Laibson (1997); Gul & Pesendorfer (2001) Naïve versus rational models. Do you know the extent of your self-control problem? Evidence: Della Vigna & Malmendier (2006); Burger & Lynham (2009) Both seem evidence for self-control being important for exercise and weight-loss Further, both argue for the naïve form of self-control

Interaction of Obesity and Social Influences Oswald & Powdthavee (2007), in reviewing Offer’s book, note that happiness is decreasing in BMI using data from the BHPS 2004 -

However, the coefficient is small Nonetheless, this is evidence against the rational choice explanation of obesity, whichever way causality runs

Happiness and BMI

Different Specifications

(1) (2) (3) (4)

Life Satisfaction on BMI alone Life Satisfaction on BMI with basic demographics Life Satisfaction on BMI with full set of controls except income As (3) except also with income

The results show that there is no real difference in the coefficient on BMI. Thus, the apparent lower happiness of higher BMI people is not a confound with their socio-economic status 

Lower happiness is evidence of self-control problems or stigma not being compensated by pleasure of food, or unhappiness causing obesity

Remaining Questions about Causes… Thus, we have some evidence that it is self-control issues combined with the increased availability of convenience food that is responsible. At the same time, it is not obvious why: -

Obesity should be worse in less equal societies Obesity should have a socio-economic gradient

Socio-Economic Gradient in Obesity   

There is evidence for a socio-economic gradient in obesity In industrialised countries, obesity is more common among the poor and less-educated This relationship is more pronounced for women than for men

Obesity Rates by Years of Education (US)

Why is this Puzzling? o o

o o o

It is true that in general the rich and educated have better health than the poor This is understandable if health requires investment of time or money. However, a low BMI seems accessible simply by eating less – at no direct cost. In this sense, there is a free technology available for weight-loss in the form of simply eating less. Interestingly, the obesity gradient is the opposite in developing countries There, obesity is correlated with high status Further, if obesity in the US/UK is rising because of increases in restaurant meals and tasty convenience food, shouldn’t that affect the rich the most?

Most studies find a positive relation between status and obesity in developing countries, but a negative relationship for women in the US and UK

Some Speculation on Causes – 1   

Simple economic explanation: value of non-food consumption is higher among the rich. Or, in other words, the rich have more to live for. For example, (in a different context), Oster (2009) finds evidence that limited behavioural response to the HIV epidemic is because of “limited non-HIV life expectancy” Or in other words, if you expect to die young anyway, why take health precautions?

Some Speculation on Causes – 2

Social causes: Offer in The Challenge of Affluence theorises that a major factor in exercising selfcontrol is participation in the marriage market. Slimness is a costly signal of “virtue”. o o

He also suggests that the rich simply have more resources to devote to self-control (and thus can successfully signal higher social status) Relatedly, social standing is usually relative. If your friends gain weight, this makes it more acceptable for you to also gain weight

Status to Unhappiness to Obesity Causation i.e. reverse causation Depression and stress can be a cause of eating – finding comfort in food -

Stress is typically higher for the poor Thus, Wilkinson & Pickett argue in The Spirit Level that this is why obesity is higher in more unequal societies

A Simple Model Let us look at a couple of simple models that include rational and social motivation for differential obesity. Let an agent choose her body mass b to maximise overall utility W given by:

Where the first term is the benefit from eating, p is the probability of living to old age in the absence of obesity, v the utility of not dying early, and k is a constant

If we differentiate with respect to b and set to zero, we obtain the first order condition:

That is, the chosen body mass is decreasing in the existing probability of survival p and in expected utility from living in old age v. Put another way, people with high p or v (those in better health or economic conditions) choose healthier lifestyle options, and rationally choose lower body mass. A Less Simple Model 

Let us introduce self-control costs á la GP into the existing model and make it:

Where m is the maximum (food) consumption and λ indexes self-control One can calculate that the optimal choice of b is now:

    

Notice that the choice of b, as one would expect, is increasing in λ, the level of self-control cost Further, this outcome, in contrast to the simple model, is not efficient Any individual with λ > 0 can be made better off just by reducing m, the level of temptation Thus, the individual would pay or take other actions to reduce or avoid temptation So, this model can support the idea of greater temptations reducing welfare (GP model)

As discussed in earlier lectures, we are still looking for a mechanism linking poverty with increased self-control problems. We might think that m, and thus one’s self-control problem, is greater for the rich But notice the following:

 

That is, the marginal effect of self-control on bodyweight is decreasing in the wealth parameter v So, an increase in control cost λ will have less effect on bodyweight if you are rich than poor

Graphically We do have this negative status gradient. If we increase selfcontrol costs, if you are rich, there is an increasing in bodyweight, but the effect is small (represented by the vertical difference between the

two curves). For the poor, on the contrary, the increase in bodyweight (following the increase in λ) is much larger.

Evidence of Social Influence on Self-Image Oswald & Powdthavee (2007) also examine self-perception of being “overweight”   

The survey question wording was ‘Would you say that for your height you are…under/about right/slightly over/very over weight? They find that for a given BMI, the perception of being overweight increases with education That is, social norms about acceptable weight seem to vary with socio-economic status

Perception of Being Overweight

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The first regression is missing a very important variable; BMI There is a gender difference in the perception of being overweight (for a given BMI) After you control for weight, more educated people are more likely to self-perceive being overweight, or declare being overweight

Interpretation of Results on Self-Image o o o

Notice the following: in the first regression without BMI (first column), the coefficients on graduate education are negative, but in the second with BMI, they are positive That is, without controlling for BMI, graduates are less likely to say they are overweight, probably because they are less likely to be overweight But controlling for actual BMI, graduates are more likely to say they are overweight. That is, they aspire to a lower weight than non-graduates

Summary   

We have seen that there can be quite a simple rational reason why richer people can choose lower weight (assuming that weight can be chosen) Theoretically, these differences could be magnified if ideal BMI levels varied across groups Further, there is empirical evidence for relative comparisons and for aspirations to differ across social groups

Inequality, Obesity and Other Social Problems o o

Inequality has grown considerably in the UK and in the US ever since the 1980s How big a problem is that? Is it plausible that the very presence of inequality causes social problems such as obesity? Some think so.

David Cameron – The Big Society – Hugo Young Lecture – November 10 th, 2009 “Research by Richard Wilkinson (sic) and Katie (sic) Pickett has shown that among the richest countries, it’s the more unequal ones that do worse according to almost every quality of life indicator. In The Spirit Level, they show that per capita GDP is much less significant for a country’s life expectancy, crime levels, literacy and health than the size of the gap between the richest and poorest in the population”. Health and Social Problems are not related to Average Income in Rich Countries

Health and Social Problems are worse in More Unequal Countries

More Adults are Obese in More Unequal Rich Countries

Health and Social Problems which are substantially worse in more unequal societies:

Low birth weight Imprisonment rates Obesity Trust International Data: Social mobility UNICEF Child well-being index 

Mental illness Life expectancy Maths & literacy scores Drug Abuse

Infant mortality Teenage birth rates Homicides Social Capital

Hours worked High school drop-out rate

Child conflict

Smoking and suicide are the only counter examples found

What is an Economist’s Response? The apparent relationship is striking, but:  

Correlation is not causation Wilkinson & Pickett’s (WP) statistical analysis is very weak by economic standards, and they are ultimately only reporting correlations

Where’s the theory? What is the actual mechanism driving this correlation between inequality and obesity? It may not be that inequality is driving this, but given that there is a correlation, we must explore (and strive to explain) why this correlation pervades.  

It is not clear what there is in the standard economics toolkit that we could use to explain this For a long time, economists have separated inequality and efficiency. Therefore, they are likely to be sceptical of WP’s claim that inequality leads to lower quality of life for all. But maybe it is traditional economic thinking that is wrong?

Questions Over Data Analysis First, joint causation. Rather than inequality causing bad social outcomes, there could be unobserved factors (country, social, or institutional “quality”) that effect simultaneously inequality and health/obesity/crime o o

Looking at panel data (i.e. many countries across many years) would permit the possibility to see if increases in inequality are associated with higher rates of obesity etc. That is, if we are trying to say inequality causes obesity, we need to look at changes over time in the data for the respective variables

Second, lack of controls. These are simple, single variable correlations. o

o

In previous work (not in the book), WP report simple 2 variable (income per capita and inequality) regressions for obesity across countries. Obesity is found to be related to inequality This could be misleading

Aggregating Non-Linear Relationships

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There is evidence that health measures such as life expectancy are an increasing, but concave, function of income So, this in itself is a reason for health and inequality to be linked A statistical “artefact”

Concavity

A standard trade-off by taxing by taxing the rich is that, though the poor are made better off, you are simultaneously making the rich worse off, and so though average health increases, such a policy approach is certainly not Pareto improving.

This is a relatively more equal country compared to above, and average health is actually higher in this country, however the relationship between income and health is exactly the same as above. Income inequality doesn’t have a relationship with health, but comes up as a “composition effect”. The more unequal people are as a function of the X-axis, the lower the average y will be (in this case health); in other words, this is just a mathematical result.

An Example   

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Consider two countries A & B with the same per capita income. A is more unequal than B and has more obese people. This data is consistent with WP’s findings But suppose obesity was caused by the purely economic model we considered where those with low absolute incomes rationally invest less in their health Greater economic inequality in country A means that there are more low income people there, thus more obese people i.e. inequality is inherently controlling for the proportion of low income individuals (in the absence of inclusion of an explicit income variable) But if you ran a regression using data from A and B that controlled for individual income, there would be no effect of inequality on the probability of obesity

So, what is WP’s Claim?

o

In fact, what really they would like to claim is that greater inequality raises the probability even of a high-income person of becoming obese and/or suffering poor health

However, this is not what WP are claiming! Their claim essentially says that there is a direct, causal effect of inequality on health. That is, even rich people would be better off in a more equal society. Inequality is, in some way, directly in your utility function, and therefore as inequality goes up and down, your actual welfare goes up and down too. If, as they claim, inequality does have this direct effect, then if you could make people more equal (e.g. increase taxation on rich and welfare payments for the poor to reduce inequality), then you could potentially make everybody better off, including the rich (who see lower post-tax incomes). Only if there is a direct effect from inequality, however. This would be quite amazing if it were to be true. o o

Greater equality can thus lead to a Pareto improvement Unfortunately, the evidence they present to support this specific point (as opposed to the correlations they repeatedly present) is very weak

It may or may not be true, but the point here is that, if there is such an effect, there is a free lunch trade-off from taxation, and moreover, WP fail to present a strong enough argument for such an effect.

Theories of Possible Mechanisms       

What might be driving a possible negative relationship between inequality and welfare? WP have a (non-mathematical) theory: stress from social rivalry which is exacerbated by inequality Can economists contribute formal modelling? Wider topic of relative concerns or social preferences Hopkins & Kornienko (2004, 2010) use techniques from game theory to model social rivalry and its relation to inequality If anything, social rivalry is predicted to be worse in a more equal society But Fehr & Schmidt (1999) p...