Some readers might remember I wrote about obesity and wealth a couple of months ago. One of the conclusions I came to was that there is an inverse relationship between a state’s GDP and the rate of obesity in that state. In other words, richer states have fewer obese people (relative to their total population) than poorer states do. Some people may disagree with regards to how significant or even causal the relationship is, but I believe there is a general and visible trend that can be explained in part. One reason that I surmised is that poor people have fewer choices, namely because they have less money. One thing that this implies is that poor people will be forced to buy cheaper foods. The cheaper foods, however, tend to be the unhealthier foods. Of course, it’s not impossible to buy cheap and nutritious foods. However, if we look at just a few statistics regarding food and prices, we can begin to see the perversity of the current situation. For example, in my previous post, I cited the fact that the real price of vegetables and fruits have increased 40% between 1985 and 2000, while the price for soft drinks have declined 23%.
This is partly the consequence of government interference in the market. Most of this interference comes in the form of subsidies. Government subsidizes some foods to a great amount, such as corn, and subsidizes other foods to a very little amount or not at all, such as vegetables and fruits. This has an effect. One effect is that certain foods such as corn are overproduced and prices decrease. This is why soft drinks, which use a great deal of subsidized corn syrup and sugar, can remain cheap while more nutritious foods and drinks become more expensive. That’s just one example, but it holds across the board.
Effectively, this means government is subsidizing the consumption of unhealthy foods. Poor people that lack choices are thus more likely to be unhealthy due to their eating habits. The reason I’m bringing this topic up again is because of something Professor Nathan Hampton of the economics department at SCSU said. I had Dr. Hampton over last summer, but not this semester. However, my roommate currently has him for principles of macroeconomics and he forwarded Dr. Hampton this chart about government subsidies to certain foods vis-à-vis nutrition guidelines that are recommended by the government. The chart is supposed to explain why salads cost more than Big Macs. According to the chart, it’s because dairy and meat are heavily subsidized while vegetables and fruits are hardly subsidized at all. Thus, unhealthy foods like Big Macs are cheaper than healthier foods like salads.
Dr. Hampton’s response, however, was that this chart is misleading. He essentially called it a lie and told my roommate to sharpen his critical thinking skills. The reason, Dr. Hampton says, is because meat is not subsidized the U.S. government. While dairy is highly subsidized by the government, it is misleading (“pathetic” even) to group “meat and dairy” together to make it appear as if Big Macs are being subsidized by the government. Thus, the argument that Big Macs are cheap due to subsidies is “only for the simple minded and the weak.”
Perhaps Dr. Hampton’s response wouldn’t seem so berating if there were any merit to his claims, but there is none. The fact of the matter is that meat is being subsidized by the government. Though there may not be any direct subsidies, as Dr. Hampton claims, it is being subsidized indirectly. Exercising some of those critical thinking skills Dr. Hampton implored, it’s not very difficult to see that what’s being subsidized to a rather large extent is feed crops. What are feed crops like corn doing? They’re feeding livestock—the same livestock that eventually ends up in your Big Mac. The Institute for Agricultural and Trade Policy concludes in a rather interesting study, “corporately owned, vertically integrated, industrial animal factories have reaped major gains at the expense of U.S. farmers and taxpayers.” The reason? Subsidies. If you subsidize that which is necessary for the production of meat, you also (indirectly) subsidize the production of that meat. So, yes, when you subsidize feed crops like corn, you also subsidize the production of meats, which are used in Big Macs. It doesn’t take a great deal of critical thinking to see this fact.
Dr. Hampton says the first principle of economics is that everything has an opportunity cost. Maybe so, but it’s also true that people respond to incentives (according to Greg Mankiw‘s fourth principle of economics). When government subsidizes feed crops, it’s an incentive to overproduce meat and to lower the price of Big Macs. People respond to those incentives.