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Life matters!

deliciousoda.JPG

This discussion between Greg Mankiw and David Leonhardt reads a bit like an economics textbook gone rogue. At issue is whether a soda tax makes sense. David Leonhardt says it does: There's good evidence that it will reduce obesity, which will reduce health-care costs. Au contraire, says Mankiw: You have to "net out the appropriate budgetary savings from shorter lifespans."

In other words, maybe it's not worth it, as the obese live shorter lives and so cost the government less. Leonhardt responds by saying that chronic diseases cost a lot of money, and so even though obesity costs life-years, it may still be worth it. My understanding of the evidence is that Leonhardt is basically right on this, and becoming more so as we continue making advances in keeping people with chronic diseases alive for a really long time. Our progress against diseases that shorten lifespans has been more impressive than our progress against old age itself. Eventually, we'll close the gap in years between someone who has diabetes and someone who doesn't -- but it won't be cheap.

That said, something's getting lost in here. A policy that (1) increases lifespan, (2) increases healthy lifespan, and (3) adds revenue might well be worth doing even if it (4) increases total health costs. Economists, after all, do believe that people value extra years of life. You see this a lot in discussions about health-care spending, where we tend to focus on the number of dollars rather than the value derived from each dollar. The elite health-care reform conversation, for instance, seemed uninterested in the fact that we were covering 32 million people, but obsessed with ensuring that it didn't add even one dollar to the deficit.

But the biggest problem with our system is not how much we pay, but how little we get for our spending. If we really were getting twice as much benefit as other industrialized countries, if everyone were covered and our life expectancy stretched into the triple-digits, then our absurdly high spending wouldn't be such a problem. It's all the wasted money that galls.

This is not to pick on Leonhardt and Mankiw, who probably agree with most of what I've written here. It's just to say that the terms under which we tend to debate this stuff lead us down some weird rabbit holes, and probably disadvantages the quality/value agenda as compared with the cost-control agenda.

Photo credit: Jacquelyn Martin/AP.

By Ezra Klein  |  June 18, 2010; 3:13 PM ET
Categories:  Health , Health Economics  
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Comments

Presumably Mankiw is a big fan of Sarah Palin's death panels.

Posted by: randrewm | June 18, 2010 3:24 PM | Report abuse

Ummm, we don't want our citizens to be healthy because it saves money, we want them to be healthy because it's a great good anyone would wish for a loved one.

Sounds obvious enough, but this fallacy is not confined to health care. I find the education version -- that the purpose & justification of education can be measured in dollars and cents -- equally offensive.

I say, a healthy and well-educated citizenry is priceless, and I would gladly sacrifice any number of merely material interests to promote it.

Posted by: neversaylie | June 18, 2010 3:32 PM | Report abuse

Any policy that is justified by an increase in premature deaths is a pretty shaky policy.

Posted by: Jasper999 | June 18, 2010 3:34 PM | Report abuse

i'm confused as to why a shorter lifespan means more savings. if we have a healthier population that's living longer, aren't we being more productive and generating more revenue? furthermore, what about the difference between a shorter life span and a shorter lifespan where the last many years of it are spent massively spending on medication?

Posted by: zperez | June 18, 2010 3:40 PM | Report abuse

"i'm confused as to why a shorter lifespan means more savings. if we have a healthier population that's living longer, aren't we being more productive and generating more revenue?"

Not if the people in question have ceased to work and are living off of transfer payments. The difference between retirement age and life expectancy is what throws off a lot of the earlier calculations about the affordability of social insurance programs.

Posted by: jnc4p | June 18, 2010 3:43 PM | Report abuse

they're talking about a tax

a soda tax

and looking for a reason to "sugar coat" the tax

make it "easier to swallow"

typical tax maneuvering

find a group to tax who are vulnerable and unable to win a fight

a soda tax

not a carbon tax, not a gasoline tax, not a financial transactions tax, not an estate tax, not a gun tax,

a soda tax

Posted by: jamesoneill | June 18, 2010 3:43 PM | Report abuse

This is a rehash of the smoking debate. Smokers maybe don't cost the health care system in the net because they die early and don't tend to suffer from diabetes (which is a real son of a gun insofar as health care costs are concerned). But they live much shorter lives on average than non-smokers and tend to die of really unpleasant diseases (not to mention a host of co-morbidities which no one wants).

So if we want to reduce end of life health care costs, we ought to put a pack of lucky strikes back in GI rations.

Obviously reducing end of life health care costs isn't the only goal. what is less obvious is that reducing end of life health care costs (in the net) is the subject of Mankiw's analysis. So for him (and Leonhardt), this business about quality of life is ancillary. It gets in the WAY. And they are right, in a fundamental sense. It is easy for people with no training or sense to argue back and forth about a particular policy and come to no sound, repeatable conclusion. It is difficult to generate some analysis which can be repeated given that your assumptions are validated. Generating assumptions like Mankiw's are what economists do.

Posted by: protonk | June 18, 2010 3:45 PM | Report abuse

Not to mention, Manikw is an overrated idiot.

Obese women get pregnant. A lot--something like 20% of women are obese before getting pregnant. That increases the cost of begetting the next generation quite significantly. In addition, the impact of maternal obesity on neonatal health is significant; to cite just one example, pre-eclamptic obese mothers must be delivered asap, which means more preemies. Obese women take longer to realize they're pregnant, which can impact prenatal care. Maternal obesity has a profound, and apparently lifelong affect on the child's own metabolism.

Obese moms alone would wipe out all Manikw's "oh, how convenient they're dropping dead before retirement" savings. Which he would know if he'd paid any attention to this issue, but he doesn't.

The reality is we almost never have enough data to do full economic modeling of any important issue like this. You can ALWAYS posit an unsolvable hypothetical downstream effect which will wipe out our savings.

So, we have to chose which certainty we will embrace--the economic uncertainty that comes with saving money by helping people live worse lives, or the uncertainty that comes with helping people live better lives. I am on the side of embracing the uncertainty which comes from helping people live healthier, longer, happier, and more productive lives. Not only because history tends to support it--long term, the richest societies on earth tend to be the fairest and most decent ones--but also because I can live with myself if it turns out I'm wrong. So, we go extinct a little sooner, but we have a much better run of it. So be it.

I don't think the defenders of "nasty, brutish, and short" have the same comfort.

Posted by: theorajones1 | June 18, 2010 3:54 PM | Report abuse

So now we want to tax Soda, because it is too cheap and we are getting too fat.

So why is Soda so cheap, subsidized corn.

We subsidize corn to keep our farmers working and then tax people when they use the subsidized product.

Perhaps we should just stop the corn subsidies. They don't help anyone but the big corporations anyway.

Posted by: PaulArkay | June 18, 2010 4:06 PM | Report abuse

Theora,
Get a grip. The fact that you called Mankiw "an overrated idiot" pretty much takes away any ability to take you seriously. Not to mention your analysis of pregnancy and obesity is a nice example of a spurious correlation.

Posted by: novalifter | June 18, 2010 4:06 PM | Report abuse

@Theora: "Obese moms alone would wipe out all Manikw's "oh, how convenient they're dropping dead before retirement" savings.
...
The reality is we almost never have enough data to do full economic modeling of any important issue like this. You can ALWAYS posit an unsolvable hypothetical downstream effect which will wipe out our savings."

Oh the irony. So Mankiw is wrong because we don't have enough data to really model this, yet you can posit the hypothetical savings from fewer obese moms giving birth and conclude that it wipes out the increased costs of longer lifespans. Got it.

Posted by: ab_13 | June 18, 2010 4:14 PM | Report abuse

jnc4p,

There are significant medical costs at the end of a person's life -- regardless of whether they have lived a healthy or unhealthy life. My late grandfather, for example, who lived one of the healthiest lives, was costing Medicare $40,000/yr. in his last 5-7 years of life. A hero of mine, he passed a way at age 84.

My late uncle, in contrast, who wouldn't eat a single vegetable or exercise for a nanosecond, had severe depression, type II diabetes, congestive heart failure -- you name it and he had it. He passed away at 53.

In other words, there will always be exorbitant medical expenses at the end of a person's life. That's why Mankiw's argument makes sense (and also why doing something on end-of-life care and comparative effectiveness research makes so much sense, too).

Posted by: moronjim | June 18, 2010 4:16 PM | Report abuse

"Not to mention your analysis of pregnancy and obesity is a nice example of a spurious correlation. "

Wat

How in the world are the specific medical problems associated w/ pre-natal care and obesity an example of a spurious correlation? What is the unobserved third variable? What is the missing mechanism?

Have you ever talked to a surgeon about operating on obese people? Have you ever been in an OR and seen an operation on an obese person then seen that exact same operation on a person of a healthy weight?

Posted by: protonk | June 18, 2010 4:21 PM | Report abuse

ab_13,

I know you're a health actuary (I'm a life actuary), so I'll let you answer the question. I thought I remember when studying for Course 5 the textbook concluded that longevity increased health care costs because medical expenses at old ages are inevitable, but I know I could be wrong. Please enlighten me and everyone else.

Posted by: moronjim | June 18, 2010 4:24 PM | Report abuse

Does no one allow for including in the calculation that, in addition to valuing health and long lives, people *also* value SODA? In counting up the costs and benefits of soda taxes, does the public's enjoyment of soda count for nothing?

Posted by: raylehmann | June 18, 2010 4:24 PM | Report abuse

What's missing in the Mankiw/Leonhardt debate (at least as presented in Ezra's post) is productivity. Not only do healthy people live longer, they are more productive in their prime working years, and they work for more years. That's a key reason the United States is more productive now than it was a century ago.

Smoking may or may not have reduced health care costs, but evidence is pretty clear that it reduced lifetime productivity of workers who smoked. The same is true of obesity.

Posted by: tomh6 | June 18, 2010 4:25 PM | Report abuse

Actually, it's not carved in stone that the obese lead shorter lives. Some recent studies show their lives are not necessarily shorter. But the time they spend above ground is more miserable, unhealthy and costly.

Posted by: Rick00 | June 18, 2010 4:29 PM | Report abuse

moronjim, in general it is true that longer lifespans lead to higher costs. But I was simply pointing out that Theora made the contradictory argument of: "Mankiw is wrong because he doesn't have the data and oh by the way with no data at all I'll claim that fewer obese moms would save enough money to cancel out the cost of higher life spans." That could very well be true, but Theora shouldn't make the claim with no data to back it up while simultaneously ripping Mankiw for doing the same. That was my only point.

Posted by: ab_13 | June 18, 2010 4:30 PM | Report abuse

raylehmann,

I enjoy soda. I must drink at least 40 oz. of diet soda per day, and I support the soda tax. I don't think other people should be required to subsidize my unhealthy lifestyle choice.

There are certain lifestyle choices I believe other people should be required to subsidize -- i.e., procreation. [I don't believe married couples who choose to get sterilized should have lower health insurance premiums than those who don't.] The health care costs associated with heavy soda drinking isn't one of them.

Posted by: moronjim | June 18, 2010 4:35 PM | Report abuse

Rick00,

As a life insurance actuary, our company has maximum weights for given heights to get super-preferred, preferred, and standard heights for fully-underwritten policies. That's standard for most life insurance companies. In other words, there is overwhelming evidence that at least obese life insurance policyholders have higher mortality rates than non-obese life insurance policyholders.

Posted by: moronjim | June 18, 2010 4:54 PM | Report abuse


"In counting up the costs and benefits of soda taxes, does the public's enjoyment of soda count for nothing?

Soda is cheaper in real terms now than it ever has been, in part because of government-subsidized corn which is made into high-fructose corn syrup. According the Bureau of Labor Statistics, soda that cost $1 in 1980 (in dollars adjusted to the Consumer Price Index) now costs 67 cents. (Fresh fruits and vegetables that cost $1 in 1980 now cost over $1.40). Soda is so cheap now that people guzzle quarts of the stuff at a sitting. There's plenty of room for a tax that would reduce the amount consumed at a sitting without reducing the pleasure of the drink.

"The difference between retirement age and life expectancy is what throws off a lot of the earlier calculations about the affordability of social insurance programs."

But obesity is a cause of chronic conditions that push people into early retirement: diabetes and heart disease, to name two. There's reason to think that reduction in obesity would allow people to work longer and retire later.

Posted by: Bloix | June 18, 2010 5:20 PM | Report abuse

"It's just to say that the terms under which we tend to debate this stuff lead us down some weird rabbit holes, and probably disadvantages the quality/value agenda as compared with the cost-control agenda."

As this thread has demonstrated.

But I'd like to think that there is room for debating both quantitative empirical data and less measurable quality/value assessments within a single discussion. But questioning data and methods appears to be a lot easier for us than questioning values.

Posted by: slag | June 18, 2010 6:16 PM | Report abuse

This is another example of Klein thinking that the people who agree with him are "smart" and that they are therefore entitled to pick winners and losers, aka who should be taxed for behavior of which he and they don't approve. It's really about controlling the behavior of others through selective or punitive taxation.

The show was on the other foot recently in the District when there was a proposal to tax some services such as health clubs and yoga classes. When the shoe was on their foot, they screamed to the high heavens.

Posted by: parkbench | June 18, 2010 8:03 PM | Report abuse

*****This is another example of Klein thinking that the people who agree with him are "smart" and that they are therefore entitled to pick winners and losers, aka who should be taxed for behavior of which he and they don't approve*****

Sorry, but this is truly idiotic. Certain types of behavior or activities create costs that must be borne by society as a whole. Taxing such activities creates money to pay for these costs. Why do conservatives want a free lunch? And, even when the tax revenue generated exceeds those costs, at least we can find good uses for it. And the point is, we're getting tax revenue from something whose incidence is desirable to REDUCE. You make it sound like liberals are just sitting around in secret rooms dreaming up ways to make life inconvenient for people.

*****The show was on the other foot recently in the District when there was a proposal to tax some services such as health clubs and yoga classes. When the shoe was on their foot, they screamed to the high heavens.*****

Right. Because everybody knows that the activity that goes on in health clubs and yoga classes is bad for society, and generates all kinds of externalities we need to recoup.

Posted by: Jasper999 | June 18, 2010 9:56 PM | Report abuse

Mmmmmmmm, Fanta.

Posted by: laser83 | June 19, 2010 12:23 AM | Report abuse

Major brands always give out their popular brand samples (in a way it is similar to coupons) I alway use qualityhealth to get mine http://bit.ly/bhhLUy enjoy your free samples

Posted by: shellroyal19 | June 19, 2010 3:29 AM | Report abuse

" Certain types of behavior or activities create costs that must be borne by society as a whole"

the whole point of mankiw's analysis is that "obesity" doesn't have nearly the negative fiscal externalities that are presumed by certain policymakers. you strip out the negative externalities, and yes, you are left with either 1. naked paternalism or worse 2. power grabbing.

"You make it sound like liberals are just sitting around in secret rooms dreaming up ways to make life inconvenient for people"

No, but they certainly sit around, congratulating themselves on their enlightenment (which is fine by itself) and then designing systems to push such enlightenment on to others (which might be more troubling). now that's a (political) externality!

Posted by: stantheman21 | June 19, 2010 2:02 PM | Report abuse

Wait a minute ... LIFE MATTERS?

Just think about that for a minute.

Does human life have inherent value?

Life matters? Years of life have value? Value that might even outweigh ... (gulp) MONEY?

Wow. I think we should all just go sit for a while and ponder this.

The implications are huge, and unsettling.

Posted by: mizhviz1 | June 19, 2010 11:53 PM | Report abuse

When it comes to weight gain, there is nothing “special” or unique about the calories in sugar-sweetened beverages. All calories count when it comes to balancing one’s weight.

This article provides only one solution for the complex problem of obesity – tax soft drinks. But a study out of the Mercatus Center of George Mason University found that even a very high 15-cent tax on added to a 75-cent soft drink would only reduce BMI from 40.00 to 39.98. That’s an amount not even measurable on a bathroom scale.

Real world evidence shows us that soft drink taxes don’t work. West Virginia and Arkansas are the only two states long-standing with excise taxes on soda, yet they rank among the 10 highest rates of obesity in the country. And it’s pretty hard to single out soft drinks as a unique contributor to obesity when regular soft drink sales have declined 9.6 percent since 2000, yet adult and childhood obesity rates have been rising during the same time, according to the CDC.

Common sense tells us – and science has shown – that adopting the right balance of calories consumed and burned through physical activity is the key to a healthy lifestyle. A discriminatory and regressive tax on sugar-sweetened beverages is just a money grab and won’t make an ounce of difference towards addressing the complex problem of obesity. For more information, visit www.ameribev.org.


- American Beverage Association

Posted by: jbadger1 | June 21, 2010 6:09 PM | Report abuse

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