Food Is Not the Bad Guy

What happens when stupid people learn some economic jargon without actually learning any economics?

We get things like this piece today in the Huffington Post by Richard Greene.

The gist: companies whose products are used in excess by irresponsible consumers should compensate the rest of us for their products’ “external costs”–that is, their costs to society via government-run health care programs.

According to the study just reported in the Archives of Internal Medicine, obesity results in $147 Billion a year in health costs for America.

And soda manufacturers and pizza vendors (and we all love pizza) don’t pay one penny of that.

In a true free market, the real costs of any goods and services are always included in the cost of the goods and services. Otherwise the market is out of balance. If the pro-rata share, for example, of a 20 ounce can of Coke is $.50 of that $147 Billion, then the free market demands that Coca Cola take care of that cost and add it to their product so that “the market” can then make an informed decision as to whether they want to buy the can of coke or a can of Perrier or Fiji water.

Only problem is, in a “true free market,” the cost of drinking too many Cokes–obesity and higher health care costs–would be shouldered by the individuals who drink too many Cokes, not by the government and the taxpayers.  By subsidizing health care, the government takes those costs that should be internal, and it artificially externalizes them.  That’s hardly Coke’s fault, and it’s hardly Coke’s fault that people consume its product irresponsibly or choose to lead inactive lifestyles.

And as an occasional consumer of Coke products, it isn’t my fault either.  I consume Coke products, pizzas, cigarettes, booze, and lots of other things that could be bad for me if I overindulged, but I don’t consume them in a way that will negatively affect my long term health, and certainly not in a way that will require government-subsidized health care.

So why should I have to pay an extra soda tax or a pizza tax or an alcohol tax or a cigarette tax?  There aren’t any negative externalities to the transactions I make with the companies that sell me those products, and what minor costs there are to my (usually) responsible consumption of them (hangovers, bronchitis, feeling full, and caffeine crashes) remain internal. (If there were, however, a way for the federal government to externalize hangovers, I’d be all about it.)

This is the price we pay for having a health care system that subsidizes bad decision making and makes individuals immune to their irresponsible consumption habits.  It isn’t the choice I’d make, but it’s the choice our society has made, so I’m dealing with it.

So Mr. Greene, we can have a subsidized health care system that spreads out the costs and benefits of the bad and good health decisions Americans make, or we can have a free market system in which costs are covered by producers and consumers alone, with no subsidized health care–and the logical outcome would be that people would buy fewer Cokes. But you can’t have it both ways.