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Junk Food Taxes vs. Healthy Food Subsidies

March 30, 2010

Tom Laskawy wrote a great piece on Grist a few weeks back about a psychological experiment run at SUNY Buffalo to try to measure the effectiveness of taxes on junk food and subsidies for healthy foods (via Laskawy and Science Daily):

[Study author and clinical psychologist Dr. Leonard] Epstein and colleagues simulated a grocery store, “stocked” with images of everything from bananas and whole wheat bread to Dr. Pepper and nachos. A group of volunteers — all mothers — were given laboratory “money” to shop for a week’s groceries for the family. Each food item was priced the same as groceries at a real grocery nearby, and each food came with basic nutritional information.

The mother-volunteers went shopping several times in the simulated grocery. First they shopped with the regular prices, but afterward the researchers imposed either taxes or subsidies on the foods. That is, they either raised the prices of unhealthy foods by 12.5 percent, and then by 25 percent; or they discounted the price of healthy foods comparably. Then they watched what the mothers purchased.

Both the tax and the subsidy have an effect on consumers’ purchasing power, but there was a critical difference in the way the mom-volunteers reacted to the two price changes: when junk food prices increased by 12.5 or 25%, making healthy foods relatively cheaper, consumers switched their purchases to lower-calorie foods.

But when the lab simulated a subsidy for healthy foods, consumers used the money saved from the price change to buy more junk food. In fact, after the subsidy, consumers increased the amount of fat and carbohydrates in their virtual shopping carts by about 10%.

Still, there are a number of reasons to argue for new subsidies for healthy foods, given the US government’s problematic relationship with the corn and soy industry, the benefits for those in the farming and agricultural sectors, and the lack of cheap, fresh produce available to many consumers who would purchase in spite of unhealthy alternatives. The challenge now, as Laskawy points out, is “to figure out a way to bring down the cost of fruits and veggies in such a way as not to increase purchases of junk food.” He suggests subsidizing farmers’ markets, green grocers, and other markets for fresh produce that don’t stock high-calorie, processed foods (thereby limiting the consumer’s ability to substitute away from healthy foods).

3 Comments leave one →
  1. emancipationofjamie permalink
    April 25, 2010 4:40 pm

    This is so interesting! As much as I hate the idea of “sin taxes” (if you’ll extend the category a bit), this would suggest that they’re more effective than subsidies, at least in this context. It’s easier to discourage people from something than encourage them to another!

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