Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Tuesday, July 05, 2005

Obesity and Paul Krugman:
Medical Externalities?

In "Girth of a Nation" [July 4, NYTimes; reg. req. (nice title, btw)], Paul Krugman attacks the food lobby for questioning studies about health, weight, and obesity. He says:

I've been looking into the issues surrounding obesity because it plays an important role in health care costs.

... obesity clearly increases the risks of heart disease, diabetes, back problems and more. And the cost of treating these weight-related diseases is an important factor in rising health care spending.

... as officials from the C.D.C. have pointed out, mortality isn't the only measure of health. There's no question that obesity plays an important role in many diseases that diminish the quality of life and, crucially, require expensive treatment.

Once again we see a problem with major gubmnt intervention in the health system. When we let the gubmnt provide a really high health safety net, we do two things:

  1. We create serious moral hazard problems. People do not have to bear the costs of risks they take. People can overeat, incur health costs, and not bear those costs themselves. If people had to buy risk-rated health insurance, you can bet that insurance companies would be looking into the health risks due to obesity and charging premiums accordingly. If obesity causes increased health risks, obese people would pay more. Food companies would be lobbying insurance companies, not the gubmnt. And if insurance companies lost money by listening to the food lobby, they'd stop listening; we wouldn't need gubmnt intervention.
    What if group health insurance charged a premium for obese members of the group? for smokers? and refused to pay for people who weren't wearing seatbelts when in an auto accident? What if skinny people could form their own group to buy cheap health insurance? The point is that market solutions work well in cases like these.

  2. More problematic is that gubmnt health care is used as a justification for intervention in all sorts of other areas of our lives.
    (a) wear your seatbelt because if you don't you'll impose costs on the health care system.
    (b) don't smoke because of the costs you might impose on the health care system.
    (c) watch your weight because of the costs you might impose on the health care system.
    (d) you must exercise because if you don't you will impose costs on the health care system.
    (e) you must get counseling to avoid being a "Type A" personality and risking heart disease that would impose costs on the health care system. Etc.

If people want to be obese and want to bear the costs, where's the problem?
The only "externality" arises because of non-risk-rated, gubmnt-provided health plans.

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