Lifestyle Economics

Food and soft drink taxes: the whole story

A study was published in PLoS One last year titled ‘Economic Instruments for Population Diet and Physical Activity Behaviour Change: A Systematic Scoping Review’. I didn’t notice it when it came out because it did not receive any press attention, but it is the most extensive review of the impact of food taxes and other health-oriented economic ‘nudges’ that I know of.

After reviewing 880 studies that looked at the effect of ‘economic instruments to promote dietary and physical activity behaviour change’, such as food taxes.

Amongst the authors’ findings was the observation that much of the evidence in favour of food taxes comes from  computer simulations which are based on ‘simplistic assumptions’ and that there are significant, unpredictable substitution effects which nullify or reduce the intended effect of economic interventions on diet and health.

‘Whilst economic instruments have been suggested in several studies to hold promise, mixed patterns of findings for most intervention types are likely to reflect the heterogeneous evidence base, as well as the complexity of behavioural responses to economic stimuli and of the causal pathways involved. This suggests a need for caution in developing policy based on limited evidence and overly simple assumptions about how people will respond to changes in prices and income. It does not necessarily imply that underlying economic theory, which holds that people respond rationally to incentives, or behavioural economic theory, which holds that rationality of choice is moderated by heuristics and biases attributable to various social, cognitive, and emotional factors, are flawed. Rather, it is likely that people’s responses to, say, a tobacco control tax are relatively predictable, whereas their responses to, say, a tax-stimulated increase in the prices of specific foods, relative to the vast array of alternative foods available, are less predictable and more complex in their relationships to health behaviours and corollary outcomes.’

Looking at the broader literature, the authors find inconsistent and contradictory evidence. They caution against ‘hasty generalisation’:

‘610 studies conducted in [high income countries] incorporated evidence for price or income levels as correlates or determinants of target outcomes. This body of evidence bears indirectly on the public health case for using economic instruments because such instruments are proposed to operate via price and income mechanisms to influence the target behaviours (e.g. price promotions change the relative unit retail prices of foods, and prices are, in turn, a determinant of food choices. This evidence base was characterised by heterogeneity of study designs and of the populations, exposures, outcomes, and covariates assessed. However, a clear inference from reviewing this set of studies is that the relationships between prices or income and target outcomes may often be non-linear, moderated by a wide range of modifiable and non-modifiable factors and mediated by complex mechanisms of action. Also, many studies reported null associations or statistically significant associations in the opposite direction to that anticipated. Whilst further synthesis of evidence drawn from subsets of studies within this large body of literature may provide some useful pointers for policy design, it primarily serves to highlight that hasty generalisation about the causal pathways linking changes in prices of diet- and physical activity-related products or services and income to behavioural and health outcomes is not warranted.’

As I discussed in The Proof of the Pudding and The Wages of Sin Taxes, the peer-reviewed evidence on food taxes (and, indeed, food subsidies) is highly inconsistent, with even the more optimistic studies (which are typically based on theoretical modelling) finding a relatively small effect on dietary behaviour, let alone health outcomes.

In conclusion, they write:

‘Our findings have exposed a complex, limited and largely equivocal evidence base, suggesting that the public health case for using economic instruments to promote dietary and physical activity behaviour change may be less compelling than some proponents have claimed. This conclusion provides an important counterpoint to what are, in our view, overly optimistic claims made by some authors of individual primary studies and reviews for the use of economic instruments to improve population health behaviour. It implies a need for caution in the development of public health policies intended to alter economic environmental stimuli to incentivise health-enhancing dietary and physical activity behaviour change at population level.’

It is little wonder that this study received no media attention. Its findings are nuanced and unsensational. Nevertheless, it provides an excellent summary of all the evidence produced to date and it should be borne in mind when more heavily promoted studies appear in the media making grander claims.

Head of Lifestyle Economics, IEA

Christopher Snowdon is the Head of Lifestyle Economics at the IEA. He is the author of The Art of Suppression, The Spirit Level Delusion and Velvet Glove; Iron Fist. His work focuses on pleasure, prohibition and dodgy statistics. He has authored a number of papers, including "Sock Puppets", "Euro Puppets", "The Proof of the Pudding", "The Crack Cocaine of Gambling" and "Free Market Solutions in Health".