One of the great things about the new wave of free online courses available is that there is such a wide variety of topics to choose from. And since it’s free, there is almost no cost to signing up for a course that doesn’t immediately benefit you but might be interesting. Such is the case with this course for me – The Principles of Obesity Economics offered on the Coursera platform, and taught by Professor Kevin Frick.
This course was interesting in that it attempted to address the obesity problem from an economists perspective. You often hear many people suggesting economic solutions to problems such as obesity, but until you actually study the issue, you wouldn’t know of the hidden and unexpected side-effects of those proposals.
For instance, say you were to impose a $1 tax on fast food (McDonalds, KFC, Burger King, etc), to dissuade people from eating at those establishments and encouraging them to make healthier choices. What would you expect to happen?
Most people would expect that sales of that food would go down, while sales of healthier options (like groceries, and healthy take-out food) would go up. That would be the intended outcome of such a tax.
But it might surprise you to learn that sales of fast food might actually stay around the same, while sales of the healthier options would go down! That’s an unintuitive outcome from that tax, but studies show that applying a sales tax with the intention to change behavior actually does not change it.
The reason, according to Professor Frick and the course, is that people have a limited supply of money to spend. Let’s say, after rent and car payments, people have $250 a month to spend on food. If you increase the cost of the fast food option, and they actually don’t eat less at those places, you are actually just reducing the amount of money they have left over for other things. And so it’s the other things (like groceries) that will suffer.
To me, that’s interesting stuff. I think the audio and video quality was a bit below the standard of other courses, as the professor basically recorded it on his laptop camera. I found myself not even watching the video and just listening to the audio. And at 4 weeks long, the course is quite short. So only a couple of limited topics were covered.
If you are at all curious as to why taxing something you are attempting to discourage might actually decrease sales of what you want to encourage, I would encourage you to take this class the next time it’s offered. It seems that economists are often faced with such paradoxes, and it’s interesting to see how the market reacts to these attempts at change.