The Indian state of Kerala has introduced a fat tax on fast food such as McDonald’s and Pizza Hut in a bid to tackle growing obesity. A BBC report of the story included an expert who said it won’t work; the government should run information campaigns to tell people fast food is bad for them.
I wonder how hard the journalist had to dig to find an expert who would give an opinion so contrary to the evidence. And why is it good reporting to find someone who is against the policy rather than looking at the evidence and reporting that?
The expert made two claims. First, that increasing the price won’t reduce demand. Second, that public information campaigns are effective in promoting healthy eating. What does the evidence say?
The price elasticity of demand is the percentage change in demand given a one percentage change in price. Essentials, which we need to buy no matter what the price, have a low elasticity. Is fast food an essential? No. Evidence from systematic reviews suggests that the tax imposed on fast food by the Keralan government will be effective. Systematic review evidence is that the food price elasticities are highest for food consumed outside the home: over 0.8% compared to less than 0.6% for milk and vegetables.
Another review shows that sugar taxes have been effective in reducing consumption of sweetened soft drinks, which have a price elasticity of 1.2%. The review also shows that demand for fruit juice and milk goes up as the price of soft drinks rises. And there is review evidence which suggests that the positive impact is highest amongst lower socio-economic groups who are most at risk of obesity.
What about the second claim, that public health campaigns are a better alternative? A comprehensive systematic review of interventions to promote healthy eating found no evidence of sustained benefits from information-based approaches. And even short run benefits, if any, are generally modest. Improvements in public health and safety have been a combination of factors such as legislation (seat belts, smoking), more effective enforcement (speeding), taxes (alcohol and cigarettes) and long-term changes in public attitudes (drink driving).
So here is the story again. The government of Kerala has introduced a fast food tax to tackle obesity. The evidence for such a policy is good. Increasing the price of fast food will reduce demand. An alternative policy of promoting healthy eating by public information campaigns is unlikely to be effective.
And finally, a memo to the BBC: spend five minutes on Google searching for systematic review evidence before you run any story about the effectiveness of a new policy. To put it another way: Who are you going to call? Call Campbell.