Hi everyone. So today I'm going to talk about an article I found in the Economist. The article is called "Waist banned", and deals with a possible enforcement of a junk food tax in the United States.
This kind of tax is also known as a Pigouvian tax, Pigou being a 20th century economist.
First I'm going to introduce you to the concept ofPigouvian taxes, second we'll talk about its underlying rationale, third we'll try to wonder whether a fat tax will - or not - really changes behaviours, and last but not least we will focus on the theory's flaws.
I. PIGOUVIAN TAXES
- definition: PIGOU
Arthur Cecil Pigou is an English economist. He was particularly interested in welfare economics. He developped the concept of negativeexternality, and from this the concept of Pigouvian tax.
A Pigovian tax is a tax on a market activity which aims to correct the market outcome if there are negative externalities associated to the market activity.
If there are negative externalities in a market, it means that the social cost of a market activity is not covered by the private cost of the activity. In such a case, the market issaid not to be efficient and the market will thus tend to over-supply the product. A Pigovian tax equal to the negative externality is meant to correct the market outcome, so that he can be efficient.
There are many externalities in our daily lives, such as cigarette smoke for non smokers, as cigarette causes lung cancer and other dysfunctions, or also possible violence caused by alcohol abuse,etc.
This explains the -over- increasing amount of Pigovian taxes in our daily lives. For instance, the environmental taxes (such as a carbon tax) are Pigovian taxes.
Thanks to this theory, governments are starting more and more to think of creating a tax to minimise bad externalities.
Thus, this tax logic would be applied to junk food in the United States, as suggested by Barack Obama. Thiswould aim to encourage people to live a healthier life.
The tax would also aim to raise money to help paying for the American social care system, which needs to fill a serious financial hole (le trou de la secu, quoi! je sais pas trop comment le dire)
II. THE LOGIC BEHIND
Now I'm going to illustrate the logic behind this proposal.
To explain and understand the logic, we must focuson four fundamental facts:
- The first one is that about one third of Americans are obese, which makes (of ?) the United States the country with the highest percentage in the world of obese and overweight persons.
- Then, we all know that overweight people are more likely to contract heart diseases, cancer, diabetes, and bone disorders, let's make it short: health problems.
- There is also afinancial side to the issue: an obese person’s annual medical costs are more than $700 greater than those of a comparable thin person.
- Finaly ,When health-care costs are shared, obesity can be seen as a burden for anyone who pays for it and who's not touched by it.
To understand well the issue, one must know that there are two ways to pay for health care : the public health-care plan:Medicare, and the private health-care plan: employer-sponsored health-plans.
The point is everyone pays taxes for Medicare, so that half of America's obesity health costs are paid by every taxpayer, may he be slim or not. Whereas for employer-sponsored health plans, a slim person pays less than a fat one, as she is less likely to contract diseases.
It is not fair to pay for others and thisactual fact may be seen for economists as a bad externality. Thus the tax on "fattening food of little nutritional value".
III. WOULD A FAT TAX CHANGE BAD BEHAVIOURS ?
Now, we can wonder whether a fat tax would change or not behaviours. First, we all know that numerous studies have shown the relationship between the price of food, and overweight. The more the food is cheap, the more people are...