Who Is to Blame for Obesity?

March 3, 2005

Unedited transcript prepared from a tape recording

1:45 p.m.	Registration
2:00	Panel 1
	Panelists:	Jonathan Klick, Florida State University and AEI
		Tomas Philipson, University of Chicago
	Moderator:	Todd Zywicki, Georgetown University Law Center
3:00	Panel 2
	Panelists:	Richard Daynard, Public Health Advocacy Institute and Northeastern University
		Ted Frank, O'Melveny & Myers LLP
		Thomas Haynes, the Coca-Cola Bottlers' Association
		Alison Rein, National Consumers League
	Moderator:	Michael S. Greve, AEI
4:00	Adjournment

Proceedings:
MR. ZYWICKI:  -- United States, but that by 2002, which is the data we have here, there are three red states in which over 25 percent of the population is obese.  But you see a general trend identified on this chart.

It also turns out that it's a worldwide problem.  Europeans like to make fun of Americans, but it turns out Europeans are really only about seven to ten years behind the curve on us, and England is pretty much right there with us.

As you can see, pretty much the whole world is going through similar trends involving obesity, which I think is something to think about in terms of thinking about country-specific obesity type problems.

This is a projection going into the future if nothing changes.  As you can see, a lot of the developed world is expected to keep getting fatter and fatter, but even countries like Mauritius are expected to be catching up.

This is a trend on children's overweight trends.  As you can see, there's a general upward trend generally with respect to children.

I just wanted to flag two things for you by way of my own research.  What my research has been on is on the claim that obesity--that children's advertising is causing--advertising directly to children is the cause of children's obesity.  What this chart demonstrates, this is just data on adult versus children's obesity.  What we see on this is that parents started getting fatter faster and fatter sooner than their kids.  Basically if you look at the distribution here, the right-hand edge, the right tail, is getting thicker faster for parents than it is for their kids.

In general, interestingly enough, the mean or median--the median BMI in the country seems to have shifted upward a little bit.  But what we've really seen is a large explosion at the tail.  The number of people who are highly obese seems to be the larger problem that the data seems to be suggesting, at least that I've seen, as opposed to something at the median.  And this is the same chart, a little more clearly.

With respect to children, what we see are two interesting things:  first, that in general white kids are less overweight than blacks and Hispanics, and Jonathan Klick is going to have some very interesting data on demographic groups.  But what we see, curiously enough, is that for children, at least, the problem seems to be primarily a problem of black girls rather than boys, and for Hispanics it seems to skew to be more of a problem of Hispanic boys rather than girls, which is a curious sort of problem, which may--it's been suggested there may be some cultural reasons for that.

I'll just skip to my punch line, which is that the data seems to suggest that kids are seeing probably less advertising than they've ever seen before.  Kids are watching less television and probably are exposed to less advertising than they ever have before.  Certainly they are watching more DVDs and videos and certainly playing more video games.  But it's not clear the extent to which food advertising is prevalent in those media.  Kids are spending unquestionably more sedentary time in front of screens, like computers, DVDs, and the like, but they seem to be watching television less and being exposed to less advertising than ever before.

One final chart that I will just show to give you the framework, as noted at the outset, I noticed that parents are getting fatter faster than their kids.  This is some data I came across which is the question of--someone said that the problem is that parents are barraged--their kids are barraged by advertising, and then the kids nag their parents so much that the parents finally give in.  Well, what this chart seems to indicate is that parents and their kids eat the same thing.  Kids eat what their parents eat.  So it seems to be that the problem is that kids are giving in to their parents too much with respect to what they're eating.  And there's further research that tends to suggest that what matters most for children's eating habits is what their parents do, not what their parents say, that parental supervision is not that big of--does not change that much.  What actually happens is that kids eat what their parents eat.  And so if parents eat junk food, their kids eat junk food.  If parents have a tolerant attitude towards junk food, then their kids tend to eat junk food.  And so basically if it's around, kids will eat it.  But what this demonstrates is that parents and kids seem to be eating the same food.

So that's just sort of by way of background.  This is a final chart that demonstrates the worldwide changes in obesity, which again shows that with respect to children, it's a worldwide crisis, and basically what you see here is that obesity rates have about tripled for kids in the United States.  They've also tripled in Brazil, Morocco, Ghana, Egypt, and Haiti.

So it could be that al Jazeera is awash in Cocoa Pebbles ads, and as a result, Egyptian kids are eating themselves into fatness.  But it could be that there's more generalizable trends about what is driving obesity epidemics both in the United States and throughout the world.  And I think that's what both of our excellent speakers today are going to address, is what are perhaps the underlying economic forces that are driving the obesity problem.

Tomas Philipson has been a real path-breaking researcher in this area.  He will go first.  And then Jonathan Klick will describe some of the effects of change in relative food prices and what effect that may have.  What I think that--what we're seeing is that there may be general trends that emerge throughout the world that could explain certain sorts of things about why people are getting fat.

I'll leave you with one final thought, which is that if advertising is what was causing the obesity epidemic, then the PBS diet would work, right?  Which is, if I took my kid to the doctor and said, "Doc, you know, Billy's getting a little chubby, what should I do with him?"  And the doctor says, "Well, how much TV does he watch?  "Well, I'd say about, I don't know, seven, eight hours a day."  "Oh, okay.  That's all right.  Well, what channel does he watch?"  "Well, he watches a lot of SpongeBob.  He really likes Nickelodeon."  And your pediatrician says, "There's your problem.  Make him watch PBS, watch all the TV he wants, and he won't be fat anymore.  The problem is he's watching Nickelodeon and he's getting all those television ads, and that's what's making him fat."  Not like at the FTC where you attack a lot of fraudulent ads and claims for products, we are not confronted with an advertisement for the PBS diet as a mechanism for children to lose weight.

So, with that in mind, I will turn the podium over to Tomas Philipson, who will perhaps give us a more intricate statement of the Wizard of Id's views on obesity.

MR. PHILIPSON:  Okay.  Thanks for having me.  I'm going to discuss--I don't know what the fraction of sort of the skill set is in the audience, but I assume there's a lot of people who don't do a lot of economics, and I assume there's some people that do.  I'm going to be fairly general, and people can ask questions later--or during, if you want--about what I'm talking about.

I'm going to address this from pretty much my own research perspective.  That's the one I know best.  But I'll also mention other people's contributions in this area, sort of more important or equally important.  But in general, the papers I'll be drawing from are mainly work I've done in the past.  I'm doing some current work as well, and I'll talk about that as well.  But if you want, you can talk to me later, and I can send you the slides if you want the references.  It's mainly from my paper that's coming out in American Economic Review soon, as well as papers in the National Bureau of Economic Research, nber.org.  They have a working paper series.  If you want to go online, you can download it there.

The main things I want to talk about as sort of underlying the discussion today on who's to blame for obesity is sort of what are the economic forces that may contribute to this issue.  And economists sort of start off almost always by arguing that if something is really common, there's got to be a lot of benefits that outweigh the costs.  [inaudible] behavior is very common, so weight gain or high weight seems to be a very common type of behavior, and, therefore, economists would start looking at what are sort of the offsetting benefits to--clearly there's some cost of obesity, which much of the discussion is focused on.  But certainly there have got to be some benefits to these activities; otherwise, we would argue few people would be engaged in that behavior, in particular, having higher weights.

So in explaining the trends over time, I want to start up with sort of a historic perspective, which is from data ranging back more than 120 years, historical data from Endora Carsten (ph) and co-authors.  And this is data that essentially shows the trend over time in average weight.  The distribution has sort of shifted in average to the right, but also in the variance has gone up, as discussed earlier.

But if you look at average weight, what this shows on the X axis is the age and then on the Y axis, which is the most common measure of weight, your height, adjusted some way or another so you don't call taller people more fat just because they're weighing more.  So BMI is a common way of height adjusting weight, and you essentially see that the age profile, which kind of looked like an inverted U, is shifting up over time across these surveys that have been taken of BMI over time.

The take-home message here is that there's a very long-run trend in weight, average weight, both in the tail and in the average, of weight going up.  And, in particular, there's been, you know, even more rapid increases in the past compared to the last, you know, 20 years, which is what people usually want to talk about when they talk about this issue.

There's been more rapid increases in the past, particularly in the post-World War II period.  There was extremely rapid weight growth in the population relative to the current weight growth the last 20 years.

There's another trend that relates to this, and I'll talk about three particular time series that I'm interested in sort of interpreting the economic force that's been taking place.  The second one I want to talk about is the best measures we have of long-term trends in calorie consumption which comes from the food supply of the Department of Agriculture.

And the thing I want to bring attention to here is that there's sort of been an ambiguous effect in calorie consumption over the last hundreds years, say.  In particular, calorie consumption went down a lot after World War II when we saw the rapid increases in weight.  So that should sort of raise the issue that not only is food consumption important for explaining the overall trend upward in weight, but also physical activity levels have to be taken into account some way or another.

But, again, to put it this way, the time series correlation between calorie consumption and weight gain is not very strong.  There's been rapid increases in weight when we had declines in calorie consumption in the '40s, and there's been rapid increases in weight when we have a substantial increase calorie consumption in the late '90s and '80s, which is the current focus.

The last series I wanted to bring your attention to is the best data we have on the long-term trend in food prices comes from the Bureau of Labor Statistics, and essentially, except for the oil spike in the '70s, we've seen a downward trend of food prices, about roughly 0.2 percent every year going down.

So there are three types of behaviors in some sense that if you're interested in explaining why this is occurring that you've got to capture.  You've got to capture an increase in weight over time.  You've got to capture that food consumption has moved up and down.  And you've got to capture somehow that food prices have declined over time.

And that's where I think economics obviously are--you should take my opinion with a grain of salt, but I think economics can make the biggest contribution relative to other disciplines in interpreting those trends.

So what economists argue generally is that technological change is a natural interpretation of these trends in the following sense:  There's been technological change on the demand and the supply side.  When we say on the supply side, we mean essentially agricultural technological change.  The fact that a long time ago most of the population was engaged in producing food for each other--you know, 90 percent of GDP was agriculture around 200 years ago--to right now where less than 2 or 3 percent of the population produces even more food for more people.  That's an enormous productivity gain of the agricultural production.  And that presumably has translated into lower prices of food consumption.  That's not very hard to understand.

There's been a specialization or market production or market provision of food.  Instead of being self-produced and self-prepared, it's gone to being produced by people who specialize in food production and also more recently in the last two decades or three decades, people are specializing in preparing food.  So restaurant, basically market preparation, as opposed to home preparation of food, has increased.

That's a natural interpretation from the gain, also the value of time going up, particularly for women, and, therefore, has made faster delivery of food more valuable in terms of fast food.  And if you look at actually fast-food consumption, which I'll talk a little bit about later, it's predominantly done by people, not surprisingly, who are strapped for time.  It's the middle management people who eat lunch.  That's the biggest consumer of fast food.

So that's on the supply side.  Essentially lowering the price of calories presumably is a very important force in the long-run trend, and also in the recent trend where we have big gains in the '80s and '90s.  Some people, David Cutler and others, have argued that the time price of preparing foods has gone down dramatically in that period, and that is partly responsible for the increase in weight, even in the later decades.

If you look at the demand side, there's also a force towards higher weight gain, and that's essentially that when we become more productive, when we have economic growth through being more productive, that economic growth is generated by more sedentary technologies.  So one way of thinking of this is that you used to essentially get paid for exercising historically; that is to say, you wanted to make a living, you engaged in manual labor.

Today you're paid to exercise instead, not so much in dollars but in leisure time, so either you spend your time with your kids after work or you go out and exercise.  That's a cost of exercising if you presumably, hopefully, like spending time with your kids.

So the price of exercise has gone up as we've basically gone to more sedentary technologies, which at the same time makes us more productive, i.e., raises income, but also makes us sit in an office longer without moving.

And because of that shift from physical activity from work to leisure--or it's been as a consequence of that shift from physical activity from work to leisure you see all this gym and jogging activity in the leisure time, substituting for what took place at work historically.  So professional athletes don't go out jogging after work for the same reason people didn't do it historically.  They get paid to do it.  They get paid to exercise at work.

But the total, essentially, the total spending of calories has gone down.  It used to be that you sweated ten hours at work.  Now you're lucky if you sweat maybe three hours a week in a gym.  So, you know, the substitution is not offset.  Even though we have an increase in leisure exercise as an offset to the decrease in on-the-job exercise, total exercise has presumably gone down by being more productive in the labor force.

So these two forms of technological change, that is to say, more productive activities makes you more sedentary, raises income, but also lowers calorie expenditure and agricultural innovation makes the price of a calorie coming down are needed to explain these three time series I talked about.

Essentially, that's due mainly by the simple fact that sort of eating and physical exercise are complements.  They move together.  So that when you have more sedentary work, that has an offsetting effect on calorie intake relative to prices, so prices are going down through agricultural innovation.  That presumably makes people be able to afford being obese, historically, and in poor countries today you can't afford to be fat even if you wanted to.  But there's an offsetting effect on that; that is to say, you're in a more sedentary environment today than you were before, and, therefore, there's conflicting forces on the consumption of calories, which may be one interpretation for this going up and down on the calorie side in the time trend.  Weight presumably goes up for both reasons.  You are more sedentary now and you also have cheaper food, and prices fall because of agricultural innovations.  So those three time series, you need both forms of technological change, both on the demand and supply side, to generate the three time series.

The demand side or the food story alone or the agriculture story alone that prices are going down wouldn't explain the lack of time series correlation between weight and calorie intake.  Weight would be going up when prices went down, but calorie intake would be going up as well over time.  And, again, a sedentary technology that makes us more productive, again, couldn't explain the increase in calorie intake, as you would have sort of a reduction or inward shift in the demand.

Now, relevant to today's discussion, there's sort of a demand-based story of why obesity has gone up, has a hard time explaining these trends as well, in the sense that we have a food culture now.  You know, it doesn't cost so much to be obese, when other people are, et cetera.  Essentially, it sort of can be interpreted as being demand explanations of demand shifting outward for food.  That would have a hard time explaining the falling prices, because prices fall when demand shifts out, or when supply shifts out more than demand does.  So certainly there's been offsetting supply expansions to explain the falling prices in food.  It can't be demand alone that explains the growth in obesity in the long run.

Also, the technological explanation -- [blank spot] -- are important to understand the differences across countries in the level of obesity.  If you look within a country as sort of an inverted U-shaped weight as a function of income, so that when you're very poor, you're thin, then you're middle-income, you're heavier; but as people become richer, they're less overweight.  So for a large part of the income distribution, you have a negative relationship between income and weight within countries.  That is, the individual data within countries in rich countries show a negative relationship between the richer you are, the less problem obesity is.

So one interpretation would be, you know, we're just going to grow out of this problem.  If economic growth is going to generate a higher income, wouldn't we just become thinner?  But that's certainly not the case, it appears.  So there's a cross-country effect essentially being due to technological differences, which makes richer countries--in the data richer countries are obviously more obese than poorer countries, even though within countries, richer individuals are thinner than poorer individuals.

One interpretation of that would be technological differences in the sense that the richer countries are richer is because they use better technologies, are more productive, et cetera, than those technologies are more sedentary, which is presumably lower physical activity in an offsetting effect.

So it's a very natural interpretation of the difference slope--the different effect income has on weight within and across countries as being generated by technological differences.  It also determines the future time series, what the path of future obesity will be.  Presumably we got here where we are today because the income effect, the pure income effect, if you want, without the associated physical tension, physical activity, would lead us to believe that richer people are healthier, richer people would, therefore, be thinner, just as they are within countries.  But presumably the offsetting effect of the way we became richer is because we engaged in more sedentary activities has dominated in the past and got us where we are right now, and the question is in the future if technological change will have that continued path.  It's not clear.  There's two offsetting forces.  One is that richer people are healthier and, therefore, thinner.  But, also, richer people may be more sedentary, which would make them weigh more.  So those two conflicting effects in the future, it's not clear whether we're going to have this continued growth.  Maybe it's due to recent technologies, such as computers, et cetera, have made us sedentary, and there's not much more room to move in that direction.

I'm not going to talk about, since I have so little time, the paper I mentioned.  It essentially discusses what are the work effects on BMI.  How much do people differ across jobs in their weight?  And the answer is:  A lot.

I'll talk a little bit about public policy and obesity, which I think relates to the coming discussion on the second panel.  And my work in FDA--even though I have a great admiration for my colleagues there and I have nothing bad to say about them--was very little influenced by what the positive forces were explaining the growth in obesity.  And I think programs in general or legislation in general needs to be better informed of what the forces are.  In particular, on the obesity task force at FDA and, in particular, within HHS, there's much emphasis on public education and information being the best method of publicly regulating or subsidizing thinner behavior.  But certainly information has increased over the last two decades.  We had the NLEA with the food labeling coming in in 1992, and certainly more awareness of the quality of the food we have has increased over time, at the same time as obesity has increased.  So there's got to be some offsetting forces.  Certainly this can have an effect on the margin, but there's got to be some more important forces that are going in the other direction than information being the problem with obesity.

Personally, I don't think it takes a rocket science to figure out how to get thin.  You move more and eat less.  I think people fully understand that.  And I would be very surprised if you had a randomized education program about that you need to move more and eat less, that that actually would have BMI effects.  I wouldn't want to bet on it, put it that way.

So I think information is not the issue at all.  I think the incentives involved are much more important, the ones I've discussed.

In terms of normative analysis, should we or should we not try to lower obesity?  That's taken for granted, I think, in the public health community that it's a public health problem as opposed to a private health problem.  Clearly it's a private health problem.  People have adverse health effects from being obese.  Actually, some people would even argue with that.  But most of the medical profession believe it's a private health problem.

The question is what role does the government play in reducing obesity, and the two things that get brought up in that context are--one is that obesity or calorie consumption is addictive, that there's some kind of addiction aspect to getting--having--being overweight, which I certainly believe it's true that people can really control their behavior in some regard.

The question is, you know, this actually came up in economics in the savings literature, that's how it started.  It's not clear what the public sector advantage is to the private sector here.  Government in the savings context runs big deficits all the time, probably have a harder time controlling their deficits than people who are by legislation penalized for running deficits.  So it's not clear the advantage in addiction.  And a lot of private--a mechanism for committing yourself to behaviors, which is sort of the result of addictive behavior, that you sort of want to precommit to certain behaviors so you don't get tempted, a lot of private sector sort of products can be supplied in that context.  Stomach surgery I think is sort of a prime example of that.  You can certainly achieve that behavior of not eating with will power.  But you sort of precommit yourself to certain behavior by having stomach surgery, and that certainly could and has been supplied in the private market.  The question is what role in that context that a public sector intervention has in curing addictions relative to the private market.

The second aspect--and I'm out of time--that people point to in terms of government intervention to lower obesity is that it has public insurance externalities, that is to say, Medicare and Medicaid, which most recently changed the policy on obesity while actually I was there at CMS, is paying for medical care that is excessive on people who are of higher weight than relative to those who are thinner.

The issue there, I think, is essentially that many people who make those--many obesity conferences start with that argument, that that's why we care about obesity in a public policy sense because of medical insurance externalities through Medicaid  and Medicare in the U.S.

The problem with that argument is that there are many offsetting forces to those fiscal effects, such as Social Security, that people are actually dying and you save money.  But then people say, well, that's kind of ridiculous.  That's an economist's view of the world.  Why are you talking about that?  That's sort of just pointing out that that's not really the issue we're talking about, because if you really cared about the fiscal effects, you would care about all the fiscal effects, and you would be concerned whether, you know, actually obese people saved you money.

So there's some underlying issue which I'm not fully aware of, I don't fully understand what the exact sort of explicit nature of it is, but it hasn't really been spelled out, I think.  I think the insurance externalities is the same kind of argument you get in other contexts when you have healthy behavior or more medical care necessarily--or sometimes having offsetting effects with Social Security.  But many times people only want to hear one side of that, which I think is more of a sign that that's not really the debate, the debate is about something else.

MR. ZYWICKI:  If you'd finish up--

MR. PHILIPSON:  So to finish quickly, I think it's an open question, and I think this relates to the second, whether obesity--it certainly has not been made explicit in a convincing fashion whether it's a public health problem or whether it's only a private health problem.

Thanks.

MR. ZYWICKI:  Thanks, Tomas.

I will turn to Jon Klick.

MR. KLICK:  Thank you.  I'm going to be talking about some research that's in a much earlier stage than the research that was presented by Professor Philipson, although the research is very much complementary to Tomas' results and basic theoretical construct.

I'll start off with the same question that all three panelists have started off:  You know, why have Americans gotten fatter?  And if you look in the public health literature or in sort of the public policy literature, a lot of attention is placed on the question of food advertising, particularly as it relates to children.  Also, there's some talk about the growth of the fast food industry, where we place soda and candy machines--some communities have actually taken them out of schools, I guess on the premise that these things have really added to and perhaps have driven the obesity increase among children.

As Tomas pointed out, economists are more apt to look for economic or what I dub "natural" explanations, and among these natural explanations that economists have looked at is the stuff that Tomas talked about, and also a handful of other factors.

Mike Grossman, a health economist with the National Bureau of Economic Research, has some work suggesting that part of the problem may be an increase in women's participation in the workforce on the premise that in days gone past, in the family you actually had someone controlling what the family was eating.  Nowadays there's more--people are more--the families are more strapped for time, so they're more apt to go for quick food, which tends to be less healthful.

Grossman has also pointed to the possibility that declining smoking rates have increased body mass index among individuals.

What our research--and this is joint research with Thomas Stratmann, an economist at George Mason.  What our research does is it tacks on Philipson's research and looked for a price theory explanation as a microeconomic explanation.  And so as Tomas talked about, part of his argument is that as food prices have declined in real terms, people eat more.  Now, that's, of course, not the whole story, as he laid out, but jumping on to that story, what Thomas Stratmann and I have thought about is what if different foods have different effects on the nutritional composition of an individual's diet?  And particularly what we're interested in, has the price of healthful food evolved in the same way as the price of unhealthful foods?  When Tomas gave you the graph about the decline in food prices, there was no distinguishing between kinds of foods, but clearly the composition of a diet is going to matter on the margin in terms of what food you're eating.

And so looking at this in a microeconomic framework, what we basically lay out is that a rational individual, when making his consumption decisions, is going to look at the relative prices of food; that is, as the price of healthful food goes up relative to the price of unhealthful food, an individual is going to substitute toward more unhealthful food and vice versa, and this is going to obviously have an effect on the nutritional composition of an individual's diet.

And so what we did is we collected some price data on kinds of food.  Now, what you have here on this graph is not deflated for general changes in the price level.  This is just nominal prices of different kinds of foods from 1970 through the year 2000.  And what you see is in the early portion of this graph, up through about the mid-1980s, the prices of fruits and vegetables, ground beef, fish, carbonated beverages all tended to evolve in the same way.  But when you hit the mid-1980s, you see the price of fresh fruits and vegetables and fish increased substantially more in nominal terms compared with the price of ground beef and carbonated beverages.  So this is leading to or suggesting that there may have been some relative price effects at work here in the obesity epidemic.

And so to think about this in a bit more comprehensive or rigorous way, what we did is we put together food price indexes.  We basically looked at what foods BLS--Bureau of Labor Statistics--has tracked over the last 20 years, and we tried to divide those into the categories healthful and unhealthful food.  And basically what we find in these price indexes is that over this time period, the price of healthful food has gone up relative to the price of unhealthful food.  And, in fact, in the late 1980s, you see a significant upward trend, a very steep upward trend in this price ratio.

And so what we did is we combined these data--at the census region level, we combined these data with some individual health data from some of the big health data sets, particularly the National Health Interview Survey, for the years 1980 through 2000, and what we did is we separated everyone into their census region level, which is the level at which we had price data.  And then running some regressions, controlling for the things that have been suggested in the literature, what we find is that indeed, as the price of healthful food goes up, as healthful food gets more expensive relative to unhealthful food, people's body mass index goes up.  They get fatter.  Okay?  That is, as healthful food gets more expensive, people substitute toward less healthful food.

And so a secondary question that we asked is:  Is this effect uniform across different groups?  And one of the differences that we wanted to look at suggested by some of the public health literature was:  Do white individuals and minority individuals have the same price sensitivity in their eating habits?  And so what we did in the National Health Interview Survey, we were able to divide individuals between white and black.  Basically that survey lumps all other racial groups together, so we looked specifically at white and black.  And what we did is we re-estimated these regressions allowing for separate price sensitivities by race.  And what we find is although the effect is positive, that is, as healthful foods get more expensive relative to unhealthful food, BMI goes up for both groups and is statistically significant for both groups.  The effect is much larger for black individuals, that is, black individuals tend to be much more price sensitive than their white counterparts.

Now, we don't really have a good explanation for this.  As I said, this is pretty early-stage research.  But some possibilities are things like maybe the racial difference we're picking up is really an income difference.  So it may be the case that as you get richer, you become less price sensitive and it just so happens that black individuals tend to be poorer, although we do do some controls for income and the regressions for equity, but we may not be able to pick up that entirely.

Another possibility is some of the public health literature suggests that there's differential health literacy across the racial groups.  That is, really what the comparison individuals are making is the full price or the full cost of food consumption.  So in that, nominal price is just one component.  The other components include your expectations about what the effect of this food is going to have on your health, but if you don't really have much nutritional literacy, it may well be the case that you undervalue that component.  And so in the context of these results, it may suggest that white individuals place more value, relatively more value on these health aspects of the food than on the price sensitivity.

One last possibility is it may be a difference in discount rates.  It may well be the case that people from different racial groups rationally discount the health effects of different food consumption.  And so think about, for example, if one of the expected costs of eating poorly is diabetes and Type 2 diabetes may be something that leads to problems well down the road, well, if you've got a high discount rate--that is, you discount future costs significantly, maybe for good reasons, maybe because in general people from your groups have lower life spans or something like that, you can rationally ignore some of these health effects.

But, again, we don't have a good explanation for this.  All we have is that black individuals appear to be much more price sensitive than white individuals.

And so jumping from this to what information content our analysis has for public policy responses is, again, if we accept the premise that obesity is really a public health issue--which I, along with Professor Philipson, would say that that's not an open-and-shut case.  But if we accept that possibility, what kind of public policy responses make sense in light of these results?

Well, one obvious implication is that there might be decent room for the taxes and subsidies on particular foods.  So you might imagine you can change relatively prices by taxing unhealthful foods or subsidizing healthful foods, or some combination there.  But it turns out that this policy effect might be greater for black individuals, right?  So you might not have a uniform public health effect here.  And that may be all right, particularly since CDC and others have highlighted minority individuals as being particularly at risk for obesity.

Now, interestingly enough, we've done some analysis where we don't look at relative prices, but we look at an individual's response to changes in the prices of healthful foods ad unhealthful foods separately.  And it turns out that we get the expected direction of result, but for both kinds of food, it turns out that the magnitude of price sensitivity is bigger for black individuals than for white individuals.  But the effect of prices of healthful foods is not statistically significant for black individuals.  So if you particularly want to target black individuals, you might want to focus more on taxes on unhealthful foods than subsidies for healthful foods.  And, actually, for white individuals too, the estimates suggest that taxes on unhealthful foods might be more effective than subsidies for healthful foods.

Now, we're in the process of checking to what extent these results are robust.  We're looking in some other data sets.  It appears as though the basic results are robust, and we're also including some additional controls.  Again, the result seems to be robust.

And so the basic idea here is we need to perhaps look more seriously, as Professor Philipson said, look more seriously at these natural causes or natural components of the increase of obesity before we so quickly move away from these economic determinants towards the more advertising type determinants.

Thank you.

MR. ZYWICKI:  Thanks.  We've got, by my watch, about 13 minutes for questions.  So we'll just start in front.  We have a microphone.  Just wait for the microphone to come around before we plunge in.  In front.

QUESTIONER:  One of the beautiful things about economics is that you have a macro theory ad you have a micro theory and the ability to conceptualize between aggregation and disaggregation.  I would comment people to an article in the Washington Post sometime within the last year that was an in-depth view of a small town in Mississippi with a lot of overweight people and how the food had become relatively cheap to them over time and relative to the other kinds of things they could do.  It was a whole cultural aspect of you could see how very difficult it would be to lose weight even though these were people with diabetes and heart trouble and so forth.

The other item I would mention, which in--because of my lifestyle, I eat out a lot, and I find that the portions are very large, way larger than I want.  And I have made inquiries of managers in some of the chain restaurants as to what was the relative cost of food to their overall operations.  And they uniformly tell me it's 15 to 25 percent.  And they also say, well, there's a lot of people that want these big portions and to them--it appears to me at least that the price of food is a relatively small component and that when they look at a customer coming in the door, they need to get X dollars from that customer in order to keep their business going.  And so they just throw away food and make their portions very large.  You have to order appetizers or order from the kids' menu in order to get small portions.

I personally think that a lot of people might make better choices if the menus actually had a calorie count on them and if you had options for getting smaller portions, there are lots of people who would want smaller portions.  I would think here that part of what's driving this is portions are really large, and the reason they're large is for these basic economic reasons in the restaurant business, plus a lot of people are eating out and what they pay for food is relatively small portion.  All of the things that you've identified here in terms of rising income levels and shortage of time for people.  But I would really like to focus here, I think, having gone down to the macro part, economists to look at the micro level and the decisions that people make on a micro level, and how that affects their choices of food.

MR. ZYWICKI:  Do either of you have a comment?

MR. PHILIPSON:  I'll respond to that.  I think the portions is really a price effect, that the cost of throwing away stuff is low.  I agree with that.  I don't think--if you look at total calorie consumption, restaurants is still a pretty small part of people probably eat--I think it's a tenth of their meals in a restaurant on average.  And I believe that fast food restaurants is a subset of that.  That certainly relates to the second panel today.

In terms of explaining the obesity epidemic from the behavior of people who are engaged in market preparation, in some sense it's going to be a little difficult, I think.  That's an overall point.

In terms of restaurant labeling of calories, that was actually under discussion at the FDA Obesity Task Force I was involved with, and I was heavily involved in that.  It turns out FDA does not have any legal authority.  There's an exemption in the National Labeling and Education Act of '92 which instituted the food label on packaged foods, which some of you may use, exemption of the restaurants in there.  So even if FDA wanted to have restaurant labeling, it couldn't enforce it.

The important issue there on the labeling, I think, is the fact that food labeling today is very burdensome on the consumer, that is to say, he or she has to add up on their own what this implies for their diet.  The point of considering the restaurant labeling that we did on the Obesity Task Force was motivated not so much by the fact that these people are large share of calories consumed--they're not--but much more so that it would facilitate learning about what calories went in a particular meal as opposed to a particular product.  Ideally, you would like calorie labeling of your diets or nutritional information about your diets, but few people are selling you diets.  We have people selling you meals, and that would sort of aggregate up the information, and that I think would be useful.  But, again, that's something that Congress has to do.  It's not something the executive branch at this point can do.

MR. ZYWICKI:  Can I press both of you a little bit, though, on a more general question?  First, with respect to that question, it appears that portion sizes at home, home-prepared food portion sizes are going up just the same rate as eating out.  And it's clear that the economics of super-sizing is that the labor of the kid behind the counter to fill your cup is much more of the cost of the product than what's going in the cup.

But both of you guys indirectly suggest that we should make food more expensive, and I just want to press you a little bit on that, whether I heard that correctly, or, Jonathan, your position was to make some foods perhaps more expensive.  But to press you on that, first, there's an obvious incongruity in that.  And, second, do we know if people pay more for food, either--what they're going to be substituting away from?  If we do--we know that, for instance, if we raise the price of unhealthy food, surely you find that people will eat less of unhealthy food.  But what other effects on their--do we have any idea what they're spending -- [tape ends].
T1B  MR. KLICK:  Truth be told, I don't particularly believe that we should be taxing and subsidizing.  I mean, I premised that part of the comment by saying if we agree that this is a public health problem, I tend to fall into the camp that I think Tomas was implying.  Certainly it's a private health problem, but it's a public health problem to the extent that we've got these fiscal externalities.  We've got programs that say we're going to pay for people's health problems.  Well, you know, given that, we may decide that it's worthwhile to tax and subsidize, but that's a pretty big conditional there.

MR. PHILIPSON:  I would say that the bigger problem, even if you agree that it should be limited or calorie consumption should be reduced, for whatever reason, the problem is that we want to tax overconsumption.  We don't want to tax consumption.  There's poor families who eat, you know, and we don't want to raise their food burden or the budget for food spending in those families.  So ideally what you would like, if you were after this, you would want to tax not the first 3,000 calories but the next 1,000 calories that you eat per day.  You couldn't, obviously, do that.  You couldn't enforce that.  But that's what you would like, what economists call a nonlinear tax.  You don't want to make poor families who are starving face a higher price of their food.

So the problem in general with food taxation, I think, is that it would be very regressive in the sense of, you know, food is a necessity, meaning the share of income spent on food goes down with income.  The percent of your income spent on food consumption becomes much smaller when you're richer than poorer.  Therefore, a tax would hit the poor a lot more than it would hit the rich.  So you're basically trading off that issue.

In terms of taxes in general, I think, you know, like I said, there's benefits of these activities.  That's why we're fat.  And those benefits apparently outweigh the costs.  I mean, I view this very similar to highway transportation or cars.  Cars lowered the cost of transportation, presumably, but they also had adverse health effects of highway mortality.  It's exactly the same phenomenon here.  We have new technologies that come in that lower the price or raise productivity, but they have adverse health effects.  If you just look at the adverse health effects, you should not sort of discourage the activity.  There's a lot of benefits with activity.  We wouldn't want to go back to the '60s when we were thinner and poorer.  No one would want that.  So you like being in today's environment, but you also have worse health.  That doesn't mean you're worse off.

Now, obviously, on the margin, you're better off if we can, you know, reduce obesity one way or another, but it's very hard, I think, with taxation to do that because you're hitting poor people so hard.

MR. KLICK:  Again, I don't want to go too far down the road of supporting policies that in general I don't.  But one could handle, I think, the regressivity problem by subsidizing the healthful food or by taxing the unhealthful food but then rebating, you know, a lump-sum payment to the poor families.  But, again, this is all conditional on us thinking that this is a public health problem.

MR. ZYWICKI:  A lot of hands up now.

QUESTIONER:  You guys talked a bit about some of the economic analysis on the consumption side.  Have you done any of the economic analysis over on the expenditure side?  You talked a bit about the fact that, you know, it costs most to engage in physical activity in a gym, but, you know, there's all sorts of subsidies for sedentary activity.  How about that side?  Have you done any analysis to look at the expenditure side either as sort of--you know, in terms of what's going on in the real world or from the public policy side?

MR. PHILIPSON:  No, I mean, in terms of expenditure, I mean the cost, I think, in terms of exercising, leisure exercise, not so much in dollars.  It's much more in foregone time that people value their leisure time and they don't want to be sweating in the gym during that time.  There are a lot more fun things to do.

So I think the predominant cost of exercising now is foregone leisure, so that's not going to show up in any national accounts or whatever.

MR. ZYWICKI:  We have surprisingly poor evidence--the data is surprisingly poor on people's calorie expenditures also, isn't it?

MR. PHILIPSON:  Yeah, it's much harder to measure, obviously, than it is--like I said, the data I alluded to where we followed people in jobs, we actually had longitudinal data where we saw people switching between jobs, and we had jobs coded by how much physical activity there was in the job.  Those job effects are very large.  I mean, for a career you have a 3.3 BMI change difference between people who are in a sedentary job versus people who are in physically demanding jobs.  So in that sense, under calorie expenditure we don't have--even the calorie intake data is very poor because the food survey data is very poor, especially among women.  Women say they don't eat at all, but they're the fastest growing people in weight.  And so the survey data is very unreliable, particularly on the intake side, but even more so, I guess, on the spending side.

MR. KLICK:  This is not totally serious, but I guess what that might imply is that, you know, industrial policy that favors exportation of service jobs abroad--

[Laughter.]

MR. KLICK:  And the importation of manufacturing jobs to the U.S.--

MR. PHILIPSON:  That would be--

MR. KLICK:  --would help.

MR. PHILIPSON:  --[inaudible] which I disagree with.  There are offsetting benefits.

MR. ZYWICKI:  We're out of time, so let's try to squeeze in some quick questions with quick answers, if we can.

QUESTIONER:  Thank you.  Yes, I have a concern with categorizing foods unhealthy versus healthy.  There's a vast majority of foods where the dose makes the poison.  They may be healthy depending on how much or how little you eat.  So what criteria did you use in defining foods?

MR. KLICK:  Sure, that's a good question.  In general, at this stage we haven't been terribly rigorous in defining, but we have been rigorous in looking at sensitivity of recategorizing foods.  So, for example, as of now, these results that I presented to you, we have milk consumption as a healthful food, but that gave us some--you know, a bit of hesitancy.  And so if we pull that out and we rerun the numbers, it doesn't seem that our categorization is really driving our results.  But your point is well taken.  No doubt--in fact, in the paper we've got a point that says in the extreme, you know, any food can be in one or the other categories.

MR. ZYWICKI:  We'll take one more quick question.  Yes, right here.  I apologize to those who we weren't able to get to.

QUESTIONER:  Thanks.  I had a question actually about the graph that you showed where there's the confluence of events in the 1980s and it appears that fruit and vegetable and fish prices start soaring and everything else sort of starts declining.  And I'm wondering if you've looked at comparable graphs that show actual consumption of those commodities and the extent to which marketing was done at that period to increase consumption and, therefore, lower the prices for those.

MR. KLICK:  No, we haven't, is the short answer.

MR. ZYWICKI:  Well, thanks to both of our panelists, and I'll turn the podium over to Michael Greve.

MR. GREVE:  Okay.  We run a tight ship here on the Titanic.  We will, without delay, proceed to the second panel, which deals with the policy and legal questions involved in this important question.  I'll introduce our speakers briefly in the order in which they'll appear.  There are more extensive bios in the materials that we distributed and you hopefully received.

We'll start with Tom Haynes, who's the Executive Director of the Coca-Cola Bottlers' Association, formerly served as the general counsel of the mother ship itself, Coca-Cola of North America.

Alison Rein is the Assistant Director of Food and Health Policy for the National Consumers League.  She'll go second.

We'll then hear from Ted Frank, who's with the firm of O'Melveny & Myers here in town, where he practices defense work, including antitrust and some class-action work.

And, finally, we'll hear from Richard Daynard, Professor of Law at Northeastern University, who played a leading role in the tobacco litigation several years ago and has since written very widely on the insights that one might learn from the tobacco litigation with respect to the public health debate.

Tom, please.

MR. HAYNES:  [inaudible] any particular Coca-Cola bottler or myself, although I may change my mind on that at the end.

I thought I'm going to leave it to the rest of the panel to address some of the more technical legal issues.  I'm going to try to approach this from kind of a somewhat layman's perspective and really pose a couple questions:  Are there viable legal claims--and, again, I'm going to defer to some of the other folks on some of the technical analysis, but things that make some apparent legal claims for folks to try to recover obesity-related injuries arising from consumption of food or beverages--or other activities for that matter?  And if the answer is yes or maybe, what are the implications of that from a policy perspective?  Should the legal system recognize these claims?  And is the litigation system in particular an appropriate way to address them?

What I'm not going to address directly in my remarks, because I think it's a somewhat separate issue, is:  Are there legal claims surrounding activities that might be related to, you know, the obesity crisis?  If, in fact, you know, folks are engaged in false advertising, deceptive advertising, other kinds of activity that might be attacked under conventional legal theories, but the particular injury that's related is not related to obesity, I'm not really trying to address that, because obviously there's a whole panoply of laws that apply to food and beverages and the marketing of food and beverages.  So I'm going to--because I think it's kind of what we're trying to focus on, I'm going to focus specifically on the notion of a private remedy for obesity-related injuries or derivative injuries, i.e., the kinds of cases that were brought by the AGs on tobacco, on health care costs.

Anyway, I thought I'd throw up some--try to lay out some propositions that, you know, most of us or maybe all of us on the panel would agree on, because I think there probably are some things we can agree on.  Of course, anything can be disputed and at the margin probably is appropriately disputed.  But there is an obesity crisis.  The statistics I think are fairly clear.  Todd put them out there.  There is a significant increase in obesity rates in the United States and most of the rest of the developed world.

It's not clear, by the way, to me whether you would make that statement with the same kind of fervor relative to 2005 as you would have with 2002 because I'm not sure that we've got good current data.  But, you know, it could be that there's more there than I really realize.  I just haven't seen a lot of it.  A lot of the data I've seen really goes back four or five years; whereas, I think there has been an increasing amount of public attention to the issue, and perhaps we may find as the data is collected that the situation is mitigating somewhat in very recent times.

Consumption of food and beverages contributes to both individual and collective weight management challenges.  I don't think that's really disputable.  I mean, you know, weight is related, in part at least, to consumption.  It's also related in part to activity.  Everything plays a role.  I mean, I don't think anybody really should argue about that.

Another proposition is very simple:  the very activity that contributes to, you know, weight management problems is essential to human life.  And I think that differentiates it from a lot of other kinds of activities that have been the subject of the litigation system--tobacco smoking, you know, breast implants, although I think you might be able to argue for some folks that's essential in some ways.  A lot of other activities that are essentially voluntary, inessential in nature that have been the subject of extensive litigation I think can be differentiated from food and beverage consumption because they simply don't involve essential activities.

I think it is undisputable that obesity and weight problems, both for the society as a whole and for each individuals, are multi-factoral.  The data on--the economic data that we saw from the first panel on the societal issue I think clearly makes it very difficult to identify one, two, three, four, or even 20 causes.  There are a bunch of things that contribute.  And I would dare say that the same is true with respect to an individual.

At the same time, I think it is fair to say that, with respect to any individual, you can identify "but for" factors:  Had I done this rather than that, I would not have the same weight problem.  And I'm going to talk about some examples that--they will be presented humorously, but it is a serious proposition.

The final proposition that I think nobody can really argue with is food and beverage companies are in the business to convince consumers to purchase more of their products.  That's what they're there for.  It's the nature of the commercial enterprise.  So hopefully those are, you know, a starting point in terms of what we can look at and agree on.

Now, a plaintiff's lawyer--I don't know that this is the theory they've pursued or the way they think about it, but just to my own mind, I've laid out what I thought a plaintiff's lawyer might say with respect to a specific individual.  The lawyer might have a client who has obesity-related health problems that the legal system would recognize as compensable injuries.  There are folks out there like that.  There's no question about it.  There are a lot of people like that, more than I think any of us would hope that there are.

My client regularly consumed the defendant's product.  A single defendant, multiple defendants, again, undoubtedly a claim that could be made, undoubtedly true.  Had my client not consumed the defendant's products or consumed them in reduced quantities, I might not have that problem.  I'll put out a couple of examples of how that might be a credible case, but, again, I think that that's probably a proposition that somebody could assert with respect to individual clients and many a number of folks.

Now, this is the one that is obviously very fact sensitive, and reasonable minds can differ.  Again, I'm just going to take it as a given that, you know, there's a series of laws out there that regulate deception, false advertising, in some states, you know, unfair trade practices, a lot of conduct that's already subject to the sanction of the legal system.  And, undoubtedly, I think a lawyer could find a circumstance, valid or not, where he would accuse a food or beverage manufacturer of violating one of those legal principles.  You know, let's be frank.  Violations of those principles do occur.

So the final--you know, part of that would be a claim that, but for the misconduct of the client, the plaintiff would not have consumed the product or would have reduced their compensation in a way that would have obviated their obesity problem.

You know, that's sort of the simple way of putting, I think, what the argument might be for imposing liability in an obesity case.  And I think it's kind of a proposition that a lot of people would endorse.

Whether these allegations by themselves or these facts by themselves would amount to a claim the court would recognize as valid and would allow to go past a motion to dismiss I think is probably somewhat situational from jurisdiction to jurisdiction, depending on governing law, because I haven't put anything in here about, you know, detrimental reliance, I haven't put anything necessarily about scienter, I haven't put anything in here about causation.  I think these facts are fairly similar to the allegations that in the Pelman v. McDonald's case that was reinstated by the Second Circuit not too long ago.

And I look at all those things, and to me, where I get hung up is on the "but for" notion in the context of a multi-factoral situation, because the truth of the matter is every individual's obesity and weight gain is the product of an imbalance between calories in and calories out.  And the consumption of any specific product is not an inevitable source of an obesity problem.  The example I would give, which I think is fairly obvious, is Governor Schwarzenegger is about my height, he's about my age, I dare say he probably has consumed about 25 percent to 50 percent more calories over his lifetime than I have [inaudible].  To me, the consumption of food cannot fairly be stated to be the source of anybody's problem except in the context of the rest of their lifestyle, the rest of their physical activity, because, in fact, every level of caloric consumption can be offset.  And there are huge differences, as I think the first panel pointed out, in calories expended related to people's everyday lives and then to sort of their conscious decisions they make in terms of their leisure physical activity and how they make those judgments.

But the fact is that there are marginal activities with respect to every individual that could be identified as the source of an imbalance.  Let me give you an example.  I think these numbers are more or less right.  Don't hold me to any of them, but if an individual consumes one Big Mac per week instead of a salad, they will gain approximately 14 pounds per year.  I think those numbers are more or less accurate.

The question is, you know, does that mean that McDonald's is responsible or should be focused on as a potential source of liability for the fact that some people may eat not just one Big Mac a week but might eat five, maybe one a day.  Well, I'd ask the question--and, again, I'm going to be somewhat humorous about this, but, you know, is McDonald's the only place you could look.  And I'd look for other people I could target as a source of obesity litigation, and my favorite personally is Michael Moore because, you know, Michael Moore's movies are extremely entertaining, Michael Moore himself is a bit of a role model, and by my calculation a decision to watch one Michael Moore movie per week or any other movie as a substitute for a walk--I'm not talking about, you know, a 20-mile jog; I'm just talking about a brisk walk--actually results in the same amount of weight gain as the McDonald's Big Mac.  And don't forget the personal role model effect on top of that.

A movie that got a lot of attention and is kind of closer to--very close to, you know, a McDonald's situation is "Super Size Me," the Morgan Spurlock movie, and a person who chose to go to Morgan Spurlock's movie and had a large popcorn, no butter or beverage--so if you add that, the number would be greater--would be having the equivalent in terms of the caloric imbalance--again, look at the alternative of a brisk walk, rather than going seeing "Super Size Me"--of four Big Macs.

Now, let's get personal.  My own favorite candidate--and anybody would look at me and say, well, what's your problem?  I mean, there's a lot of them, and I certainly can list a lot of factors.  But personally I'm going to look across the table at my friend Mr. Greve.

[Laughter.]

MR. HAYNES:  My calculation is reading one lengthy Mike Greve article, including the mandatory and involuntary naps that go with it, per week would represent about 20 pounds per year.  And, trust me, if you haven't tried it, it is habit-forming.

So, in conclusion--and, again, this is humorous, but this is a serious issue and it's a serious public health issue.  I'm just focus specifically on the notion that attaching civil liability is an appropriate way to address it.  My conclusion would be:  "Stop him before he kills."

[Laughter.]

MR. GREVE:  Thank you, Tom.  I didn't actually know that some people actually read my articles.

Alison?

MS. REIN:  Good afternoon.  Thank you for inviting me to be here.  I actually am going to take a little bit of a different approach here because I don't want to focus in on one specific domain.  I'm going to try and talk about the entire epidemic problems and solutions in 15 minutes.  So if anyone remembers the old days of "Saturday Night Live," it's like five-minute college.  And I guess nobody remembers the old days of "Saturday Night Live."

First I'll start by just telling you a little bit about my organization.  I am the Assistant Director of Food and Health Policy at the National Consumers League.  We're the nation's oldest consumer advocacy organization.  We've been around since 1899.  And I personally work on food safety and nutrition and health care issues.

So I think that a number of people have alluded to sort of the context for intervention, so I won't take the time to review the scary statistics that we've all seen, although I will say up front that I do believe this is a real public health issue, a private health issue definitely, but when so large a portion of our country and other countries are affected by this, I'm not sure that you could still just call it a private issue.

I think more instructive than assigning blame for this problem is really just sort of a brief review of the factors that have contributed to it, and hopefully that will help us point to some potential solutions.

So one is what a lot of people called the social or built environment, and people have alluded to this already.  We live in an increasingly fast-paced, time-crunched, and automated society.  I don't think any of us expect it to change, and given that, we need to look for some solutions around that.

Access to healthy and affordable food is difficult for many populations, and that was a topic that was also raised earlier, particularly the fact that it tends to hit certain populations harder than others.  Also, the food environment, calorie-dense, nutrient-poor foods are usually much cheaper, faster, and easier to buy and prepare.  There was some notion of a percent of purchasing outside the home for meals, and actually the figure I've heard is somewhere in the 30- to 40-percent range.  It's not necessarily eating out at sit-down restaurants, but purchasing pre-prepared foods to bring back to the home.  And this sort of feeds into that.  And whole or non-processed foods that tend to be more nutritious really present few opportunities for marketing and advertising.  You don't see a whole lot of posters with an apple or a piece of broccoli.

I think there's also a communications environment to we have to consider.  It's my personal belief--and this is certainly an arguable statement--that marketing and advertising don't just respond to the free market, but they are actually a very effective means of stimulating consumer demand.  And I think this is especially true with kids.  I had the opportunity about a month ago to spend 48 hours with a two-year-old, and I don't think she can even say SpongeBob SquarePants.  But if you put that character on anything, she wants to eat it.  And it's just sort of the way it is.

Consumers have relatively little access, I think, to unfiltered, unbiased food and nutrition information.  There was a point raised earlier about NLEA, which was implemented in the early '90s.  Unfortunately, the education part of NLEA has never been funded, and so I'm not sure we can say right now that education doesn't work, because I don't think we've actually given it a chance.

The food label is one of the most important tools available, but it's not always--it's sort of imperfect at times, and it's not available in every type of commodity.  And messages from the government and other nutrition sources often get drowned out or are not available through the popular media.

So the field of play.  In the last year, I think we've seen multiple parties take steps to help address the obesity epidemic and some broader issues of nutrition.  There's a private sector response, federal agency response, legislative, academic research, and then consumer/consumer advocacy response.  And I don't mean to imply that those two are one and the same, and I'll talk about the difference a little bit later.

All of these parties, and probably others, I think will need to take significant action if we're to make a dent in this problem.  And it can either be voluntary or compelled so long as it happens.  And so I just thought we could go through and take a look at some of the things that have happened so far, particularly in the last year, as this sort of drumbeat has gotten louder.

In the private sector, with food retail, there's been some menu modifications.  There's been some addition of healthy alternatives.  I think one that we can point to is the McDonald's "Go Active! Happy Meal."  It was targeted to adults.  It was well packaged.  It was a salad, a bottle of water, and a pedometer.  It's on longer with us, unfortunately.

Portion-size reduction.  Some restaurants actually put a stake in the ground and said that they were going to reduce their portion sizes.  We saw the end of McDonald's supersizing of fries and drinks.  But, actually, a lot of restaurants, in response to consumer complaints, have now increased or expanded their portions sizes again to what they were previously.  And some chains actually--Hardee's specifically--have done the opposite, which, in the face of all of these different efforts to promote nutritional options, has just come out and said, You know what?  We don't really care.  We're giving you the biggest, gooiest, most bad-for-you food," and it seems to be working for them.

Reduction or elimination of trans fats.  I think as we move closer to having full implementation of the label in 2006, more and more people are becoming interested in doing this.  Some restaurants, such as Ruby Tuesday's, have gotten rid of this in their oil for frying, but McDonald's despite a 2002 pledge to do so, has stepped back from that promise, and so they actually still use trans fats.

In terms of nutrient disclosure, there's a lot of information available on the Web, sometimes in the restaurants via posters or napkins or tray liners.  But to a point that was raised earlier, it would be really nice if you could just know, because there has been study after study where nutritionists even have been asked to estimate the caloric content of a meal on a plate, and over and over again they underestimate the number of calories by two or three hundred.  So even people who are trained nutrition scientists don't even really know what they're eating.  I don't know that we can expect the same of the general population.

Promotion is an issue, ad campaigns linking consumption of certain products to healthy lifestyles, and I think Subway has been really successful in this.

At the manufacturer's side, we've seen more interest in reformulating products, reduced carbohydrate or sugar products, which I don't want to get into the whole carb frenzy issue, but I would also say that I'm not necessarily a huge fan of that craze from a nutrition perspective.  So some of these have benefits, others don't.

Fortified or enriched products, General Mills made a statement that they're going to be using whole grains in a lot of their cereals, but at the same time they launched a new, I think, chocolate Lucky Charms with marshmallows.  So I'm just not sure where they're putting their energy in terms of marketing these products.

Voluntary label and packaging modifications.  I think it's been alluded to that the FDA is working on this issue obviously a great deal, and they're sort of in this pilot mode with a lot of industry folks on the manufacturing side to see how much they're going to do, so that's what I mean by pilot.  And then reduced size of individual consumption containers is also something that we've seen.

Again, we've seen promotion and ad campaigns linking consumption of a product to healthy lifestyle.  The dairy industry has done a lot on this lately, and some voluntary advertising restrictions, Kraft's recent announcement that they would not advertise to children of a certain age.  And I will say that even with restricting advertising, there's still a lot of effective media, such as the Internet, cell phones, and video games.

The government response, I mentioned earlier a little bit about FDA and the Obesity Working Group effort, the new dietary guidelines.  There's some proposed rulemaking.  All of these, though, are really proposals.  Nobody's implemented any radical edicts that will affect the regulatory environment.

The only thing I'm going to say about the legislative response is that I'd like to point out that I think it's really interesting that we have two different things here:  one, whether you agree or not, actually does something to address the root problem, and another that in my mind doesn't do anything to address the root problem of obesity.  I would challenge anyone to take the position that banning lawsuits will actually get people to lose weight.

The research and advocacy response, I think there's a number of academic and other institutions that are trying to do more to examine this relationship.  Those are some that I've certainly seen.  I'm sure there's many, many more.

Consumer advocacy response.  We're not calling for paternalism, but we recognize that a reliance on the free market alone probably won't work since it hasn't worked for the last several decades.  And I'm not suggesting there are bad guys or good guys, but the fact remains that consumer welfare and long-term best interest is often at odds with at least the short-term corporate welfare.  So we're not saying restrict choice or tell people what they can or can't do.  But we do want to ensure more of a balance in the information availability and actively promote to consumers.  I think that that's--any person with an advanced degree or a lot of experience in marketing will tell you that it's not enough just to make people aware of something; you have to make them want or almost need something.  And I would say that the price of inaction is one that we all will pay with increased morbidity, mortality, and, again, this goes to the public health issue.

Really quickly--I know I've probably run out of my two minutes, but just a couple more.  What's wrong with the current model?  The stakes are really high.  The interests, at least in the short term, are divergent.  There's no carrot and sometimes the stick is wrong or too blunt an instrument, or sometimes it's just too small.  So I'm trying to look forward in how we actually can work on solving this, and I think one possible step is to enable federal agencies to make evidence-based policy changes, such as restricting food advertising to young children, which although there's some contention on this issue, I think there's some evidence to suggest that that might not be such a bad thing, requiring public meal programs to comply with the new dietary guidelines, and this would also mean providing state and local entities with the resources to do so, and enhance and enforce labeling requirements that are being implemented with rules by the FDA.

I'd also like to see us refocus on congressional action for identifying incentives for companies to adopt and promote healthier product lines and increase education and social marketing.  I think education can really work.  It's just about having the desire to do it.

Thank you.

MR. GREVE:  Thank you very much, Alison.

Ted Frank next.

MR. FRANK:  Thank you.  And, of course, I'm not speaking on behalf of my law firm or any of its clients.

Mr. Haynes did an excellent job talking about the underlying theories behind obesity litigation, so I'd like to build off of that and talk about obesity class-action litigation and its effects and where that might be heading.  I happen to be an obese-class-action litigator, and speaking with that personal experience, the causes of my obesity are genetics and spending too much time litigating and not enough time exercising, and probably my grandmother's recipes.  But that's more than just a flippant joke because it goes to the very nature of class-action litigation.  Class-action litigation is supposed to be a procedural device to aggregate claims where common issues predominate.  And as we can see, the causes of any individual obesity is a highly individualized issue--different genetics, different exercise patterns, different eating patterns, different choices.  And Mr. Haynes did an excellent job running through the possibility that it could all be through reading too many AEI papers.

So the natural conclusion of that is, well, you have all these individualized issues, the common issues don't predominate.  Therefore, the proper conclusion is the class-action mechanism is not the appropriate way to handle the obesity problem.  The danger we have is that some judges let the tail wag the dog.  As Richard Epstein has pointed out, what sometimes happens is there are judges out there who see the class-action mechanism as a means to do justice, and if the individualized issues predominate and make the class action impossible, the way to solve that is to not try the individualized issues and just have causation disappear from the case entirely.

This is a dangerous problem because then the litigation becomes one of the corporation supposedly did something bad, people were supposedly injured, and the critical link of tort law, causation, but for causation, never enters into the picture, and that's how we get $10 billion damages in Philip Morris litigation where the entire plaintiff class admits that they were not personally injured by tobacco.  And that is the underlying strategy behind the plaintiffs' bar and what they're seeking to do through lifestyle litigation, is to eventually get that big result, to find the judge who will do that.  And they'll have a lot of false starts along the way.  They'll lose a lot of cases along the way.  But they're hoping that somewhere along the way they'll get that victory.

In general, there is, I think you can describe it as sort of a Bell curve of judges out there.  Most judges are very conscientious and they follow precedent and they will do the right thing and they will look at these cases and they'll say individualized issues predominate or the causation issues falls out, or however, and they'll knock these cases out.

But there's a curve out there, and there are other judges out there who say, well, I want to do something about this issue, it's a huge public health problem, and I can solve it as a judge; but I'm not going to do it unless there's some precedent, I'm not going to be the first one out there to do that.

And then there are other judges who would be very happy to be the first one out there to do it.  And what happens is--and this is what happened in the tobacco litigation--you eventually get a sort of unraveling of the sweater, a sort of tipping point, where one judge opens the door and says, okay, I'll let this lawsuit go forward.  And then the other judges who were inclined to say let's do something about the problem, let's do something about this through class action but I need the precedent, they have the precedent and they jump on board.  And before you know it, the entire litigation playing field has shifted.  And it might be the case that legislation to prevent these sorts of obesity lawsuits won't prevent obesity or prevent public health problems or solve public health problems, but they'll solve a different problem, and that's the huge social costs incurred by these class-action litigations where effectively we have wealth transfers from consumers and stockholders to lawyers, with very little actual solution to the underlying problem.

Where is this now?  In general, the big cases have failed.  You may have heard the plaintiffs' bar talk about some successes in the obesity litigation and lifestyle litigation, and that's because there's sort of a mixing of three different kinds of lawsuits.  The first type of lawsuit I'll call the Seinfeld yogurt shop lawsuit, where you actually have a corporation committing some sort of consumer fraud.  They're mislabeling their product, they're actually out there saying, "Our product has no fat," when, in fact, it does have fat.  There's a big ice cream suit in Florida on precisely this issue.  And those suits aren't really obesity suits.  They're the run-of-the-mill suits, and they're getting grouped in with the obesity litigation.

You have other suits that are sort of the pinprick suits where Nabisco is going to remove trans fats from its cookies anyway.  They're getting sued over the issue.  They give some money to lawyers to go away, and everybody's happy that the market has moved on that issue.  The other types of suits you see sometimes are lawsuits against school districts.  Get your candy machines, get your soda machines out of the schools.  And those happened.  The lawyers get paid and then there's a thriving black market in the schools for the candy and Cokes that they can no longer get through the vending machines.

But then you have the third type of cases, that's the Pelman v. McDonald's cases, where you have the alleged class actions:  Your products caused me to get fat because I believed your advertising that it was really yummy and I could eat McDonald's every day.  And that's what we're seeing proceeding in New York.  What's going to happen there, the judge has already indicated that he's not inclined to believe these theories.  It will probably get thrown out on summary judgment at some point along the way.  But because the Second Circuit, through technical interpretations of the Federal Rules of Civil Procedure that we don't to go through here, has said that the complaint gets to move forward, that means the plaintiffs get to conduct discovery.  And what's going to happen is they're going to say to McDonald's, we want every bit of marketing information and study that you've done since 1987, and McDonald's is going to turn over seven million pieces of paper at a cost of millions of dollars.  And the plaintiffs are going to look through that and they're going to find the 30 or 40 pages out there that says Big Macs are addictive, or some low-level marketing person suggesting let's target young children, and say there's really a conspiracy here.  And that won't succeed in this lawsuit, but it might go forward in another one.

That's the sort of problem that lawsuit reform--that H.R. 339(?) is seeking to prevent, and it's already happening at a number of states levels.  There is, of course, federal legislation pending.

Are corporations scared?  Well, what we see is--we've heard in the medical malpractice arena the concept of defensive medicine, and I think what we've heard in the previous talk is some examples of defensive restauranting.  We're seeing McDonald's introduce healthful foods in an effort to say later on down the litigation line, see, we tried to do something about this, and they're spending millions of dollars promoting it, and then these products fall flat on their face or they lose money because they've stopped super-sizing, because at the end of the day, the consumers want to go to McDonald's or they want to go to Hardee's and get the giant thick burger, they want to go to McDonald's and have something other than a lukewarm salad.

So there may be regulatory and tax solutions out there, but whatever their benefits and costs, it's clear that this is not going to be solved through litigation, and that's a good reason why we should stop the social costs in the bud and pass litigation reform on the issue.

Thank you.

MR. GREVE:  Thanks a lot.

Finally, Richard Daynard.

MR. DAYNARD:  Thank you.  I'd really like to thank the American Enterprise Institute for sponsoring this very exciting work by Jonathan Klick demonstrating that differential taxation, something that actually has been raised in previous talks, would differential taxation make a difference, demonstrating that it would make a difference.  I also--just to put on the record, I basically second everything Alison has said.

On the issue of the definition of public health, which was sort of Jonathan's way out, how he could continue to keep his American Enterprise Institute credentials while actually doing some good science, his way out was, along with Tomas Philipson's, to make a  (?)  on the definition of public health.  But if you go to the public health community rather than perhaps the economic community to figure out what public health is all about, it's about the health of populations.  And the slides that we saw at the beginning that Todd Zywicki showed us demonstrate what's happening with the health of populations.  Well, we need the additional fact, which I think is also agreed, that the increase in obesity has also had drastic adverse health effects.  We can go into that if anybody has questions about it.

The question really is should we care about it, and one can take the position--I think it's a rather odd position to take--that I really don't care, I'm a great American patriot but I really don't care if the country is becoming sick.  You can take that position.  I don't find it attractive, and I think most people out there also don't find it an attractive position.

On litigation, I think there's a basic question for anyone who's worried about am I going to be a defendant.  The question is:  Have I done something to contribute to the obesity epidemic?  And, really, can I say that I've done what I can or my company has done what it can to stop being a part of the problem and to become part of the solution?  If the answer is yes, then you're not a very attractive defendant for plaintiffs' lawyers, and you're not very likely to be sued.  If you are sued, you're going to get out of the case very easily, and conversely.  So I think that's a little rule of thumb.

If obesity litigation is -- [tape ends].

I think it's also true that the discovery's going to make it more difficult if the discovery is only going to come up with some low-level marketing person's thing that had nothing to do with corporate policy.  That's not going to make litigation more effective.  What made the tipping point on the tobacco litigation was when it became clear that this was corporate policy.  The notion of McDonald's, for example, somebody who would eat five Big Macs a week, what kind of weirdo is that?  That's what McDonald's used to call their heavy users, and I think it was responsible for something like 40 or 50 or 60 percent, I forget what, of their income.

So I think the question really--and why was McDonald's so very eager not to get to the discovery stage which was what had been achieved until the second such reverse because I think the know I don't know what they have in their files, but I think a lot of the pressure behind this bill that the previous speaker was pitching is that these companies don't want, for very good reason, they know exactly what they have in their files, and they sure as heck don't want it becoming public.

I think the--so while I think these cases in the long term may have viability and along with them perhaps attorney general cases modeled after the tobacco attorney general cases, I think the more immediate horizon, we're dealing with cases that are--while there are a variety of possible legal theories, they tend to center around the state consumer protection laws, the unfair fair, deceptive act and practices laws, and these are laws that can be enforced both by state attorneys general as well as private attorneys in every state besides Iowa, and they have provisions that allow for recovery of attorneys' fees.

They also permit the cases to go forward typically as class actions.  They also allow not only for damages but for injunctive relief, in some circumstances for minimal damages per transaction so that you could show that, for example, a single sale that violated UDAP in Massachusetts I think there's a minimum penalty of $25 damages that can be assessed.  The question is can that be aggregated?  It may well be possible to aggregate it in either an individual or a group or a class action.

Now, what wasn't mentioned is--I'm sure some folks in this room helped out with the supposed Consumer Class Action Reform Act, an act that every consumer organization was opposed to and folks like the tobacco industry and others were absolutely delighted with and have been pushing a long time.  It moves these cases to federal courts, obviously, in general not as friendly a jurisdiction for plaintiffs.  It doesn't necessarily move every possible case, but it moves many of the cases to federal court, and that's clearly a hurdle that has to be considered in class action litigation.  You guys got it, so it's there.

I mean what are the kinds of cases that the types of cases that I think are particularly appealing, sort of at first blush, advertising to kids.  As Allison said, there are two sides to those statistics that you saw.  I think there's a lot of reason to think that advertising to kids, lots of very detailed studies that support the conclusion that advertising to kids both has increased and has also increased in effectiveness.  And use of Sponge Pants Bob as an example, tie-ins with program characters and so forth so that it's become that technology, if we're talking about technology improvement, the technology of marketing has clearly improved.  This is a great wonder of the late 20th, early 21st century, but there it is.

I think advertising high calorie density, low nutrition density foods to kids is an unfair and I think also deceptive act or practice.  I think Tom's little soda machines in schools, when the panelists or at least most of us I would say on the panel were going to schools, they actually didn't have it.  And guess what?  The schools were able to finance the education, they were able to pay for teams and so forth and so on.  It doesn't turn out to be absolutely true that it's a necessity that schools have soda machines there.  They're there.  There's very good evidence that for every additional soda that a kid drinks there's a 60 percent increase in his or her chance of becoming obese.  These are good, well-controlled scientific studies.

Deceptive marketing of foods to adults or whether for themselves or for their kids, you know, you pitch a cereal as containing all the necessary vitamins and minerals, that's a health claim.  It's not a micronutrient claim.  It's essentially a claim.  The seller obviously understands that claim will be read by, understood by the viewers as a claim that this is better for you.  If it's 50 or 60 percent sugar in the cereal it's not better for you.  Claims that foods are low fat when they may have less fat in the food but the fat calories have been taken out and high fructose corn syrup or something like that has been put in in its stead, so same number of calories, no less fattening.  This is substantively deceptive.

My guess is when you get into the files of the companies you'll find they did focus groups in their advertising and marketing agencies.  They did focus groups and surveys and so forth, and they know exactly how these are interpreted.  They know they are deceptive.

So I'm going to not take my last 45 seconds or whatever I have left, and I'm sure there will be lots of good questions.  Thank you.

MR. GREVE:  Thank you very much.  We'll move immediately to questions.  Michael Petrino has a microphone.  I'll call on you.  If you could kindly identify yourself by name and affiliation before asking your question.

QUESTIONER:  I'm the worst kind of questioner.  Bonnie Wachtel [ph], interested person who's been on a lot of diets in their life.

I didn't hear the first panel, so please rule this out of order if it was already asked.  With respect to the smoking health claims, you know, the public imagination is that smoking costs the society a lot, but in point of fact we know that although it may cost the smokers a lot, it's really a wonderful financial benefit to society because smokers die young.  I know Michael Greve is going to be making his contribution to the world in this respect.  And really, not only is it a financial benefit, it's almost a necessity these days for letting states balance their budget.

So my first question is:  does obesity fall into that category of public health problem, where the main cost is people are dying young, and if you balanced it out and took that into effect it wouldn't cost society anything?  If it does, I guarantee you, I've lost interest in the problem.  Let political do what they want.

Second quick question is:  you know, I have talked facetiously about dieting, but anybody who has faced the food issue knows if you're going to tackle this it requires will.  It's not just a matter of information and having fresh berries around.  One of the things I think was done to smokers is that there were penalties, financial penalties in terms of insurance and that sort of thing.  Well, if fitting into a bathing suit isn't something that's important to your life in terms of incentive, would you look at stick-type incentives in society as well as going to the corporations and trying to make them do what our own willpower and personal responsibility should be doing?

MS. REIN:  I think that to your first point, I'm not sure to what extent smokers are a financial boon.  I haven't really studies the economics behind that, but in terms of the obesity epidemic and the advances in medicine that we have, it's true that people may actually die, but we expend a heck of a lot of money on maintaining chronic long--and we call them chronic long-term conditions for a reason, and so diabetes, congestive heart failure, all of these fall into play.  So there's a direct expense associated with caring for those people.

And I would also say that there's an opportunity cost.  They're not just draining the health sector resources, but they're failing to contribute necessarily to their optimum level to our society, and I think that that's a cost that while difficult to capture is something we should consider.

To your second point, I think that there's been a lot of focus and emphasis on the individual, and I think that there is a place for individual responsibility in making reasonable choices, but I think that people are, some people in particular are very quick to rush to that as the sole solution, and what I think a lot of policymakers are trying to do is recognize that this is a huge issue.  There are many confounding factors associated with it.  And we can't just point to one thing and say "if you do this you'll solve the problems" because clearly if that were the case we would have addressed it already.

I don't know if that answers your question.

MR. GREVE:  Anybody else?  I actually have a question if nobody else does.

MR.          :  I could add on the smoking issue as to whether all governmental levels in the United States make win or lose  by people smoking.  Apparently it turns on what interest rate you assume.  So it's a close enough question there.

In terms of the state governments, I think they clearly lose because the pensions are generally Social Security, and money paid by the Federal Government.  So I think from a state government point of view, smoking is a costly operation.

If you just want to consider the point that Allison made, particularly about diabetes, there was a study published by CDC.  They released it on a Saturday.  The political will was obviously in the other direction, so that it got very little coverage, but of the children born in the United States in the year 2000, if current trends continue, well over a third will develop diabetes.  And if anybody knows anybody who has diabetes, you know what kind of disease that is not only in terms of expense.

I must tell you, once again I'll just put my moral where I stand, ethically and morally right out here.  I understand people disagree with it.  I think it's a bad thing if there are other people suffering even if it doesn't directly affect my pocketbook.  I understand I may be in a small minority in this room in thinking so, but I think I'm probably part of the majority in the country on this issue.

MR. GREVE:  Yes?

QUESTIONER:  If we're going to be talking about smoking and obesity, let's get the whole consolidated balance sheet.  Smoking cuts the other way.  So basically the cost of cigarette smoking in terms of obesity pretty well documented.  So if yo