Tomas Philipson

The Long-Run Growth in Obesity as a Function of Technological Change

This paper analyzes the forces contributing to the worldwide long-run rise in obesity and the role of public interventions in affecting its continued growth. A growth in obesity in a population must result from the growth of calorie consumption outpacing the growth of physical activity. Yet historically in developed countries, obesity has grown with modest rises in calorie consumption and with a substantial increase in both exercise and dieting. We consider the economic incentives that give rise to the long-run growth in obesity by stimulating intake of calories at the same time as discouraging the expending of calories on physical activity, whether in work or leisure. We argue that technological change provides a natural interpretation of the long-run growth in obesity, that it predicts that the effect of income on obesity changes from positive to negative with economic development, and that it implies that technological change may not continue to raise weight. We discuss the positive and normative impacts of direct and indirect public interventions to reduce obesity.

The growth of obesity and technological change.

This paper presents a dynamic theory of body weight and develops its implications. We argue that technological change has induced weight growth by making home- and market-production more sedentary and by lowering food prices through agricultural innovation. In addition, we illustrate that, while exercise and food intake are complements, reductions in exercise will always raise optimal body weight, as will increases in food intake. We also characterize how body weight varies with income, both within a country, and across countries. Within a country, income may have an inverted U-shaped relationship with body weight, due to the offsetting effects of the demand for food, and the demand for an ideal body weight. This can have important implications for the body weight impacts of public transfer programs. Across countries, however, mean weight is likely to be higher in richer countries. Finally, we present descriptive empirical evidence that illustrates the inverted U-shaped relationship between body weight and income in US males, and suggests the importance of secular trends in weight gain, which are consistent with the impacts of broad-based technological changes.

Welfare-Enhancing Technological Change and the Growth of Obesity

There has been concern about the dramatic growth in obesity seen in developed countries. This paper advances the view that a neoclassical interpretation of weight growth that relies on changing incentives does surprisingly well in explaining the observed trends, without resorting to psychological, genetic, or addictive models. Although the recent rise in obesity has attracted attention, weight growth is not a recent phenomenon (Dora Costa and Richard Steckel, 1995). Weight has been rising consistently over the past 150 years, particularly during the immediate post-World War II period. As Figure 1 illustrates, the secular growth in weight has been accompanied by modest growth, or even declines, in calorie intake (Judith Jones Putnam and Jane E. Allshouse, 1999). This suggests the importance of both rising food intake and declining physical activity. The calorie and weight trends have coincided with a decline in the relative price of food, of around 0.2 percentage points annually, from 1950 to 2000 (Lakdawalla and Philipson, 2002). To explain these trends, this paper argues that welfare-improving technological change has simultaneously lowered the cost of calories and raised the cost of physical activity by making agricultural production more efficient and work more sedentary. When home or market production involves manual labor, the worker is paid to exercise; in advanced economies, people pay to exercise, primarily in terms of forgone leisure. Leisure-time exercise, such as jogging or gym activities, must be substituted for jobbased exercise. Technological change on both the supply side (through agricultural innovation) and the demand side (through more sedentary household and market work) lead to weight growth, falling relative food prices, but ambiguous food consumption trends, because both food supply and demand fall. Welfare-enhancing technological change also has new implications for the effect of income on weight. Growth in earned income that results from more skilled, sedentary work raises weight, even though growth in unearned income might raise the demand for thinness. This helps explain why richer people are thinner than poorer people within countries where workplace technologies are more uniform, even though richer and more technologically advanced countries are fatter than poorer ones. This theory also produces different implications for price than its competitors, such as a change in the psychology of food consumption, growth in the demand for fast food, genetically induced eating, or changing social norms. These alternatives emphasize rising demand for food, which implies rising food prices. We develop the implications of the idea that economic progress (as income growth, food price declines, and sedentary work) leads to weight gain when people behave efficiently. To make concrete the point that obesity is a side effect of progress, we offer an empirical example of how lower food prices (a result of technological change) improve nutrition. Objective blood-test-based data suggest that lower food prices correlate with markedly improved nutrition in the United States. This relationship is often expected for developing countries, but less so for developed ones. Our results suggest the difficulty of improving welfare by “rolling back” obesity to earlier levels, because obesity is a side effect of welfareenhancing progress. The case of food prices and nutrition bears this out: raising food prices through taxation may reduce weight (cf. Marion * Lakdawalla: RAND Corporation, Santa Monica, CA 90407; Philipson: Harris School of Public Policy, University of Chicago, Chicago, IL 60637; Bhattacharya: CHP/ PCOR, Stanford University, Stanford, CA 94305. Lakdawalla thanks NIA for support (P30AG024968-01). 1 See Philipson and Richard Posner (1999) and Lakdawalla and Philipson (2002) for elaboration of the discussion here.

Old-Age Longevity and Mortality-Contingent Claims

This paper analyzes the savings and longevity impacts of mortality‐contingent claims, defined here as income measures, such as annuities and life insurance, under which earned income is contingent on the length of ones life. The postwar increase in mandatory annuity and life insurance programs, as well as the rapid increase in the life expectancy of older ages, motivates a better understanding of the incentive effects that mortality‐contingent claims have on longevity‐related behavior. We claim that these incentives in often alter the standard conclusions obtained about old‐age support when mortality is treated exogenously. In particular, we argue that annuities involve moral hazard effects that increase longevity and, among other things, introduce a positive interaction between public programs for health care and income support for the elderly‐programs that have grown enormously in developed countries

Rational Epidemics and Their Public Control

This paper studies an economic model of the dynamic spread of an infectious disease, contrasting its implications in terms of the occurrence of the disease itself, as well as the effects of public health interventions, with those of mathematical epidemiology. Copyright 1996 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

The Responsiveness of the Demand for Condoms to the Local Prevalence of AIDS.

This paper investigates the degree to which the local prevalence of AIDS increases the demand for disease-preventing methods of contraception among young adults. Using data from the National Longitudinal Survey of Youth (NLSY-1979), we find substantial evidence that the use of condoms was quite responsive to the prevalence of AIDS in ones state of residence, and this responsiveness has been increasing over time. We present both cross-sectional and longitudinal evidence estimating that a 1 percent increase in the prevalence of AIDS increases the propensity to use a condom significantly and up to 50 percent for the most prevalence-responsive groups. Our findings lend support to the existence of a self-limiting incentive effect of epidemics-an effect that tends to be ignored in epidemiological theories of the spread of infectious diseases.

Labor Supply and Weight

We use panel data from the National Longitudinal Survey of Youth to investigate on-the-job exercise and weight. For male workers, job-related exercise has causal effects on weight, but for female workers, the effects seem primarily selective. A man who spends 18 years in the most physical fitness-demanding occupation is about 25 pounds (14 percent) lighter than his peer in the least demanding occupation. These effects are strongest for the heaviest quartile of men. Conversely, a male worker spending 18 years in the most strength-demanding occupation is about 28 pounds (15 percent) heavier than his counterpart in the least demanding job.

The Rise in Old-Age Longevity and the Market for Long-Term Care

This paper analyzes how markets for old-age care respond to the aging of populations. We consider how the biological forces, which govern the stocks of frail and healthy persons in a population, interacct with economic forces, which govern the demand and suppoly for labor-intensive care. Many economists have argued that aging will raise the market demand for long-term care, and hence price and quantity through classic market effects. We argue that the direct effect of aging is to lower the demand for market care by incresing the supply of home production. By influencing the length of frail lifetimes, aging may also have a further indirect demand effect, which may reinforce or counteract the direct negative demand effect. By providing healthy spouses, the marriage market provides care-givers for home production of long-term care; therefore, growth in old-age longevity may lower the demand for market production. Growth of elderly males serves to contract the long-term care market becuase it eases the scarcity of men in the old-age marriage market; growth of females serves to expand market care because it worsens the scarcity of men. These predictions lend themselves to an interpretation of the rapid deceleration in output growth that has taken place in the US over the last two decades, despite a constant rate of longevity growth and enormous growth in demand subsidies: since growth in elderly males has risen dramatically relative to growth in elderly females, the rate of long-term care growth has slowed significantly. We test our predictions empirically using state- and county-level evidence on the US market for long-term care in nursing homes over the last three decades. The evidence provides support for our predictions concerning the response in output growth to aging and the contraction of output due to the aging of males.

Industry funding of the FDA: effects of PDUFA on approval times and withdrawal rates.

The development of new therapies is a crucial component of efforts to improve healthcare. Because drug development and FDA regulatory review have historically been lengthy and costly processes, the US Congress passed a series of legislative acts, beginning in 1992, known collectively as the Prescription Drug User Fee Acts (PDUFA), which sought to expedite the FDA drug-review process. Here, we review data on drug approvals and drug-approval times, both as a whole and by therapeutic class, which demonstrate that implementation of the PDUFAs led to substantial incremental reductions in approval times beyond what would have been observed in the absence of these legislative acts. In addition, our preliminary examination of the trends in the number of new molecular entity withdrawals, frequently used as a proxy to assess the FDAs safety record, suggests that the proportion of approvals ultimately leading to safety withdrawals prior to PDUFA and during PDUFA I and II were not statistically different.

Cost-effectiveness analysis and innovation

While cost-effectiveness (CE) analysis has provided a guide to allocating often scarce resources spent on medical technologies, less emphasis has been placed on the effect of such criteria on the behavior of innovators who make health care technologies available in the first place. A better understanding of the link between innovation and cost-effectiveness analysis is particularly important given the large role of technological change in the growth in health care spending and the growing interest of explicit use of CE thresholds in leading technology adoption in several Westernized countries. We analyze CE analysis in a standard market context, and stress that a technologys cost-effectiveness is closely related to the consumer surplus it generates. Improved CE therefore often clashes with interventions to stimulate producer surplus, such as patents. We derive the inconsistency between technology adoption based on CE analysis and economic efficiency. Indeed, static efficiency, dynamic efficiency, and improved patient health may all be induced by the cost-effectiveness of the technology being at its worst level. As producer appropriation of the social surplus of an innovation is central to the dynamic efficiency that should guide CE adoption criteria, we exemplify how appropriation can be inferred from existing CE estimates. For an illustrative sample of technologies considered, we find that the median technology has an appropriation of about 15%. To the extent that such incentives are deemed either too low or too high compared to dynamically efficient levels, CE thresholds may be appropriately raised or lowered to improve dynamic efficiency.