Fighting the externalities of sugar

New York Mayor Michael Bloomberg, or The Nanny as his detractors like to call him, has lost a round in his battle to make New Yorkers lighter — and so less of a burden on the public health system and the fiscus – by limiting the size of SSD servings in most of the city’s stores, bodegas and restaurants to 16 fluid ounces (500ml) or less.

SSD is short for sugary soft drink and how the New York Health Department abbreviates non-diet Coke, Pepsi and their ilk. The trim billionaire founder of the financial news service that bears his name wishes to mitigate what he sees as the negative externalities of the SSD business – obesity-related diabetes and other preventable illnesses – and the costs they impose upon society.

Comes Justice Milton Tingling of the State Supreme Court in Manhattan last week to thwart him.
Bloomberg’s proposed regulation, said Tingling in granting the interdict sought by the American Beverage Association and others, was “arbitrary and capricious”, violated the separation of powers and “would need an administrative Leviathan” to enforce.

The mayor has appealed. Whether or not his appeal succeeds, he has focused attention on an important question: should government deter people from making bad personal choices and if so how and under what circumstances?

From agribusiness giants like Archer Daniels Midland who produce high fructose corn syrup (the primary US sweetener), to owners of SSD brands and formulae like Coca Cola, to bottlers, distributors, retailers, restaurants and convenience stores , to the fledgling entrepreneur selling drinks from a cooler by the side of the road — everyone in the SSD value chain wishes to maximise sales of a perfectly legitimate product for which there is a perfectly legitimate market.

No one is deliberately trying to make the consumer overweight, or increase her risk of diabetes, cancer or heart disease, nor will the product have such effects if used in moderation. Trouble is, SSD’s often aren’t used in moderation. They are, after all, carefully designed and marketed to be craved.

So it is hardly an unforeseen consequence that people will drink more than is good for them or without first having a plan to work off the 140 or so calories in each 250ml serving. Coke now openly admits as much with an ad campaign suggesting ways consumers can burn off those calories.

Most Americans would agree with John Stewart Mill that “the only purpose for which (state) power can can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others. His own good…is not a sufficient warrant.”

Alcohol is regulated because an inebriated person can be a danger to others. But things go better with Coke, don’t they? That’s what the ads used to say, at any rate. Bloomberg and his health department have a different story.

They point to city’s latest community health survey which they say shows a clear correlation between SSD consumption and obesity. At one end of the scale, in the Bedford Stuyvesant neighbourhood, the adult obesity rate is 33 per cent and 47 per cent of adults reported drinking one or more SSD’s a day. At the other, on the Upper West Side, home of Tom Wolfe’s social X-rays, only 12 per cent are obese and only 14 per cent indulge in one or more SSD’s.

Overall, 23.7 per cent of New Yorkers were officially rated obese in 2011. Obesity increases the risk of diabetes and a host of other serious conditions. One in eight New Yorkers – up to 700 000 — is diabetic. A person with diabetes in New York can expected to incur $6 649 more a year in medical costs than a person who does not suffer from the condition.

And there’s the rub. The high incidence of obesity and related health problems is overwhelmingly among lower income New Yorkers the cost of whose treatment is borne by the public, contributing to fiscal deficits, consuming resources that could otherwise be spent on education and infrastructure, and putting upward pressure on insurance premiums for those who have to pay them.

Would capping the permissible size of an SSD serving reduce consumption? Behavioural science says it’s possible. Choices are strongly influenced by the way the choices are framed. In a typical US convenience store, a litre cup of Coke will always cost much less than twice a 500ml cup and so will look like a great value. That alone will convince many consumers to pick the size that will supply half the calories they need for a whole day. Anything smaller will not be such a deal, a cheat almost.

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