Another Reason to Welcome High Gas Prices

Jacob Sullum | July 5, 2007

In a recent working paper, Washington University economist Charles Courtemanche finds a negative association between gasoline prices and obesity, supporting his hypothesis that paying more at the pump encourages people to walk instead of drive, which leads to weight loss. Courtemanche projects that a $1 increase in the price of gas would reduce the prevalence of obesity in  the U.S. by 13 percent, which he says would prevent 15,000 obesity-related deaths and save $16 billion per year. He also estimates that "13% of the rise in obesity in the U.S. between 1979 and 2004 can be attributed to declining real gas prices during the period." He therefore sees a "silver lining" in recent gas price increases, which have "the potential to significantly improve public health," and suggests that gas taxes should be set with an eye toward a slimmer America.

Using data from the Behavioral Risk Factor Surveillance System, Courtemanche finds that gas prices are correlated with self-reported exercise levels. Oddly, though, his measure is all forms of exercise, rather than the walking he posits as the cause of greater calorie expenditure. He suggests that "as people become accustomed to additional walking, physical activity becomes more pleasant for them, and they may increase other types of exercise." It seems at least as plausible that they would cut back on other forms of exercise, reasoning that they are already getting a workout by walking so much. It is also worth noting that Courtemanche's projection of health care savings seems to hinge on the assumption that excess weight per se is responsible for the diseases associated with obesity. Even assuming he's right, the savings amount to just 15 percent of the additional spending on gasoline that he estimates would result from a $1 increase in gas prices.

Maybe higher gas prices do affect how much people weigh. But using that connection as a rationale for raising gas taxes means overriding the preferences of people who would rather drive than walk, even if it means they weigh a bit more than they otherwise would. The same argument could be used to justify high taxes on labor-saving devices such as dishwashers, remote controls, and gas-powered lawnmowers, not to mention TV sets, video games, books, and other products associated with a sedentary lifestyle. Courtemanche takes it for granted that fining people for avoiding exercise, which is what taxing gasoline to encourage walking instead of driving effectively does, is an unobjectionable policy, provided it works. This approach, all too common in treatments of sloth, gluttony, and other "public health" issues, transforms what should be a debate about the value of liberty and the proper function of government into a technocratic discussion about which forms of social engineering are most efficient.

Comments

|7.5.07 @ 8:44AM|#

"a $1 increase in the price of gas would ... save $16 billion per year."

Unfortunately, since Americans consume 385 million gallons of gasoline per day, it would cost them over $140 billion per year.

That's a lousy return on investment.

thoreau|7.5.07 @ 8:48AM|#

Good post, Jacob.

The other problem with protecting people from themselves is that any issue can consume all others. Let's suppose, for the sake of argument, that helping people lose weight were a legitimate function of government. (Just for the sake of argument.) A few narrowly targeted programs that directly relate to obesity would then be OK.

But if every single issue facing government, from zoning to gasoline taxes to whatever else, gets considered under the obesity rubric, how will policy-makers come up with a gasoline policy that makes sense in terms of gasoline issues? The economic impacts of a gasoline tax will have to share the stage with something only distantly related.

I'm pretty sure Hayek would say that this is a good reason why government should only have a few issues on its plate, rather than every single issue under the sun.

|7.5.07 @ 9:08AM|#

Wait 'till we have our grand national healthcare system. You haven't seen lumping disparate issues under one heading until you see what Public Health funded by the taxpayer looks like.

|7.5.07 @ 9:10AM|#

He's stringing along alot of causality, but I welcome (free market driven) higher gas prices for another reason; less SUV's on the road. Use an SUV for what it was meant for, hauling lots of stuff and lots of people, not rush hour commuting and then trying to kill us that drive smaller cars.

I welcome $4 gas and the associated benefits.

|7.5.07 @ 9:16AM|#

Here's a novel approach: if we deem obesity to be such a problem that it demands a government program of punitive taxation, why not tax fat directly? Each and every American can (and should) be required to appear quarterly at a government weigh station to be weighed, and then charged a tax based some some calculation of that individual's variance from ideal body mass. Think of the health benefits to be derived from the cycles of fasting and bingeing which will accompany one's weigh-in date.

|7.5.07 @ 9:20AM|#

If obesity is an epidemic, then why can't doctors prescribe amphetamines?

CB

|7.5.07 @ 9:22AM|#

I'm not sure what Courtemanche is basing his assumptions on. Outside of large cities with good public transportation(for my part of the country that's pretty much NYC and Boston), I'm not sure that higher gas prices would result in increased walking, just decreased driving which doesn't necessarily translate to the same thing.

For instance, I'd be happy to walk to work and to the grocery store if they weren't 12 and 6 miles away.

|7.5.07 @ 9:24AM|#

So in other words, Jacob is endorsing taxes on labor, like income taxes and payroll taxes.

Well, no, not really, but if you're going to nix one type of taxation because it changes the cost of certain activities, you are saying that you think those taxes would be better raised elsewhere, from existing revenue streams.

We've got this thing called a government. Sorry about that. It costs money. Sorry about that, too. That money is raised in the form of taxes. Again, my bad. When given the choice of Tax A or Tax B, noting that Tax A would produce an incentive/disincentive system isn't enough to draw a conclusion.

|7.5.07 @ 9:27AM|#

To be clear, I think taxation on gas is a less bad revenue raiser than most other taxes I can think of. It is certainly better than a productivity tax.

|7.5.07 @ 9:29AM|#

Also, as far as the line, "It is also worth noting that Courtemanche's projection of health care savings seems to hinge on the assumption that excess weight per se is responsible for the diseases associated with obesity,"

it would seem a pretty valid assumption that the weight people lose because they're getting more exercise via walking does represent a genuine improvement in people's health. That weight loss would, if Courtemarche's assumptions about walking replacing driving are correction, represent the effects of greater exercise. Even if one believes that BMI is a bogus measure and some people can be quite healthy even carrying more weight than the FDA recommends, that doesn't change the fact that exercise does genuinely improve health. Heck, the 180 pound woman who goes to the gym four times a week for cardio-boxing is the poster child for the anti-BMI argument.

|7.5.07 @ 9:31AM|#

And what David said.

Walking or even biking can only replace a small fraction of most people's driving trips.

dhex|7.5.07 @ 9:35AM|#

yeah i hate cars and all and love to walk, but what i've seen of 'merica that's not really feasible.

even going to college on long island with no car involved stupid bus trips with multiple changeovers and a lot of walking in the rain at 3 am. also, long island cops are not known for their sense of humor and people who walk at night make them paranoid.

gas|7.5.07 @ 9:36AM|#

*urp

|7.5.07 @ 9:38AM|#

It's also possible that since both food and fuel expenditures come from a common source, higher prices for one might reduce the ability to purchase the other.

By spending more money on gas, we have less for food, therefore weight is lost.

|7.5.07 @ 9:47AM|#

By spending more money on gas, we have less for food, therefore weight is lost.

Ah, but the rub is that fattening foods are cheaper.

|7.5.07 @ 9:56AM|#

Hugh -
Except that more money spent on gay means less money spent on food, and the potential that the same amount of food is consumed but in poorer quality, which can result in weight gain.

Courtemanche has a problem here. While I haven't read the whole study (although I'd like to), it appears to me that he needs to do a follow up study with a related time variable. The effects of $4 a gallon gas, as many of you have pointed out, cannot possibly lead to a lot of people walking instead of driving in most places. There is absolutely no way that I can take the bus to work without it taking me an hour and a half, and requiring me to bike the last mile of it (in the rain/snow), while driving only takes 20 minutes. If it was financially feasible for me to take the bus at $3 (which it is), it would still be at $4... but that wouldn't make me any more likely to take the bus. The difference here is that he needs to look at effects of $4 a gallon gas in year y, year y+1, year y+2, year y+3, etc. I imagine you'd find a much larger change in peoples commuting habits if gas stayed at the high price for multiple years, and a resulting decrease in obesity rates when walking/biking/bussing to work increases. I, for example, would probably move closer to my place of work, possibly within walking distance. Bus routes might be altered because the clientele for whom riding the bus is an economic necessity/advantage suddenly increased and changed in demographic... what I'm saying is, effects that may not be available immediately may be more available in the future if the conditions remain the same. But that doesn't seem to be what he's measuring.

Oh, and boooooo on gas taxes for the sake of government control over peoples "sinful" habits. The only reason gas taxes should be increased is if they're going to be used to completely fund this overdeveloped behemoth of an interstate system in my own state so I don't have to fund truckers going through South Carolina or whatever, and I can drive on the road without fear of breaking my axel. Thanks New York!

|7.5.07 @ 9:57AM|#

Food amounts to 9% of Americans' spending, the lowest such figure of any monetarized society in human history. In the 1920s, it was nearly a quarter of all spending.

The idea that gas prices are cutting into people's ability to secure food is a reach.

Dave W.|7.5.07 @ 10:00AM|#

So in other words, Jacob is endorsing taxes on labor, like income taxes and payroll taxes.

Maybe he'd like to see more capital gains tax, instead, like I would. I wouldn't just assume that Mr. Sullum is one of those corporatarians who has it in for the working person.

|7.5.07 @ 10:00AM|#

Maybe higher gas prices do affect how much people weigh. But using that connection as a rationale for raising gas taxes means overriding the preferences of people who would rather drive than walk, even if it means they weigh a bit more than they otherwise would.

What Mr. Sullum forgets here is that gasoline is hardly priced on anything resembling a free market model. How much would a gallon be at the pumps if the cost factored in the huge amounts of military spending that goes into securing the oil fields of the Middle East?

This approach, all too common in treatments of sloth, gluttony, and other "public health" issues, transforms what should be a debate about the value of liberty and the proper function of government into a technocratic discussion about which forms of social engineering are most efficient.

Well, aside from the derisive manner in which public policy that one doesn't like is labeled "social engineering", it seems like a worthwhile discussion to me.

thoreau|7.5.07 @ 10:27AM|#

FWIW, I think taxing gasoline is a lesser evil relative to taxing certain other things. I just think that factoring obesity into our analysis takes us far afield, and pretty soon you're in a Hayekian nightmare of trying to solve every problem under the sun.

|7.5.07 @ 10:31AM|#

thoreau,

If we are going to collect X dollars in taxes, it would seem appropriate to look at the "externalities" - positive and negative - of different approaches.

I would tax Raquel Welch. Although I have the feeling she'd tax me.

thoreau|7.5.07 @ 10:38AM|#

joe-

Sure, looking at externalities is fine, I just think it's dangerous to go too far afield in your analysis. Once you go too far from the most immediate consequences, it's likely that you'll do so inconsistently when comparing different taxes. Go several steps of causation ("this causes something that causes something else that reduces the use of this thing that increases the use of that other thing...") when analyzing one tax, but stop after two steps of causation when analyzing another tax.

That's a Hayekian nightmare.

It's like when Shikha Dalmia said the Hummer was cleaner than the hybrid because she counted every drop of fuel used to grow the food eaten by the janitor at the engineering firm that designed a key widget for the Prius. (I'm only slightly exaggerating there.) But she didn't do the same for the Hummer.

thoreau|7.5.07 @ 10:38AM|#

Regarding Raquel Welch, Elaine Benes got beaten up on Seinfeld for walking in a manner vaguely reminiscent of Ms. Welch. Be careful.

Fluffy|7.5.07 @ 10:39AM|#

It seems a bit absurd to spend billions on road infrastructure and spend decades using zoning laws to force development [particularly commercial development] built around the concept of the parking space and then get mad when people drive instead of walk.

If you live in any place developed after 1950, it's not feasible to walk for typical household errands, no matter WHAT the gas tax is. If you live in a place developed before 1950, it IS feasible to walk, and people do it whether gas prices are high or not. The people being driven to walk by the gas tax are a very small part of the population who have the discretion to walk but don't.

How about before we start punishing people with gas taxes because they use our residential and commercial spaces the way a-hole planners WANTED THEM TO, we experiment with undoing the development regime that created the problem in the first place?

|7.5.07 @ 10:40AM|#

This approach, all too common in treatments of sloth, gluttony, and other "public health" issues, transforms what should be a debate about the value of liberty and the proper function of government into a technocratic discussion about which forms of social engineering are most efficient.

Umm... This hardly makes sense to me, Mr. Sullum. What exactly is it that should be a debate about the value of liberty and the proper function of government?

The study? Hardly. The study should be about what the study is about, and there is nothing contradictory about admitting that the results of the survey may be valid (though again, I haven't read the whole thing), even if his recommendations aren't of our taste.

I really don't get what you meant. Poor writing that reeks of rhetoric and pulling at emotional heart-strings. It looks like it belongs in a stump speech, not in a review of a (probably) legitimate econometric study in a magazine that largely preaches to the choir.

|7.5.07 @ 10:43AM|#

Dave W.

"Maybe he'd like to see more capital gains tax, instead, like I would."

Did you consider that capital gains from corporations derive from retained earnings, which are already taxed? Similarly divedends derive from post-tax earnings.

However, to throw you a bone, I'm all fine with taxing interest income, since corporations deduct interest payments from their taxable income.

Basically, I believe that if you're going to tax income, you should aim to tax all income only once at the same rate to avoid distorting the productive economy.

|7.5.07 @ 10:57AM|#

Umm... This hardly makes sense to me, Mr. Sullum. What exactly is it that should be a debate about the value of liberty and the proper function of government?

In the classic "preaching to the converted" style, Sullum is telling us that the proper function of government is already decided and thus needs no further debate.

Dave W.|7.5.07 @ 11:03AM|#

Did you consider that capital gains from corporations derive from retained earnings, which are already taxed? Similarly divedends derive from post-tax earnings.

I would be willing to displace income and payroll taxes with an increased tax on retained earnings. It doesn't matter to me how many stages it takes to get the taxes out, just so long as income and payroll taxes get displaced in the end.

I am also willing to displace income and payroll taxes with military spending cuts.

I am also willing to displace retail sales taxes with drastic cuts to expenditures on police.

I have considered lots of things and support many!

Fluffy|7.5.07 @ 11:10AM|#

"In the classic "preaching to the converted" style, Sullum is telling us that the proper function of government is already decided and thus needs no further debate."

Actually, he's saying the reverse.

You would not bother conducting the above study unless you had already decided that using taxation to attempt to control people's weight was an acceptable public policy. It is Courtemanche who has decided that he knows what the proper function of government is, and now merely wants to study which taxes produce the desired outcome. It is Sullum who wants to re-debate the question of appropriateness as part of every public policy discussion.

|7.5.07 @ 11:11AM|#

Dividends are paid from the corporation to the stockholders, just like wages.

And until I see stockholders going to prison upon the conviction of a corporation for violating the law, I'm not buying the argument that corporation and its stockholders are one and the same.

|7.5.07 @ 11:13AM|#

More taxes on attorneys' income would be nice.

|7.5.07 @ 11:15AM|#

Joe, welfare payments are paid just like wages too.

Rhywun|7.5.07 @ 11:19AM|#

Except that more money spent on gay means less money spent on food

Tell me about it.

|7.5.07 @ 11:21AM|#

Finkelstein, did you think you had a point?

|7.5.07 @ 11:25AM|#

You would not bother conducting the above study unless you had already decided that using taxation to attempt to control people's weight was an acceptable public policy. It is Courtemanche who has decided that he knows what the proper function of government is, and now merely wants to study which taxes produce the desired outcome.

I could have missed it, but I didn't see anything about Courtemanche proposing additional tax on gasoline. It may simply be the case that he was curious as to whether people will walk more as it becomes more expensive to drive.

Fluffy|7.5.07 @ 11:32AM|#

That's fine, Dan. Perhaps Courtemanche is merely curious. That's commendable in anyone.

Your statement about Sollum is still wrong, though.

|7.5.07 @ 11:32AM|#

I agree, Dan. Fluffy, it's not necessary to have an underlying policy in mind before you conduct a study to see what the effects of something might be. Maybe the study was conducted for a completely separate purpose and he merely found something to be more significant than he thought he would. Maybe, as the title of the article says (and then complains about....???), the study could be used as an agent against the freakazoids who think the government needs to "do something" about high gas prices.

The Wine Commonsewer®|7.5.07 @ 11:50AM|#

I'm a markets guy but there really isn't anything about higher gas prices that I welcome.

As to preferring to walk, it is nine miles from here to the nearest point of civilization and it was 95 degrees yesterday. Yeah, I'm walking.

OTOH, I do walk almost every morning with the dogs. About a mile and a half. And where I live that's uphill both ways.

This kind of individual choice and the reasons behind the choices people make seems to be completely lost on people like Courtemanche. You know, the folks with all the answers.

|7.5.07 @ 12:01PM|#

joe:

"Dividends are paid from the corporation to the stockholders, just like wages.

Actually joe, dividends are not paid at all like wages. Wages are paid out of pre-tax income... meaning that the corporation deducts all wages from its gross earnings before paying taxes on net income. Wages are taxed only once in the hands of the recipient.

Dividends are paid out of post-tax income, and are taxed twice - once in the hands of the corporation and again in the hands of the recipient. The two are quite different.

Where it gets complicated is that individuals are taxed progressively, while corporations pay a mostly flat tax. The various permutations of individual income tax brackets, long & short term capital gains, dividend and corporate tax rates result in all sorts of complicated corporate structuring to minimize taxes (junk-bonds, income trusts, stapled-units, etc...). Tax structuring alone is probably half of what keeps investment banks in business.

"And until I see stockholders going to prison upon the conviction of a corporation for violating the law, I'm not buying the argument that corporation and its stockholders are one and the same."

Non-sequitur. Should employees be sent to prison because the evil corporation didn't pay taxes on it wage expenses?

|7.5.07 @ 12:27PM|#

To make that last comment a little more clear...

Should employees be held liable for their employer's misdeeds because their wages are only subject to taxation once?

Or to put it another way, it doesn't follow why limited legal liability and double taxation should go hand-in-hand.

|7.5.07 @ 12:28PM|#

"I would be willing to displace income and payroll taxes with an increased tax on retained earnings."

And would you be willing to call it the "success tax?"

Dave W.|7.5.07 @ 1:20PM|#

And would you be willing to call it the "success tax?"

I would call it the-rich-man-pays-for-the-army tax.

I would also call it the the-way-we-taxed-before-WWII tax.

I would also call it the-best-way-to-get-government-spending-cut tax.

I would also call it the thanking-the-people-who-made-my-success-possible tax.

Anyway, it is probably best to make it a tax on corporate earnings, and to make the rate proportional to the value of the company. THen bigness would just be not-badness, but rather it would become taxalicious goodness. And corps would lobby for cuts in favor of subsidies.

poco|7.5.07 @ 1:41PM|#

Heh. Mr. Courtemanche's name means "short sleeve". (No, I don't have a point.)

Edward|7.5.07 @ 2:46PM|#

Even when the market fails and a major depression ensues, it's all for the best because in a depression, people eat less and lose wieght. Find making ends meet stressful? Worried about a bankrupting illness? No problemo. Stress and worry reduce waist lines.

Fluffy|7.5.07 @ 3:23PM|#

Dave, the real problem[s] with a tax on retained earnings are:

1. It would bias the market incredibly in favor of mature oligopolies. You're a union guy, I know, so maybe that's what you secretly want or something, but a tax on retained earnings essentially means that mature, well-capitalized companies would be effectively protected from competition by companies that are retaining earnings to grow.

2. It would dramatically increase the power of investment bankers above even its current elevated level, since if you were a small company running up against the structural obstacle outlined in #1, the only way around it would be to increase your capital base by going to the stock or bond markets.

#1 and #2 in combination are a recipe to vastly empower the existing wealthy and allow them to entrench their positions against entrepreneurs and the upwardly mobile. No one will be allowed to compete with existing players without paying a stiff tax penalty first and/or paying a hefty fee to gatekeeper bankers and hanging off equity slices to the already-wealthy.

e|7.5.07 @ 8:40PM|#

Wine Commonsewer, you are a markets guy but you don't welcome high gas prices, and there's no reason why you should. However, would you be willing to sacrifice a trillion dollars in tax dollars and thousands of lives to keep gas prices from rising? There are many such people, apparently, although the number seems to be dropping as the cost in blood and treasure increases without apparent bound.

|7.5.07 @ 10:30PM|#

No company has ever paid any taxes. The customers of the company pay the taxes, just like they pay the light bill and the rent.

thoreau|7.5.07 @ 11:27PM|#

KenK, by that same logic you've been self you've never paid any taxes, unless you've been self-employed. Your employer has paid them.

Do you see the problem with that logic?

|7.6.07 @ 1:20AM|#

Thank you thoreau,

You've just provided yet another reason for me to continue believing that you're the single most reasonable individual here at reason.

|7.7.07 @ 4:16PM|#

I've only driven my car during one week this year. I've traveled by bicycle or walking the rest of the time. If gas was free, I'm sure that I would have driven more.

I do see more people walking and carrying bags from stores more than I used to.

For most people the convenience of a car trip outweighs the added cost from rising gasoline prices, but for some longer travel time is worth the money savings.

Its a lot like cigarette prices. As prices do up (compared to wages), the number of people smoking drops.

|7.9.07 @ 5:13PM|#

I'm the author of the paper in question. I appreciate the interest in my topic, but I'm afraid my findings are being a bit misinterpreted. I did not intend to imply that additional gasoline taxes would be beneficial for society, just that additional gasoline taxes would reduce obesity. Whether the net impact on social welfare would be positive or negative is well beyond the scope of my paper; I mention that as being a possible direction for future research.

Also, I want to comment on why health economists generally feel that some policy intervention is necessary regarding obesity, despite the fact that eating and exercise are personal choices. Classical economic theory suggests that welfare is maximized by staying out of people's way UNLESS one of several conditions, known as "market failures," applies. One of the most common market failures is an externality, which is where your action affects others. For example, this is why we have cigarette taxes ... secondhand smoke creates a negative externality, so without government intervention the social optimum will not be reached. With obesity, the most obvious negative externality is medical expenses. Because of public insurance (Medicare and Medicaid), the medical expenses of obese people are often paid for by taxpayers. For people with private insurance, their medical expenses increase everyone's premiums. In short, then, the argument that weight is a personal choice and should not be interfered with breaks down because of our insurance system. Other market failures that may apply to obesity are addiction and lack of perfect information, but this externality is the one most frequently discussed in the literature.

Again, that doesn't necessarily mean the gas taxes are the best policy, just that SOME obesity-reducing policy is probably appropriate.