 Okay everybody, we're going to get started with the next one, if I could get your attention here. So next up we have James Woodward and he's going to be doing, James Woodward is going to be doing the role of institutions and rationality. Can I get everyone's attention? Quiet please. Okay, so we're going to have up next is James Woodward. His presentation is the role of institutions and rationality in the emergence of an obesity epidemic. And James Woodward is a doctoral student in the Martin School of Public Policy and Administration at the University of Kentucky. And his research interests include policy analysis, behavioral economics, and nutrition policy. Thanks. Hi everybody, I'd first like to thank the organizers for putting this event together and allowing me to present. My name is James Woodward and I'm a PhD candidate in public policy, as she said. I hope that by the end of this talk I can convince you all that aspects of economic theory, including rationality and institutions, can add to our explanations for the origins of the obesity epidemic in the United States. Although my analysis is mainly informed by the American context, we being pioneers in this regard, I believe it could also be applied to other nations as well. So this slide gives some indication of just how complex the world of dieting may appear to consumers. I pulled these words and terms from last year's AHS program and added some prevalent terms from more conventional points of view. It is by no means an exhaustive list. It does make one wonder how anyone is able to make eating decisions at all. Before going any further, I should point out that I have little to no training in nutrition, medicine, or public health. I did, however, lose a great deal of weight by following a high-fat, low-carb, paleo-inspired diet while liberally applying the 80-20 principle. But I do not intend to advocate for that or any other dietary strategy to alleviate obesity. I'm inclined to agree with Joan Rivers, who once said diets like clothes should be tailored to you. The question I wish to address is, how do we understand an obesity epidemic as a market outcome resulting from the behavior and choices of rational agents, that is, consumers? This may sound like a naive or obtuse question, but I hope to show why this is a reasonable starting point for my analysis. So this graph shows what we're dealing with and how quickly we got here in case anyone was unaware. And here's a state-by-state breakdown. My home state and the state I'm living in now are not doing quite as well as California, as you can see. But as you can see, obesity is associated with a number of far more serious health conditions and is a significant driver of health care costs. These are the reasons policymakers and the public at large ultimately care about obesity. They also provide some preliminary evidence that there may be a further role for public policy to play. So many of the talks at AHS have been concerned with the sometimes controversial relationships between diet and health and individuals, including obesity. While such work is obviously important and needed to explain an epidemic, we need more. Social phenomena require explanations at the population level and as a result, fairly strong assumptions about individual behavior. Given the extent of this controversy, a good explanation for an obesity epidemic should be general enough to incorporate risk and uncertainty about these relationships. We should prefer a general framework for understanding and explaining market behavior until some of these questions are settled. One that is robust to our potential changes in our understanding of the relationships between diet and health, including obesity. So my goals for this talk are the following. Briefly summarize the dominant perspectives from public health and economics, which are widely accepted and applied in the literature. Point out the insights and limitations associated with each. Provide some additional economic terms and concepts, as well as the relevance to this market. Explain and walk through my own model and its implications and wrap up with some concluding remarks and hopefully some questions from you guys. So in public health, the focus is on the toxic food environment and how it impacts our purchasing decisions. The primary insight here is that healthy choices are not automatic and are made difficult by an environment filled with unhealthy choices and producers who are not necessarily economically motivated to optimize their customers' health. And they may use misleading advertising, labeling, and mis-marketing practices. As someone with a background in economics, I'm inclined to ask a couple of questions. Where did this environment, that is the market for food, come from? We as humans have a great deal of control over our environment and are generally considered pretty intelligent. Why make it a toxic one? Further, how does the individual actually deal with this environment? Before I get into the economic approach, I'm going to throw a bit of economic jargon at you. So try to stay awake. First off, a model is a necessary simplification of reality. It focuses our attention on the most salient aspects of a problem and importantly allows for statistical analysis and hypothesis testing. As I said earlier, public health models tend to focus on the environment. Economists tend to treat individuals as rational, meaning they are goal-oriented and capable of ranking their choices based on their preferences and the total prices of goods, including the health costs. Methodological individualism is an approach in economics which says that any explanations for social phenomena should be intelligible from the perspective of a rational agent. A utility function is simply a mathematical translation of your preferences. More utility is better, all else equal. Finally, an opportunity cost is the cost to you of doing what you're doing versus what else you could do with your time or money. So with that out of the way, based on my reading of the literature, economists tend to argue that our environment is actually a reflection of the individual preferences of rational agents who are maximizing their total utility given their alternatives and dietary knowledge. In short, obese consumers either don't know how to avoid obesity and or they don't care enough to do anything about it. The insight here is that not everyone wants to be skinny or even healthy. Individual preferences and total utility matter. A great deal as do opportunity costs. We cannot assume people already know what a healthy diet is. Learning about and adhering to a diet are both costly endeavors and additionally, people are not required to be as physically active as they were in the past. But is this sufficient to explain a drastic uptick in obesity over such a short period? Are Americans really that apathetic and shortsighted? Before I answer that question, I would like to point out the broader areas of agreement between these two models. Both emphasize calories, exercise, fat, fruits and vegetables, and perhaps a couple other factors. Both models indicate that the problem ultimately lies in individuals' inability to adhere to a rate reducing diet in their current environment. And future policy interventions are likely to emphasize these same characteristics. Which brings us back to this slide. In my view, market complexity is not well incorporated into the previous two models. There is a multitude of diet related issues that consumers could worry about and affect their dietary choices with regard to health. Yet the majority of the populace has been successful in managing this complexity and avoiding obesity. But a large and growing minority have seemingly lost the stability in recent decades. How can we reconcile complexity, large incentives to avoid obesity and a not completely dysfunctional market outcome? That is, obesity rates are not yet 100%. A change of perspective might help. That is, an obese rational agent has a large incentive to learn more about diet and health. Are the short-term benefits to eating poorly that high? Shouldn't individuals make a trade-off at some point? Why has zero or negative market learning occurred in spite of decades-long efforts to educate consumers and a wide array of diets being offered in the market? There are a couple potential explanations. Perhaps the environment really is that bad and or preferences are highly stable and persistent. But what if we include a preference for no obesity? Can we create a model that incorporates environmental constraints and complexity? I think so, but we'll need a few more terms. First of all, rather than treat each food item as an economic good in itself, we can treat it as a bundle of characteristics. So consumers actually purchase and trade-off for the bundle of characteristics which they most prefer. Credence, a credence good is one that requires a third party in order to fully evaluate its costs and benefits due to market complexity or a lack of knowledge. So I think a good example is auto repair. Many of us don't really know what's going on under the hood and we need a mechanic to tell us. So another term I think that's relevant is satisfying. The social scientist Herbert Simon argued that consumers are unlikely to become fully informed in a market with many potential sources of information. It would actually be irrational to try to find out all the information you might need to know about your dietary decisions. It would take a great deal of time and effort. Institutions are social structures that can help to alleviate complexity and guide our decisions in a variety of settings. Examples include money, culture, and family. In this domain, science, nutrition, medicine, and public policy are quite salient, although others clearly matter as well. Institutions tell us which characteristics of the world we should pay attention to. They affect our menu of choices, in other words. Bounded rationality refers to the fact that in the real world, there are many areas where full rationality is unlikely to occur. But institutions can help overcome this problem. In this context, a commitment device is simply a fancy term for a diet. I think it's safe to say that in this market, that this market is not working efficiently, indicating there may be some role for policy. Which brings me to my model. Rather than read through each of these boxes, I will walk through it using a few illustrative examples based on my own experience and two hypothetical situations. I reference my own experience only because it is the one with which I am most familiar, and I don't think it is particularly unique in most respects. When I use the term iterative, this refers to the fact that the act of repeating a process with the aim of approaching a desired goal, target, or result. Sounds like dieting to me. First, let's go through an idealized outcome. So we start at the top here, and we have a consumer with preferences that lead him to eat a standard American diet that's more or less unhealthy. Until he decides he's too fat, and that's a personal judgment, he's likely to continue that pattern of diet. Until he decides he is too fat, in which case he will search for information. In all likelihood, he's likely to follow these institutions and the commitment devices they lead to, update his preferences, including using some psychological variables, and finally make a choice. There are two options. In the ideal case, his weight goes down, his utility goes up, he continues doing what he's doing, or he continues to optimize and basically stop the process. My own experience was that I became obese. I answered yes to this question. I searched for information. I adhered to this advice, made choices, and found myself more miserable than ever, and not losing weight. So I decided to weight into literature, convince into these alternative sources of information. I deemed I decided that paleo probably wasn't going to kill me, and decided to make that change. I continued to adjust and optimize according to my preferences, constraints, and any new information. So the trickier case is, what if someone goes through this process and finds his utility lower, but doesn't go to these alternative sources of information? There are a couple of options. He could revert to his old behavior, or he could retry this. Here are how many times it would be rational to retry this process if you're not seeing results. The takeaway here is that giving people advice is only at the beginning, and may not lead to predictable outcomes for a variety of reasons. Seeking out information, changing preferences, and behavior can be costly and difficult, especially when there is a significant risk and uncertainty involved. I see producers as playing a somewhat passive, though ambiguous role in this whole process, they are also responding to policy and these societal institutions as well, as well as consumer demand, of course. I think that my model shows that consumers require credible institutions to define what a healthy diet means so that they can make good eating decisions. For better or worse, probably worse, the conventional wisdom is endorsed by most in the fields of nutrition and medicine, and is tacitly accepted as fact by other disciplines, for example public health and economics. So the conventional wisdom is a large market advantage in defining a healthy diet aided by public policy in the form of labeling, information provision, regulation, and licensing. Current models do not fully address the costs of changing preferences nor the incentives to do so, and data quality means conclusions depend on model assumptions. It's very difficult to tell what's actually going on in the real world with regards to all of this. So this map illustrates the extent of the change in the provision of dietary advice. Even in green-colored states, they may be treated preferentially by insurance companies. In general, such professional regulations tend to prevent a level playing field in the competition over ideas, though they have clearly been deemed credible by both government and the public. So it's perfectly rational in the sense to go to RD for advice. So I believe there are several interesting implications of my model. For one, the epidemic is emergent. It's not preferred by anyone involved in this process, but the result of a costly choice problem that is difficult to solve due to a variety of constraints that may vary significantly from person to person. In order to distinguish the precise nature of this problem, we would need very detailed information about why and precisely how much of each food characteristic each individual consumes. Risk and uncertainty at all levels about the nature of diet and health relationships should be acknowledged and incorporated into models to arrive at a plausible and robust explanation for an obesity epidemic. So to summarize, these new, non-ancestral institutions compete with the old ones and they have a distinct market advantage. It is not clear whether they do so. They enhance decision making in a way that enhances the efficiency of consumers' choices, especially with regard to obesity. This may explain why some dietary approaches are not able to out-compete ineffective ones, leading to inefficient choices and inefficient, undesirable outcomes. My model is actually adaptable to other diet-related outcomes. Diet-related health outcomes if you just replace the obesity slide with some other health problem. We may need to acknowledge the heterogeneity both with regard to physiology and decision-making processes and place our emphasis on different characteristics or sets of characteristics. An important caveat is that my model does not incorporate the physiological or psychological effect of food itself on demand. Only information, experience and preferences, but these factors could also be incorporated into it. So if wheat or sugar are addictive, for example, and the obese consumer is unaware of this, her problem becomes that much more difficult. So these are my references. Thank you for listening. We can do about one or two questions. Anybody right here? Okay. Hi, thanks for the talk. I'm just wondering if you will consider the fact that not everyone has the same choice capacity and therefore it's not only a matter of choosing an alternative, but a lot of people don't have a choice. They cannot access to a different they cannot access to knowledge that in my presentation, people are constrained by this power structure whereby people in Ecuador, for example, believe whatever comes from the official institutions and therefore they don't have that choice. Other people don't have the economic capacity, so I'm wondering what your thoughts are on that. Well, like I said, in America we do have a choice of what we can eat. I mean, everyone in this room seems to have made some healthier decisions. I would just point that out. And what was the second part of your question? I'm sorry. The choice, because some people are privileged to have the economic means and the access. There are such things as food deserts and people are stuck there and so they don't have a choice. The food desert might be an outcome of all this, I would say. And second, I would say that the relative costs of making this choice to change your diet far outweigh the the relative benefits that is, far outweigh the relative costs of whatever effort it takes to do this at least in theory from a rational perspective. So I certainly accept that it's very difficult for some people and especially for the impoverished and so on. One more question here. What happens to your model when you discover that humans are not rational? I mean what happens to any economic model once you question rationality as an assumption? Right, well like I said that was sort of my starting point and I think I pointed out some reasons why we can't assume full rationality in this context and there are a lot of contexts where full rationality is not likely to obtain. I do agree that economists tend to ignore that fact in a lot of cases. It sort of renders problematic most of your conclusions in my view. Well I would say that the obese have a very large incentive to pursue the goal of leaving their own obesity. I mean that was my experience. So I think that if you don't think people are rational and you're trying to explain this obesity epidemic, you're essentially saying that 30% of the population has all of a sudden, I don't know is less rational than the other 60% I'm not sure. No, I think you're looking for other social forces that might include irrationality, rationality, but a whole bunch of other issues. I guess I should point out that rationality also assumes full information and knowledge of what you're choosing and that's clearly not what's going on in this market. So you're right, full rationality is not going on here, but I do think that consumers are goal oriented and able to rank their choices. That's about as far as I'll go. Thank you.