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Soda Wars

Oct 8, 2010 • Demand, Supply, and Markets, Economic Debates, Regulation • 120 Views    No Comments

In “the soda wars,” who is fighting whom? Past news articles refer to state legislative attempts to tax sugary soft drinks. Now, a NY Times article focuses on how New York City is trying to bar use of food stamps for sugary soft drinks. The Department of Agriculture, as the agency that oversee NYC’s food stamp program, will make the decision.

On one side is the city saying it is fighting obesity. Their ammunition? “…nearly 40% of public-school children in kindergarten thorugh 8th grade were overweight or obese,…and…obestity rates were substantially higher in poor neighborhoods.” With the ban, poorer familieis “…would have as much, if not more, to spend on nutritious food.” 

Disagreeing with the ban, a spokeman for the oppostion cites concern about stimatizing people on food stamps. Yes, he says, we do want to diminish sugary drink purchases but let’s use education. An industry spokewoman said, “This is just another attempt by government to tell New Yorkers what they should eat and drink.”

The Economic Lesson

Wearing economic lenses, we are seeing a classic opportunity cost battle. The (short term) benefit of enjoying soft drinks is experienced by the purchaser and soft drink manufacturers. The cost, though is borne by the tax payer twice: 1) once when the drink is purchased with public funding 2) and then again when obesity related illnesses are paid for by publically funded health care.

I expect opportunity cost battles to multiply as society pays for additional benefits. If we pay for more, do we have the right to control behavior more also?

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