The Economics of a Fatter America

While larded with calories, fast food is cheap, tasty, ubiquitous, and time-saving. No wonder obesity is on the rise

By Christopher Farrell

When I was growing up mostly on the East Coast, eating at McDonald's, Hot Shoppes, Shakey's, and other fast-food outlets was still something of a treat for my family, friends, and neighbors. Most of the kids I knew ate peanut butter, bologna, or some other sandwich for lunch at school. Mom usually cooked dinner. The food wasn't always healthy by today's standards, but most meals were made at home.

It's very different today. Despite the widespread availability of organic foods and the popularity of health-oriented cookbooks, many people I know are borderline fast-food junkies. Almost all the eating spots within walking distance of my workplace are national and local fast-food chains. It's not unusual for colleagues to grab three or four quick artery-clogging meals a week to eat at our desks. (I dashed across the street for a Big Mac while finishing this article.)

Many evenings, parents ferrying their children home from sports practice or band rehearsal stop at a fast-food restaurant to pick up dinner. The food is tasty, the portions supersize, and the meal convenient. But it's also a lifestyle that's showing up in a never-ending struggle to keep waistlines from expanding too much.


  No wonder obesity is a growing health problem in America. The numbers are disturbing. Nearly a third of the population is classified as medically obese, two times higher than in the early 1970s. About two-thirds of Americans are overweight. The average American male weighs almost 180 pounds and the average female 152 pounds, vs. 168 pounds and 142 pounds in the early 1960s. The diet business is a $30 billion to $50 billion industry.

Why has obesity evolved into a major health concern now? It's partly the remarkable and well-chronicled rise of the fast-food industry. The number of these outlets per capita doubled from 1972 to 1997, while full-service restaurants rose by 35%.

Developments in the labor market and technological advances also account for Americans' propensity to overeat, according to two recent economic papers. Although the scholars disagree in some respects in their analysis of the trend toward fat, the two investigations together illuminate the economic and social forces behind some 300,000 premature deaths a year blamed on obesity, second only to smoking.


  A key factor is women moving from laboring at home to working for a paycheck. Incomes are up smartly for two-income couples, so the cost of eating out isn't much of a deterrent. No, the scarce commodity is time. Incomes for single-earner households, especially single working women with children, have lagged by comparison. But as any single mother or father will tell you, time is also extremely scarce. More hours at work and less time at home is driving more people to carry out food, eat a quick meal at a fast-food restaurant, or zap some prepared food in the microwave.

Fast food is also relatively cheap. In An Economic Analysis of Adult Obesity, economists Shin-Li Chou, Henry Shaffer, and Michael Grossman also point out that while household budgets typically show eating at home is cheaper than eating out, that economic calculation doesn't hold after taking into account the time spent shopping for and cooking a meal. The recent fast-food price wars between some of the major chains like McDonald's and Burger King tip the economic scales -- if not the health ones -- toward fast food.

Technology is also driving the trend toward obesity. Such innovations as vacuum packing, deep-freezing, and microwave ovens have revolutionized the preparation and consumption of food. In Why Have Americans Become More Obese, economists David Cutler, Edward Glaeser, and Jesse Shapiro showcase the lowly potato. Americans ate huge quantities of them before World War II. Boiling, mashing, and baking were the favored methods of preparation. In sharp contrast, french fries were relatively rare since fries were time-consuming to peel, cut, and cook.


 A lot has changed in the post-World War II era. Potatoes are peeled by sophisticated machinery, frozen, and shipped to restaurants and grocery stores. French fries are quickly cooked in a deep fryer, oven, or microwave. The french fry is now America's favorite vegetable.

As a general rule, lower prices, more consumer choice, and technological advances are good. The standard economic view largely holds when it comes to the food-preparation industry. Still, some people have difficulty with self control when it comes to tasty, yet fatty fast food.

What should be done to fight the fat? Lawsuits against fast-food makers are deservedly the stuff of late-night comedy routines. The call for better education is important, although it's not as though information about low-fat, low-cholesterol, and otherwise healthy foods isn't available to the average consumer. Still, the main reform may be for regulators to press the food industry for improved disclosure and easily understood labeling.

Market forces are also at work. Witness the rapid expansion of healthier menus in fast-food restaurants. Plus, the fare of fresh-food convenience stores is cutting into the business of such dominant players as McDonald's and Burger King. Maybe the invisible hand can help Americans whip their waistlines into shape.

Farrell is contributing economics editor for BusinessWeek. His Sound Money radio commentaries are broadcast over Minnesota Public Radio on Saturdays in nearly 200 markets nationwide. Follow his weekly Sound Money column, only on BusinessWeek Online

Edited by Beth Belton

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