Argument: A fat tax will correct a market failure (fatty foods)


Tom Marshal, Department of Public Health and Epidemiology, “Exploring a fiscal food policy: the case of diet and ischaemic heart disease”, 2000 – “Diet determines cholesterol concentrations, and cholesterol concentrations determine the prevalence of ischaemic heart disease. This paper explores the potential effects of fiscal measures on diet and ischaemic heart disease. There is a clear economic rationale for this approach: the correction of market failure caused by externalities. Externalities are said to occur when some of the costs of consumption are not borne by the consumer. When ischaemic heart disease strikes, there are costs to the community (productivity losses or indirect costs) and to the health service (direct costs). A case can therefore be made for using taxation to compensate for the external costs of an atherogenic diet.”