Obesity in America: A Market Failure?

Abstract

Since the late 1980s, obesity in America has been a looming public health concern. Recently, medical researchers found that, for the 2011‐12 period, 35.3 percent of U.S. adults (aged 20 or older), 20.5 percent of teenagers (ages 12‐19), 17.7 percent of children (ages 6‐11), and 8.4 percent of young children (ages 2‐5) have obesity, and 6.3 percent of U.S. adults having severe obesity. In a recent working paper by Karnani, McFerran, and Mukhopadhyay (2015), these management scholars argue that obesity represents a market failure. In their study, Karnani et al. evaluate the effectiveness of corporate social responsibility, industry self‐regulation, social activism, and government regulation as to its effectiveness on consumer behavior and reducing obesity. Karnani et al. are advocates of “reasonable” government intervention, i.e., tax/subsidies, market regulation, and education, to address the public health issue of obesity. However, evidence shows that reasonable government intervention is also vulnerable to government failure and potential public health risk. Recommended is a mix of institutional activities found in corporate social responsibility, industry self‐regulation, social activism, and government intervention, all of which should provide the direction needed to continue this public health trend away from America’s epidemic levels of obesity.