In 2012, then-Mayor Michael Bloomberg waged war against oversized sodas in New York City. His controversial attempt to ban large sugary drinks sparked national debate about personal freedoms, public health, and government intervention. While the measure was ultimately struck down in court, its underlying goal—to curb soda consumption and combat obesity—remains relevant. Looking back, Bloomberg’s approach might have missed a critical weapon in the public health arsenal: taxes.
Research into the economics of milk and soda suggests that raising the price of soda, particularly through targeted city taxes, could have been a more effective strategy. Recent studies on consumer demand reveal that soda is highly elastic , meaning people are quick to cut back on it when prices rise. Milk, by contrast, is inelastic —a staple so ingrained in daily life that people continue to buy it even when it becomes more expensive. This fundamental difference sheds light on how pricing strategies influence consumer behavior and public health outcomes.
The study, conducted using advanced economic models, calculated the deadweight loss —the economic inefficiency caused when consumers reduce or stop buying a product due to price increases—for both milk and soda. Soda’s deadweight loss is significantly higher, reflecting how price-sensitive its demand is. In plain terms, if soda prices increase, people simply buy less of it. Milk, however, sees minimal changes in demand because it is perceived as essential.
This elasticity gap highlights why Bloomberg’s soda ban, while well-intentioned, might have missed the mark. A tax on sugary drinks, rather than an outright size restriction, could have delivered more impactful results. Taxing soda not only discourages consumption but also generates revenue that can be funneled into public health initiatives—a strategy successfully employed in cities like Berkeley and Philadelphia.
Milk, on the other hand, is a different story. As a cultural and nutritional cornerstone, milk is tied to ideas of health, family, and stability. It is a staple food, essential for everything from morning coffee to children’s diets. Any increase in its price would disproportionately burden households, particularly those with lower incomes.
Soda’s role in the culture is far less noble. While it is undeniably popular, soda has long been criticized for its high sugar content and its links to obesity, diabetes, and other health issues. Unlike milk, soda’s consumption is not rooted in necessity but in convenience and indulgence. This distinction makes it an easy target for policymakers aiming to improve public health outcomes without harming the economic stability of families.
The researchers behind the study used sophisticated statistical tools, including ridge regression, to analyze grocery purchase data. Their findings reinforce the idea that economic incentives—like taxes—are powerful tools for shaping consumer behavior. By making soda more expensive, governments can push consumers toward healthier choices without resorting to outright bans.
The Bloomberg soda ban, while ahead of its time, failed to account for these dynamics. Instead of prohibiting large sodas, a well-designed tax could have harnessed soda’s elasticity to drive down consumption. At the same time, milk’s inelasticity underscores why taxing staple foods is rarely considered good policy; such measures disproportionately hurt families who rely on essentials.
A decade later, the lessons of Bloomberg’s failed soda war resonate in new ways. The contrast between milk and soda highlights the importance of understanding how pricing strategies affect consumer behavior. Soda taxes, now implemented in several cities, show that price hikes can effectively nudge people away from unhealthy habits. Milk’s resilience in the face of price changes reminds policymakers of the critical role staple foods play in everyday life—and why they must be handled with care.
As New York City and other governments continue to explore ways to influence public health through economics, the milk-and-soda divide remains a potent example. Bloomberg’s war on Big Gulps may have fizzled out, but the battle for better health through smarter policies is far from over. Sometimes, the answer isn’t banning the Big Gulp—it’s making it too expensive to justify the sip.