De-Merit Goods
Demerit goods in action
Two news stories catch the eye today with respect to demerit goods.
Firstly, the government plans to reclassify cannabis as a class B drug - but will this have any impact on its levels of use? Arthur Ma, in a related blog entry, has explored the issue in greater detail here.
Secondly, alcohol abuse is harming the health and productivity of the UK’s workers. According to the BBC, one on three employees admits being hungover at work.
read more...»…Now I know my ABCs!
But does Jacqui Smith? Today she announced the reclassification of cannabis up to a Class B drug – against the advice of the government’s drug council and undoing the reclassification to Class C under Tony Blair’s reign. Legislature on drugs is an infamously contestable topic with each political party throwing their respective hats into the ring. The Conservatives certainly want cannabis at Class B, the Lib Dems want to listen to the scientific advice which means that they want it at Class C, while the Greens were daring enough to declare in their recent manifesto that they want a legalised, regulated market for cannabis, much like in Holland. Personally, I don’t even know my own stance on this, but here’s the story so far:
Simple ideas work best
Sometimes the simplest ideas work the best especially when it comes to environmental policy. Today the Campaign for the Preservation of Rural England launches its Stop the Drop campaign in a bid to raise awareness of the impact of litter and fly-tipping. And Government minister Joan Ruddock is quoted in today’s Times saying that she is receptive to the idea of restoring compulsory deposits on plastic drinks bottles and aluminium containers as a way of incentivising people to take bottle back for recycling and reducing the volumes heading for landfill. It has worked in the past - ask the good people of Oregon. What is stopping the government? Get on with it!
Food additives as a de-merit good
How badly would you miss a Turkish Delight, a Battenburg cake, tinned strawberries or mush peas?
The UK Food Standards Agency is meeting this week to debate whether up to half a dozen food additives - namely tartrazine, quinoline yellow, sunset yellow, carmoisine, ponceau, and allura red - should be removed from food manufacturing in the UK. The ban would apparently have to be voluntarily enforced by British food manufacturers but given the growing weight of scientific evidence on the damaging effects of these additives on young people in particular, I cannot understand why stronger and more decisive action cannot be taken. There are clear external costs involved - not least the damaging effects of hyperactivity on children’s behaviour and performance in school and the impact on their braind development. Further more, many food manufacturers deliberately try to hide evidence of additives in their products by hiding them away in the very small print on packagaing. As the Food Standards Agency’s own web site says:
“Spotting the additives is not easy – they are listed in ingredients lists, but the print is often very small and they can be listed by either their name or their E number. Some foods are sold without any packaging, and the additives may also be used in restaurant and take-away food. The additives also crop up in medicines for both children and adults.”
‘Food additives ‘could be as damaging as lead in petrol’ (Independent 5 April 2008)
Food additives are a de-merit good and firm action is needed to eliminate as many of them as possible from food production in the UK. Stronger lobbying is also needed to make progress in reducing the use of additives across the whole of the European Union - what is the European Food Standards Agency for?
What shall we do with the drunken nation? Volumen Dos
[This is the concluding half of my two-parter on combating alcohol abuse in Britain. The first half, focusing on the price policies the government can use can be read here.]
read more...»Information failure on plastic bags?
The Times yesterday carried an article on a dispute among scientists about the true scale of the risks facing marine life from the deluge of plastic bags find their way into our seas and oceans. The article came at the end of a week when Marks and Spencer introduced a 5p per bag charge for food sales and Gordon Brown threatened government action unless the supermarkets take fresh steps to lower the volume of plastic bags used annually.
read more...»Merit and De_Merit Goods
We had an interesting brainstorming session in our AS micro today! We wanted to discuss which examples of consumption and/or production deserved the sobriquet of merit or de-merit goods. The point was made very early on that what each of us regards as socially beneficial or socially damaging depends very much on our own value judgements. And the other aspect of merit and de-merit that we emphasised was the ever-present issue of information failure. Just today there was an article in the Telegraph about how ”taking aspirin can cut breast cancer risk by 20%” and at the same time, we know the risks of addiction to painkillers and other treatments.
This was the list of merit and de-merit goods that my two groups came up with - fuelled it has to be said by a plentiful supply of mini doughnuts and chocolate cookies from Sainsburys! I used this as an example. We wanted to test doughnuts and consider their social benefits (!) but the plastic packaging and waste we created also has a social cost. I have linked to some relevant BBC news stories as well.
What shall we do with the drunken nation?
Over the last week I’ve noticed quite a few alcohol-related articles on tutor2u (here and here). To extend the tradition, here’s my take on the subject:
It’s becoming quite clear that alcohol abuse is fast becoming a problem for Britain. Every day we see tabloids headlines screaming “A Nation of Alcoholics”, etc. Okay, perhaps the issue isn’t that bad but we definitely have to do something to curb this binge drinking “epidemic”. Being the pragmatist that I am, I’d like to examine a spectrum of policies the government have at their disposal and their likely consequences.
24 hour drinking - a case of government failure?
Last week one of our bloggers carried a story about taxation and the demand for alcohol. And today the Independent reports that a Home Office study is likely to report that the liberalising of the licencing laws in 2003 has not (as yet) led to a reduction in alcolhol related crime or a change in our drinking patterns towards a European-style culture. The Indy report claims that ‘Serious violent crime has been displaced, with a steep rise in offences committed between 3am and 6am and, despite the millions spent on police crackdowns on drunken disorder, alcohol-fuelled crime hot spots have become worse.’
You can barely walk into a supermarket these days without facing a barrage of deep discounts on cans of lager, boxes of Chilian wine and bulky dispensers of Heineken. It is cheaper to buy a can of lager than a bottle of mineral water. Online shoppers receive regular emails alerting them to the latest 3 for 2 offers on cheap alcohol. The supermarkets have a social responsibility but one retailer on their own is unlikely to make the first move for fear of putting itself at a competitive disadvantage. Is it time for a law banning the deep discounting of alcohol products.
BBC news audio-video on Tesco and alcohol prices
Would Increased Taxes on Alcohol Curb Binge Drinking?
There are a number of negative externalities caused by excessive drinking. There are 1.2 million violent incidents each year attributable to alcohol misuse, alcohol related illnesses cost the NHS £1.7 billion per year, and £6.4 billion is lost to business in terms of lost productivity. An article in today’s Telegraph argues that a small increase in the tax on alcohol could save thousands of lives a year.
Click on this link to read the article: Taxes on Alcohol Should be Increasd to Curb Excessive Drinking.
But, is increasing the price of alcohol the best way to curb binge drinking, and internalise the negative externalities? Or should there, as is the case with cigarettes, be labels on the drinks warning of the dangers? Should alcohol advertising be banned? Should bars be prevented from offering ‘happy hour’ promotions? Has extended bar opening hours had any impact? Should more be taught in school on the dangers of excessive drinking?
The Home Secretary, Jacqui Smith is considering giving police power to confiscate alcohol from anyone under the age of 18 carrying it in public:
