Chocolate tax - they wouldn’t, would they?
I don’t want to underestimate the dangers of obesity – there are clearly significant social costs associated with it such as extra cost to the NHS of treating conditions caused by it, as well as private costs for the individual – but I know I am not the only person feeling some horror at the idea of a new ‘sin’ tax on chocolate! I do not consider myself a chocaholic, but I admit that I do indulge in chocolate from time to time. Judging from the responses on TV and radio programmes yesterday I’m not alone in thinking this might be a step too far, and I think there could be a need to persuade the government that they should not consider such a move, by making the economic case against tax on chocolate. This is what I have come up with so far – I am sure there are other points that you could add…..
read more...»Trade-offs in the off trade
Proposals to tackle alcohol-fuelled violence and health related problems in Scotland were announced yesterday. This is government intervention to tackle the market failures that result from alcohol, which has been a regular issue discussed in England and Wales as well. Some of the statistics given in this video report spell out the reasons for the concern north of the border; there has been a 20% increase in the number of people being discharged from hospital following alcohol-related treatment, Scots drink the equivalent of two litres more pure alcohol each per year than the English, and alcohol-related liver disease has overtaken heart disease as one of the top three killers there.
read more...»Cheap drinks and government intervention
This BBC clip covers an announcement in the Queen’s Speech about policy proposals contained within a new Crime and Policing Bill to curb the flood of cheap drinks promotions offered by pubs and clubs which the government believes contributes to binge drinking. The Telegraph reports that
“Retailers will not be able to sell any alcohol cheaper than the price of buying one item of it, no matter how many more a customer buys. It means there will be a ban on offers such as two for ones, three bottles of wine for £10, or discounted multipacks of beer where the overall cost is cheaper than the sum of the individual bottles or cans contained.”
A seasonal hat tip to Ben White for spotting the article and for suggesting a number of economic concepts and policy issues that the article might be used to illustrate in a group discussion:
Pricing Incentives and price discrimination
Importance of price elasticity of demand e.g. if minimum drinks prices are imposed
Market Failure - externalities from consumption, alcohol disorders and de-merit goods
Regulation and Legislation - effectiveness and costs of regulatory policies
Risks of government failure including the law of unintended consequences
Social Issues
Waist Check
I am on the threshold of a new attempt to get fitter and slimmer this summer. I have pre-committed to a two month gym membership close to my holiday home and signed up for a couple of long distance walks .... it ought to make a difference .... but I might still struggle to make the cut in Japan where a new law has come in place stipulating maximum waist sizes for men and women.
read more...»Myopia and alcoholism
This BBC news video reports that the number of hospital admissions linked to alcohol has more than doubled in the last 12 years.
read more...»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.
read more...»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.
read more...»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:
Should the Police Have Powers to Confiscate Alcohol?
Social stigma and economic behaviour
Are drivers over the limit acting rationally when they get into their vehicles and pull out into the traffic? Surely they understand the possible consequences for themselves including the risk of conviction, higher insurance premiums, fines, probable loss of employment and the impact on their families?
It might be rational for some drivers to decide that they can drive their vehicle under the influence of alcohol providing they factor into the equation the expected private costs and benefits of doing so. Becker’s (1968) expected utility model of criminal behavior might be usefully applied to decisions that drivers take when they know they are over the legal limit for being in charge of a vehicle.
But what might be a reasoned decision for the driver can have terrible consequences for society as a whole as many people know to their cost. Is there a role for the government to penalise through exposing drunk drivers to social disapproval? In the state of Ohio they have tried just this approach.
read more...»Social costs of binge drinking
The Big Question in the Independent today concerns the perennial concerns over the economic and social fall out from binge drinking notably among adolescents which is said by senior police officers to have reached “epidemic proportions.” What is binge drinking? Apparently it is five or more drinks in one session for men and four or more drinks for women. Of course that depends on how one defines a ‘session’! I produced a powerpoint presentation on alcohol and de-merit goods a year or so ago and it is available in streamed format here. This BBC news av clip is also useful perhaps as an introduction to a lesson on the social consequences of binge drinking among the young.
