It’s enough to make Jared Brown spill his drink. The co-founder and master distiller behind Sipsmith,
the micro-distillery in the vanguard of the craft gin movement in the
UK, is contemplating the possibility of graphic warning photographs and
plain packaging appearing on bottles of alcohol, akin to the restrictions on tobacco that assume full force in May.
“Are they considering similar labels for bacon? Fish and chips?
Crisps?” he demands. “It’s an absurdity. It will crush the craft side of
the industry. It will shift the business back to the industrial
producers, who will be very happy to move people back to mass-produced
drinks. If something like this comes through we won’t be able to weather
it.”
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Showing posts with label Demerit goods. Show all posts
Showing posts with label Demerit goods. Show all posts
Market failure
Market failure exists when the competitive outcome of markets is not
efficient from the point of view of the economy as a whole. This is
usually because the benefits that the market confers on individuals or
firms carrying out a particular activity diverge from the benefits to
society as a whole.
Ashley Seager (Economics, 28 September,) argues for "sharpening taxes as well as axes". This should read "instead of axes", with tax reform being the alternative to cuts. Tax increases should be targeted very specifically on those high-income households and individuals who have done so well over the past quarter of a century, during which the UK has become one of Europe's most unequal nations.
This began with the radical reduction of higher levels of taxation by the Thatcher government in the 1980s and continued through the Major, Blair and Brown administrations, with minimal adjustments in tax and national insurance rates for the most affluent 10% and especially the top 1%.
The shifting of the tax burden from married couples to individuals has been particularly beneficial to households in those top categories. On the principle "the polluter pays", it would seem appropriate to use the taxation system not only to fund services in cash and kind at their current level, but to make a significant reduction in gross inequality so that the UK moves towards the position of, for example, the more equal and economically successful Nordic democracies.
Professor David Byrne School of applied social sciences, Durham University
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Ashley Seager (Economics, 28 September,) argues for "sharpening taxes as well as axes". This should read "instead of axes", with tax reform being the alternative to cuts. Tax increases should be targeted very specifically on those high-income households and individuals who have done so well over the past quarter of a century, during which the UK has become one of Europe's most unequal nations.
This began with the radical reduction of higher levels of taxation by the Thatcher government in the 1980s and continued through the Major, Blair and Brown administrations, with minimal adjustments in tax and national insurance rates for the most affluent 10% and especially the top 1%.
The shifting of the tax burden from married couples to individuals has been particularly beneficial to households in those top categories. On the principle "the polluter pays", it would seem appropriate to use the taxation system not only to fund services in cash and kind at their current level, but to make a significant reduction in gross inequality so that the UK moves towards the position of, for example, the more equal and economically successful Nordic democracies.
Professor David Byrne School of applied social sciences, Durham University
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Demerit/Merit goods
In economics, a demerit good is "a good
or service whose consumption is considered unhealthy, degrading, or
otherwise socially undesirable due to the perceived negative effects on
the consumers themselves". It is over-consumed if left to market forces.
In contrast to a merit good, consuming a demerit good creates negative spillover effects.
For example, if a driver consumes excessive alcohol and then crashes into an innocent driver causing damage to their vehicle, a negative consumption externality has arisen. Society has suffered because the actual benefit of drinking by some has reduced the benefits possible (from driving) to others. This reduces the Marginal Social Benefit (MSB) by the extent of the negative effect on others, so that the socially efficient consumption of alcohol is less than the free market level of consumption.
Similarly, cigarette smoking by some individuals in public places will reduce the benefits to others in the form of passive smoking. This may also lead to higher taxes for all taxpayers which the government pay need to pay for increased healhcare in the future.
Read more...
In contrast to a merit good, consuming a demerit good creates negative spillover effects.
For example, if a driver consumes excessive alcohol and then crashes into an innocent driver causing damage to their vehicle, a negative consumption externality has arisen. Society has suffered because the actual benefit of drinking by some has reduced the benefits possible (from driving) to others. This reduces the Marginal Social Benefit (MSB) by the extent of the negative effect on others, so that the socially efficient consumption of alcohol is less than the free market level of consumption.
Similarly, cigarette smoking by some individuals in public places will reduce the benefits to others in the form of passive smoking. This may also lead to higher taxes for all taxpayers which the government pay need to pay for increased healhcare in the future.
Read more...
Market failure with demerit goods
The free market may fail to take into account the negative externalities of consumption because the social cost exceeds the private cost. Consumers too may experience imperfect information about the long term costs to themselves of consuming products deemed to be de-merit goods
Prescription drugs to treat alcohol top £3m (BBC news, May 2014)
Obesity – a time bomb
There is a huge debate at the moment about the causes of obesity and the social costs that arise from increasing levels of obesity. Obesity is an international problem. Across the Atlantic in the USA, two out of every three Americans are overweight; one out of every three is obese. One in three is expected to have diabetes by 2050. Minorities have been even more profoundly affected.
What of harder drugs?
Should hard drugs be prohibited at all costs by the government in a bid to control demand by restricting supply? Regulation has been the route chosen by most governments in developed countries – but economists are divided on the issue. Some believe that legalisation and taxation of harder class drugs is a better policy to pursue, arguing that regulation is ineffective and costly. Another approach would be giving better information to drug users about the health implications of their consumption decisions.
The free market may fail to take into account the negative externalities of consumption because the social cost exceeds the private cost. Consumers too may experience imperfect information about the long term costs to themselves of consuming products deemed to be de-merit goods
Prescription drugs to treat alcohol top £3m (BBC news, May 2014)
Obesity – a time bomb
There is a huge debate at the moment about the causes of obesity and the social costs that arise from increasing levels of obesity. Obesity is an international problem. Across the Atlantic in the USA, two out of every three Americans are overweight; one out of every three is obese. One in three is expected to have diabetes by 2050. Minorities have been even more profoundly affected.
What of harder drugs?
Should hard drugs be prohibited at all costs by the government in a bid to control demand by restricting supply? Regulation has been the route chosen by most governments in developed countries – but economists are divided on the issue. Some believe that legalisation and taxation of harder class drugs is a better policy to pursue, arguing that regulation is ineffective and costly. Another approach would be giving better information to drug users about the health implications of their consumption decisions.
Cigarettes will be sold under plain packaging in the UK from next April as a result of a vote by MPs to ban branded packaging. Imperial Tobacco has said it will sue the UK government to defend its "valuable intellectual property"
Deloitte Monday Briefing (March 2015)
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