Posts filed under “Economy”

Why Not Just Raise the Price of Sin?

Habit forming:

A few weeks ago, we noted that Economics of Smoking were such that raising prices reduced the amount people smoked. While many other factors may have also contributed to the decline, the simple fact
may be basic economics of cost has been the prime mover.

The NYT takes this a step further. They look at a variety of teen vices, and conclude that:

"There is in fact a surefire way
to get teenagers to consume less beer, tobacco and drugs, according to one study
after another: raise the cost, in terms of either dollars or potential
punishment.

In just about every state that increased beer taxes in recent years, teenage
drinking soon dropped. The same happened in the early 1990′s when Arizona,
Maryland, New Jersey and a handful of other states passed zero-tolerance laws,
which suspend the licenses of under-21 drivers who have any trace of alcohol in
their blood. In states that waited until the late 90′s to adopt zero tolerance,
like Colorado, Indiana and South Carolina, the decline generally did not happen
until after the law was in place.

Teenagers, it turns out, are highly rational creatures in some ways.
Budweisers and Marlboros are discretionary items, and their customers treat them
as such. Gasoline consumption, by contrast, changes only marginally when the
price of a gallon does."

Fascinating stuff . . .

Our streak of beating the NYT continues

>

Sources:
To Reduce the Cost of Teenage Temptation, Why Not Just Raise the Price of Sin?
By DAVID LEONHARDT
All Consuming
NYT, July 25, 2005
http://www.nytimes.com/2005/07/25/business/25consuming.html

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