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Chapter 1: Problem 11

Governments often adopt certain policies in order to promote desired behavior among their citizens. For each of the following policies, determine what the incentive is and what behavior the government wishes to promote. In each case, why do you think that the government might wish to change people's behavior, rather than allow their actions to be solely determined by individual choice? a. A tax of \(\$ 5\) per pack is imposed on cigarettes. b. The government pays parents \(\$ 100\) when their child is vaccinated for measles. c. The government pays college students to tutor children from low-income families. d. The government imposes a tax on the amount of air pollution that a company discharges.

Short Answer

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Answer: The government policies provide incentives such as taxes on cigarettes and air pollution, and payments for vaccinations and college tutoring. These incentives aim to create desired behaviors like reducing cigarette consumption, increasing measles vaccinations, assisting low-income children with education, and reducing air pollution. Governments might want to intervene in these cases to address negative externalities or promote positive outcomes that may not be achieved through individual choice alone, such as improving public health, reducing healthcare costs, and protecting the environment.

Step by step solution

01

a. Identify the incentive and desired behavior for the cigarette tax

The incentive in this policy is the \(\$ 5\) tax on each pack of cigarettes. The desired behavior the government wishes to promote is the reduction of cigarette consumption; by making cigarettes more expensive, people may be less likely to purchase them, which could lead to a decrease in smoking.
02

b. Identify the incentive and desired behavior for vaccination payments

The incentive in this policy is the \(\$ 100\) payment to parents when their child is vaccinated for measles. The desired behavior the government wishes to promote is the increase of measles vaccinations among children. Vaccinating more children can lead to a healthier population and reduce the spread of infectious diseases.
03

c. Identify the incentive and desired behavior for college tutoring payments

The incentive in this policy is the payment to college students who tutor children from low-income families. The desired behavior the government wishes to promote is the assistance of low-income children with their education, which can lead to increased academic success and potentially break cycles of poverty.
04

d. Identify the incentive and desired behavior for air pollution taxation

The incentive in this policy is the tax on the amount of air pollution a company discharges. The desired behavior the government wishes to promote is the reduction of air pollution by businesses, encouraging them to invest in cleaner technology and thereby reduce environmental damage and negative health effects associated with pollution.
05

Reasons for government intervention

Governments may wish to change people's behaviors rather than allow their actions to be solely determined by individual choice for various reasons. In each of these cases, the government is trying to address negative externalities or promote positive outcomes that may not be achieved through individual choice alone. For example, allowing individuals to decide on their own whether to smoke may lead to negative health implications that also affect the entire society (e.g., higher healthcare costs). Similarly, the government may implement policies to promote vaccinations due to their collective benefit to public health (e.g., herd immunity).

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Most popular questions from this chapter

In each of the following situations, explain how government intervention could improve society's welfare by changing people's incentives. In what sense is the market going wrong? a. Pollution from auto emissions has reached unhealthy levels. b. Everyone in Woodville would be better off if streetlights were installed in the town. But no individual resident is willing to pay for installation of a streetlight in front of his or her house because it is impossible to recoup the cost by charging other residents for the benefit they receive from it.

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Discuss the efficiency and equity implications of each of the following policies. How would you go about balancing the concerns of equity and efficiency in these areas? a. The government pays the full tuition for every college student to study whatever subject he or she wishes. b. When people lose their jobs, the government provides unemployment benefits until they find new ones.
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