Praesidium

Sunday, March 15, 2009

Pricing Incentives

In markets, prices typically act as incentives, encouraging production of what's in demand (and encouraging people to switch their consumption to other goods). Prices can also be artificially altered to influence consumer behaviour. For example, GPs have recently rejected proposals to tax chocolate, while MPs are currently calling for minimum prices on alcohol.

Both these proposals involve sticks rather than carrots. If they want to encourage healthy eating, then I'd like to see the money raised used to subsidize fruit and vegetables, lowering the price on things we presumably want people to consumer more of. It could be argued that such moves are paternalistic but, like the taxes on unhealthy products (and, for that matter, compulsory motor helmets) they could be justified as reducing the burden we place on the NHS (and thus others).

UPDATE: Anyone interested in this issue, and looking for a PhD scholarship, may want to look at this.

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