Fatty foods cost the UK £47bn a year (and the global economy £1.3tn). Report suggests regulation is likely to be more effective than indirect tax or information provision. Are fatty foods a demerit good? Should the government control our food intake?
Market failure and government intervention. Alcohol is considered a demerit good because it creates negative consumption externalities that generate external costs to third parties. Kerala state officials are taking the extreme measure of an outright ban in order to reduce consumption and achieve allocative efficiency. However, this is likely to lead to the creation of a hidden market for alcohol as we saw during the US prohibition of the 1920's.
Proposed freeze could wipe millions from wind farm owners’ profits
Adam Dean's insight:
The energy market is incredibly complex. A web of regulation makes operations difficult in an industry that has received extensive public scrutiny recently. This article suggests that changing government intervention (in the form of a carbon tax) may hurt green energy production. The carbon tax has come under attack for being regressive and burdensome for firms (higher costs reduce competitiveness). Are the costs too high or does recent weather patterns (and associated costs) suggest it will all be worth it in the end?
Russia is looking to prop up the price of oil by limiting supply and boost exports revenue. This suggests that Russia expects little movement in the way of demand (PED inelastic). Does Russia have sufficient market power to make a difference to the price of oil?
Government intervention in the form of regulation and price controls, but will this lead to an increase in the use of 'loan sharks' in hidden markets? Unsurprisingly, pay day loan firms think it will, however, the FCA think not (specifically just 2% of the 70,000 of those forced out of the market by the intervention). Lots here on market failure, government intervention, unintended consequences and government failure.
A petition on the human right to water, signed by 1.8m people across Europe, was presented last month in Brussels. The petition called on the European Commission to recognise the UN resolution that water…
Adam Dean's insight:
England's water supply since privatisation - leaks, price hikes, and profits.
Peach and nectarine farmers to be subsidised by the EU following the Russian food import ban. Fruit bought by the EU to be distributed to schools, hospitals, etc for free. Are peaches and nectarines a merit good?
Impact of subsidy removals. Subsidies help reduce costs of production which, in turn, lead to lower prices and increased consumer surplus. However, if used over the long-term subsidies can create large opportunity costs, encourage producer inefficiency and distort price signals. Consumers become accustomed to the artificially low prices, so when subsidies are removed they are likely to react negatively to the sudden price surge, as they have previously done in Iran.
Government intervention in the renewable energy market. Minimum (strike) prices for onshore wind and solar cut - price now closer to market equilibirum. Minimum price for offshore wind increased to encourage investment.
Energy company SSE has announced this morning that it is to raise electricity and gas prices by an average of 8.2 per cent from 15 November.
Adam Dean's insight:
The Fat Cats are back in the headlines. Exploiting the oligopolstic market structure and price inelastic nature of demand, prices of energy look to soar whilst senior executive heads in the same direction.
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