Economic policy :
Lesson one :
A lot of problems in this world
- Ecology
- Climate change
There is a common problem: too much air flights
How do we reduce the amount of airflights ?
Who can do this the government
1) Tax on flights :
a. make the flight tickets more expensive with taxes
b. white market
2) Tax on parts (too dangerous) too many people will die
a. We overuse the old, cheaper plane all the flights will become more dangerous, people
will die and people will become afraid of flying so it will reduce the amount of flying in
the future
3) Subsidies for alternatives
a. Give a subsidy to people who use other sorts of transport than planes who are more
friendly for the climate
4) Quotas on flying
a. Fairness
i. The quota is two times a year
ii. If you want to fly more than two times a year, you will need to pay much more
iii. If you don’t fly , you can sell it to someone that wants to fly more
iv. It is like the same regulation as companies and CO2 emissions
b. Black market : it is illegal, people hide it, it is hard to regulate it (harder to regulate other
things)
i. When you create black market, it is very dangerous, the mafia is involved,..
Why is number 4 b worser than number 1:
- Number 4 is much more expensive because the government need to hire people on the airport to
check illegal ID’s, that there are not more flights than the quota, …
What is the problem with tax on flights (number 1)
It depends on your income
- Poor people will need to pay a small amount of taxes
- Rich people will need to pay a large amount of taxes, that makes that rich people will fly less
What is the problem of 4a the quota :
- Different preferences
- Some people want to fly a lot
- Some people don’t want to fly
,Most people are willing to pay more, if it is very important for them or they need it
- Example : Grandmother died, so you buy a flight ticket of 5000 euros to make it to the funereal
o In normal circumstances people won’t give that much amount of money to a plane ticket
o But in unprecedented and important situations, people will spend a lot of money on that
- Pro : people who need it more, will pay more. People will pay more money, so the airplanes are safe
and people won’t die
- Con : if you’re in a country of a lot of inequality, rich people don’t care and take over the flights
The tax (whether it works or not) depends on the situation and inequality of a person or country
It needs to balance each other (pro and cons)
Summarise : Quota’s and taxes :
- Lesson 1 taxes : people like taxes because if you want something you can buy it and you’ll have to
pay taxes on this. But if people don’t want that product, they don’t get it and won’t pay for it.
- Lesson 2 quota’s : people who don’t need that stuff, get that stuff.
o In Belgium
People who ned flights more, get them more often
it is expensive
people don’t like forbidding something because that will create a black market
we can control or regulate less
How can we regulate it ? people get two vouchers (two timer a year allowed to fly with a plane)
- if you fly a lot, you can buy a voucher from someone who doesn’t fly
- if you don’t fly a lot, you can sell your vouchers to people whom fly more than 2 times a year
- this system of vouchers will have a more efficient outcome
Government has all the power and can decide :
- who will fly
- when to fly
- where to fly
But you need to know a lot of information about individuals to know who needs to fly a lot and who don’t
much better : if people know about itself if they need to fly a lot or not
,Lesson two : PROBLEM : People need to throw away fewer clothes (not as often as nowadays)
Solutions :
1) taxing non-recyclable materials
2) voucher for recycling clothes
glass bottles (Germany) :
- You pay for the bottle and then when you used it you can return it, it goes back to the producer and
they can use it again (they can recycle)
- return rate : there is a return rate, if people bring it back, they get money in change
If we did the same with clothes :
- it is a bit unfair
- inequality constraints
- Voucher will help
3) Fewer production of clothes so there will be thrown fewer clothes away
4) Labels about ‘recyclability’ too much work
- Too much work in implementing this
- Need consumers who already care about the recyclability of clothing
5) No tax or subsidy for second hand clothing
- It may increase the demand for total clothing
6) We want to achieve a type of thinking more :
- people will buy rather expensive clothes with more quality, because they won’t throw it away soon
as result of the good quality. People won’t buy cheap clothes due to the fact that the quality is very
bad and within a few months it’s for the trash.
- Shift in demand : from poor quality to higher quality
7) Promote uniforms
- Con : people enjoy freedom
8) The more you boy, the higher the tax
- More effective than number 1
- With this tax you tax the problem instead of particular materials
9) Tax on throwing clothing away
- This is the best way to fix the problem
- With this tax, people will throw way less clothing away
- You tax directly what you don’t like
- Con : you can dump it into the forest , so you don’t need to pay the tax
, Lesson 3 : Examples of economic policies that have failed
Tax authority knows income about individuals.
If its leaks , that will be very dangerous for your privacy if everyone know what your income is
Economic policy failed : example snakes
Problem : Colonial India, there is a problem that are too many snakes that bite random people, too many
people die because of these snakes. How can the British government fix this problem?
How can we make sure that there will be less amount of snakes?
Solutions:
1) Solfer : you can put solfer (something that will kill snakes) on the streets.
a. Potential problem : if the product solfer was very expensive
i. India is a country with a lot of inequality and poor people
ii. If solfer was very expensive, the poor people will take the solfer and resell it to make
money out of it
b. If it is not that expensive, than there will be no problem.
2) A snake police
a. A more direct approach
b. Very costly because the government will need to hire and pay professional snake killers to kill
them , it will be expensive
3) Pay locals for killing snakes
a. Incentivize people to kill snakes
b. Pay locals each time they kill a snake and bring them in
c. This will be a cheaper alternative
Disadvantage of point 2 and 3
- People will start a snake farm
- They breed a lot of snakes in a controlled environment zo they get killed much easier
- It is a money making machine
- Because you have so many snakes, you kill al these snakes and bring them in by the British
government in trade of money
- As a result : you get a lot of money (€10,00/ a snake)
Lesson one :
A lot of problems in this world
- Ecology
- Climate change
There is a common problem: too much air flights
How do we reduce the amount of airflights ?
Who can do this the government
1) Tax on flights :
a. make the flight tickets more expensive with taxes
b. white market
2) Tax on parts (too dangerous) too many people will die
a. We overuse the old, cheaper plane all the flights will become more dangerous, people
will die and people will become afraid of flying so it will reduce the amount of flying in
the future
3) Subsidies for alternatives
a. Give a subsidy to people who use other sorts of transport than planes who are more
friendly for the climate
4) Quotas on flying
a. Fairness
i. The quota is two times a year
ii. If you want to fly more than two times a year, you will need to pay much more
iii. If you don’t fly , you can sell it to someone that wants to fly more
iv. It is like the same regulation as companies and CO2 emissions
b. Black market : it is illegal, people hide it, it is hard to regulate it (harder to regulate other
things)
i. When you create black market, it is very dangerous, the mafia is involved,..
Why is number 4 b worser than number 1:
- Number 4 is much more expensive because the government need to hire people on the airport to
check illegal ID’s, that there are not more flights than the quota, …
What is the problem with tax on flights (number 1)
It depends on your income
- Poor people will need to pay a small amount of taxes
- Rich people will need to pay a large amount of taxes, that makes that rich people will fly less
What is the problem of 4a the quota :
- Different preferences
- Some people want to fly a lot
- Some people don’t want to fly
,Most people are willing to pay more, if it is very important for them or they need it
- Example : Grandmother died, so you buy a flight ticket of 5000 euros to make it to the funereal
o In normal circumstances people won’t give that much amount of money to a plane ticket
o But in unprecedented and important situations, people will spend a lot of money on that
- Pro : people who need it more, will pay more. People will pay more money, so the airplanes are safe
and people won’t die
- Con : if you’re in a country of a lot of inequality, rich people don’t care and take over the flights
The tax (whether it works or not) depends on the situation and inequality of a person or country
It needs to balance each other (pro and cons)
Summarise : Quota’s and taxes :
- Lesson 1 taxes : people like taxes because if you want something you can buy it and you’ll have to
pay taxes on this. But if people don’t want that product, they don’t get it and won’t pay for it.
- Lesson 2 quota’s : people who don’t need that stuff, get that stuff.
o In Belgium
People who ned flights more, get them more often
it is expensive
people don’t like forbidding something because that will create a black market
we can control or regulate less
How can we regulate it ? people get two vouchers (two timer a year allowed to fly with a plane)
- if you fly a lot, you can buy a voucher from someone who doesn’t fly
- if you don’t fly a lot, you can sell your vouchers to people whom fly more than 2 times a year
- this system of vouchers will have a more efficient outcome
Government has all the power and can decide :
- who will fly
- when to fly
- where to fly
But you need to know a lot of information about individuals to know who needs to fly a lot and who don’t
much better : if people know about itself if they need to fly a lot or not
,Lesson two : PROBLEM : People need to throw away fewer clothes (not as often as nowadays)
Solutions :
1) taxing non-recyclable materials
2) voucher for recycling clothes
glass bottles (Germany) :
- You pay for the bottle and then when you used it you can return it, it goes back to the producer and
they can use it again (they can recycle)
- return rate : there is a return rate, if people bring it back, they get money in change
If we did the same with clothes :
- it is a bit unfair
- inequality constraints
- Voucher will help
3) Fewer production of clothes so there will be thrown fewer clothes away
4) Labels about ‘recyclability’ too much work
- Too much work in implementing this
- Need consumers who already care about the recyclability of clothing
5) No tax or subsidy for second hand clothing
- It may increase the demand for total clothing
6) We want to achieve a type of thinking more :
- people will buy rather expensive clothes with more quality, because they won’t throw it away soon
as result of the good quality. People won’t buy cheap clothes due to the fact that the quality is very
bad and within a few months it’s for the trash.
- Shift in demand : from poor quality to higher quality
7) Promote uniforms
- Con : people enjoy freedom
8) The more you boy, the higher the tax
- More effective than number 1
- With this tax you tax the problem instead of particular materials
9) Tax on throwing clothing away
- This is the best way to fix the problem
- With this tax, people will throw way less clothing away
- You tax directly what you don’t like
- Con : you can dump it into the forest , so you don’t need to pay the tax
, Lesson 3 : Examples of economic policies that have failed
Tax authority knows income about individuals.
If its leaks , that will be very dangerous for your privacy if everyone know what your income is
Economic policy failed : example snakes
Problem : Colonial India, there is a problem that are too many snakes that bite random people, too many
people die because of these snakes. How can the British government fix this problem?
How can we make sure that there will be less amount of snakes?
Solutions:
1) Solfer : you can put solfer (something that will kill snakes) on the streets.
a. Potential problem : if the product solfer was very expensive
i. India is a country with a lot of inequality and poor people
ii. If solfer was very expensive, the poor people will take the solfer and resell it to make
money out of it
b. If it is not that expensive, than there will be no problem.
2) A snake police
a. A more direct approach
b. Very costly because the government will need to hire and pay professional snake killers to kill
them , it will be expensive
3) Pay locals for killing snakes
a. Incentivize people to kill snakes
b. Pay locals each time they kill a snake and bring them in
c. This will be a cheaper alternative
Disadvantage of point 2 and 3
- People will start a snake farm
- They breed a lot of snakes in a controlled environment zo they get killed much easier
- It is a money making machine
- Because you have so many snakes, you kill al these snakes and bring them in by the British
government in trade of money
- As a result : you get a lot of money (€10,00/ a snake)
