The article of The Diminishing Returns to Tobacco
Legislation which published in The
Laissez Faire City Times, March 19, 2001. It illustrates the phenomenon of diminishing
returns to government intervention.
It seems that tobacco is
the single greatest cause of preventable death globally. Government tries and put on every effort to
presume effects of tobacco related disease. They tried to force manufacturers to print the
health warnings on tobacco packaging for at least 10 years. Also tried to increase the cigarette taxation
and hope to reduce the consumption of cigarette. Unfortunately, too much information kills
information, especially for the smoking addict.
No doubt that it is
really difficult for the smoking addict to stop smoking right away. Someone cannot just change their habit and
their demand. In my own opinions, provide more effort on health
education or free programs start from the youth and teenagers. Try to educate and
encourage the youth and teenagers to build up and exercise their own gut. Also, government has to educate the general public
how benefits gain from the healthy life instead of ironic harmful warnings of smoking.
Tobacco is one of the commodities
with inelastic demand. For the product of inelastic demand, government could
raise their tax revenues by simply raising the tax rate. A higher tax rate shifts the supply decrease,
the price goes up much more than the quantity traded goes down. Originally, government increase tax rate on
tobacco to increase revenue and wish to decrease the supply. Unfortunately, this has serious consequences
lead to develop of a black market for tobacco.
Per the article, the problem of smuggle cigarette is apparently growing.
In this situation, government has to
find out another way to stop this black market spread out.
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