The government have recently announced that a tax on sugary drinks should be introduced in England & Wales. The aim being to try to tackle growing obesity levels. Click here for the article.
Questions for discussions:
1. How will a tax work (you should be able to draw a diagram for this)
2. How effective will it be (reasons why it will work and why it might not)
3. Are there any other implications of this tax?
4. Will the other policies be more successful & how will they effect demand? (again, a diagram would be helpful here)
This clip, from Sesame St, is a super example that can be used to illustrate a number of Behavioural Economics and Market Failure principles:
The Edexcel A-level Economics specification requires students to understand the concepts of bounded self-control and cognitive biases. In this clip, Cookie Monster knows that he needs to have more self-control about eating cookies and must learn to "self-regulate" - difficult, though, with his habitual consumption of cookies! A relevant cognitive bias here would be the notion of hyperbolic discounting. In technical terms, this means "time inconsistent discounting", or in plain English, we don't value the future as much as we should, placing too much emphasis on current consumption. It's also easy to link this concept with the market failure associated with demerit goods - why do people continue to consume items that are "bad" for them?
Here is another Sesame St clip, again with Cookie Monster:
This time, Cookie Monster has to wait for his cookie - and if he can wait, he gets two cookies instead of the one cookie he gets to wait if he can't wait. One cognitive bias shown here is the Rhyme As Reason effect, in which rhymes are perceived as more "truthful". In this case, Cookie Monster is distracted by a song containing lots of rhymes that tell him to wait.
And finally, here is Cookie Monster and Sir Ian McKellen learning about the word "resist":
A report from the Bank of England and the Financial Services Authority has suggested that up to 10 executives that worked for HBOS should be banned from working in the City in the future. The named executives include Andy Hornby, HBOS's former chief executive, and Lord Stevenson, its former chairman.
The report suggests that the executives did not take enough action to ensure against any possible collapse in the financial markets which led to HBOS requiring a Government bailout at the start of the financial crisis in 2008.
Moreover, the report suggests that the Bank of England's own regulatory body at the time did not investigate the issues with enough stringency and relied too heavily on information from senior managers within organisations like HBOS.
For students of A Level Economics, this report offers examples of both market failure in the financial markets and the impact of regulatory capture (where the regulatory body of a market are too closely linked to the decision making of the management and ownership of the firms within that industry and therefore unlikely to act fully in the public interest).
