I’m a big believer in the saying, “You Get the Behavior You Reward.”
And if I think that statement is true, it seems logical that I would also believe the saying, “You Stop the Behavior You Punish.”
“Rewards” can be split between extrinsic type rewards, such as salary increases, bonuses, promotions, bigger offices, etc., and intrinsic type rewards, such as recognition, challenging work, autonomy, etc. Depending on the nature of the task, one type of reward may be more effective than the other, so it is important to choose the type of reward carefully.
The same is likely true when you want to stop certain behaviors from occurring, and in this post I just want to talk about the use of extrinsic types of punishment, particularly monetary punishment, as a way of preventing, or at least decreasing, certain types of behavior.
The Wall Street Journal had an article this past week, “Should There Be a Tax on Soda and Other Sugary Drinks?“, and offered the opinions of two individuals on each side of the debate.
I’ll state right from the start that I am clearly on the side that believes such taxes should be put into place, and that such taxes would be effective in achieving the objective of reducing the amount of sugary drinks that are consumed.
Kelly Brownell, dean and the Robert L. Flowers professor of public policy at Duke University’s Sanford School of Public Policy, provides the support in favor of a soda tax.
Brownell notes that economists point to taxes as the single most influential factor in the striking reduction in smoking in the U.S.—the-per capita number of cigarettes smoked is a quarter of what it was in the mid-1960s. The lives saved in the U.S. and elsewhere can be counted in the millions.
He also states that taxes on certain categories of foods could improve health and save money for all Americans. Consumption of these drinks is linked to increased risk for a number of diseases, particularly obesity and diabetes. Fully 42% of the annual $142 billion in health-care costs attributable to obesity are paid with public funds through Medicare and Medicaid, and obesity is but one disease affected by poor diet.
Tobacco and alcohol taxes are now commonplace and are considered a permanent part of the public-health and economic picture, and he believes soda should become part of that mix as well.
William Shughart II is the J. Fish Smith professor in public choice at Utah State University’s Jon M. Huntsman School of Business and research director of the Independent Institute, and provides the argument against such a tax.
Shughart does not believe the soda tax is effective because it does not reduce consumption enough since the taxes are often set too low to affect behavior. To me the simple solution then is to keep raising the taxes to the point where the tax does reduce consumption. Shughart notes that such a tax increase will lead to black markets for soda, but I can’t imagine the black market making up for the decreased sales volume associated with the regular channels of distribution because of the higher taxes.
He also argues that if there is a soda tax, the funds would not be used to support the problem the tax is trying to address. I don’t view that as a problem with the tax per se, but more with how the tax fees will be administered. Using this kind of logic, it seems as if Shughart would eliminate every single tax we have, since it may not be used for its proper purpose. Again, it seems like there is a simple solution to this as well, perhaps along the lines of a watchdog group to monitor where such taxes are being used.
For example, 100% of the revenue generated from the sale of lottery tickets in Pennsylvania is used to support senior citizen programs. I am sure that the lottery program is audited annually to make sure the funds are used properly. It seems as if the same type of program could be set up for the additional funds generated from a soda tax; the taxes could be designated for certain health initiatives, and such use would be audited every year.
Shughart does raise an important issue, and as shown by the graphic at the top of this post, and by the one below, it seems as if the majority of people are in favor of “sin taxes”, as long as the tax is used to promote a positive behavior, such as healthy eating.
So while I fully recognize that I am biased, I believe the arguments made by Brownell in favor of a soda tax are much stronger than the arguments made by Shughart against such a tax.
And it’s not just with soda that I think such monetary punishment could be effective in controlling human behavior. If I were running things, I would implement this idea in many places.
- Gun control: Ownership of guns could dramatically decline by putting a huge tax on the sale of every handgun sold as well as bullets; perhaps something like $5,000 tax per gun and $100 per bullet.
- Driving the speed limit: I must admit that one of the reasons I do not drive over the speed limit is that I do not want to incur a fine, since such a fine seems like such a waste of my hard-earned income. But since I see how others drive, they must apparently view the existing fines as insignificant. Well, let’s use a monetary punishment to control this as well. First, I would install speed-sensing equipment at random spots along a highway that can track a vehicle’s speed. If a car is driving above the posted speed limit, the system would capture the license plate number and send out a ticket automatically. Along with such a system, make the fine significant. Perhaps the minimum fine for speeding could be $5,000, along with the loss of your license for one year. My guess is that is such a system and set of fines law were put in place, most people would immediately begin driving within the speed limit.
- Economic sanctions: I think rather than the first response to an international dispute being a military one, I am a fan of (1) first determining whether we should be getting involved in another country’s problems, and (2) if we think we should, to use economic sanctions as the first approach to try and change behaviors. And if at first the sanctions don’t work, then make them more severe. Obviously, one has to be careful of unintended negative consequences that could result from such sanctions, but if properly used, I believe sanctions can be highly effective.
Getting back to the soda tax, I think Michael Bloomberg, while he was the mayor of New York City, was on the right track when he tried to impose a soda tax in New York. While he did not win that battle, it seems as if his ideas are starting to gain more acceptance, as noted in this story.
So it’s nice knowing that at least two successful people think like I do about a soda tax; I’d be curious if they also think the same way about my other suggested uses for taxes and fines.
So if you’re reading this Kelly or Mike, let me now your thoughts…