When a country’s economy is ranked the 2nd freest in the world, how do they manage auto congestion and pollution?
By auctioning a limited number of vehicle permits, Singapore makes owning a car very expensive. A VW Passat in Singapore could cost as much as the median price of a house in a US metropolitan area ($158,100).
The reason is demand and supply. On the demand side, there are lots of millionaires (17% of all households), unemployment is low, job security is high and businesses will make interest free car loans to employees. On the supply side, permits are limited. As a result, according to auction information on Bloomberg, the vehicle permit alone could cost you S$89,990 ($73,332.52).
In other words, Singapore creates a market in vehicle permits to control traffic congestion and auto pollution.
Sources and Resources: My thanks to marginalrevolution.com for the Singapore story and Bloomberg for the details. Also, here, Bloomberg reports the most recent price of the permit and here is the (astronomical) price of a VW Passat. Finally, to see why Singapore is categorized as a free economy when its political system is much more restrictive, you can look at the Singapore link in the Index of Economic Freedom.
Posted by: adminEcon
Tags: auto pollution, Certificate of Entitlement, COE, cost, demand, Index of economic Freedom, negative externalities, Pigou, singapore, supply, traffic congestion, vehicle permits, VW Passat
Which would you choose?
2000 calories from 10 donuts that would cost you $5?
2000 calories from Greek yogurt, organic raspberries, a turkey avocado wrap, Alaskan King Salmon, green beans, a whole wheat roll, strawberries and heavy cream for $25.86?
Marketplace.org presented the $5/$25.86 comparison to show us that healthy food is expensive. Predictable? Yes. Then though, they told us something we would not have expected. This takes us to a recent academic study.
University of Buffalo researchers discovered that when healthy food became cheaper, consumers used their savings to buy less expensive less healthy food. As a result, the overall nutritional value of their diet remained the same. However, when Ritz Bits Peanut Butter Sandwich Crackers, for example, became more expensive by 12.5% to 25%, consumers stopped buying them. Then, with their savings, they purchased healthier alternatives, like bananas.
The implications for public policy? Tax junk food if you want people’s diets to improve.
The Economic lesson
But isn’t it even more complicated? Aren’t we talking about targeting the elastic region of many different consumers’ demand curves? The elastic region is where price rises and total expenditures (TE) drop.
You might want to look back at the soda tax debate.