Studied by 6 people
Format: - key info - pros - cons Many RWEs are from Hong Kong to make it easier for me lol
Pigouvan tax for negative consumption
NY soda tax, $0.01-0.02 per ounce
Encourages alternatives
People travel to neighbouring states to avoid tax
Education/awareness creation for negative consumption
HK cannabis ads in MTR/TV
Discourages consumption of the demerit good
Addictive - will not reduce consumption
Legislation/regulation for negative conumption
Cigarettes in HK
Prohibits the sale of tobacco products to people under the age of 18
Bad for ciggie sellers ig??
Subsidizing the alternative for demerit, subdizing merit
PTFS, 30% subsidy on all transport spending above $400
Increases consumption of public transport, decreasing congestion, shifts D from MPB to MSB
Regressive, high min. threshold limits the benefit
Legislation/regulation for positive consumption
Hong Kong babies required to recieve a series of vaccinations within the first few years
Shifts D from MPB to MSB, reducing the welfare loss
Ethical concerns, potential of breaking the rules, opp cost of funding, deadweight loss
Direct provision for positive consumption
Hong Kong provision of 10 masks to each household during COVID
Improves health and consumption of this merit good
Costly to import and distribute masks, additional manpower was needed, not transparent about funding (was it through income taxes?)
Carbon tax
EU emissions trading system (ETS!!)
“Transformed environmental responsibility into a business opportunity”
Oversupply and price volatility causes uncertainty for firms
International agreement for CPRs
Kyoto Protocol, 1992
Expectations of countries is proportional to the amount they emit
Requires full commitment to work, HEDCs exploit LEDCs
Collective Self Governance
Plastic-Free Challenge, social media trend encouraging people to be more responsible about their plastic consumption
Put social pressure on people to be more mindful about the environment (a CPR)
No legal bearing, no requirement, social pressure not that strong
Direct Provision of a public good
HK Highways Department maintains thousands of LED streetlights
Private sector would not provde otherwise, allows economy to continue into night, massive positive externalities
Cost to taxpayers and opportunity cost (LEDs are expensive)
Contracting out for public good
HYW Highway / Lung Shan Tunnel contracted to Leighton/Dragages
Project was completed eventually, linked to China, greater trade and advantages for the HK economy
Was 2 years late and 8 billion HKD over budget, shoddy construction
Legislation for negative production externalities
Noise pollution in HK - no noisy equipment between 7pm and 7am, sundays and PH, fines start at 100k
Decreased noise pollution and therefore increased quality of life
Decreased productivity, lax enforcement
Regulation for positive production externalities
Compulsary 12 year education in HK
Increases quality of human capital, benefits for whole economy
Burden to government and therefore taxpayer
Direct provision for positive production externalities
HK School vaccination program
Healthier population, benefits to whole economy
Opp cost
Subsidies for positive production externalities
US Renewable Energy subsidies
Funded by decreasing oil subsidies, offsets the costs of producing clean energy
opp cost and decrease gov revenue
Natural monopoly
MTR
Used to have KCR as well, but it was inconvenient and inefficient
Antitrust laws
US Sherman Antitrust Act and Clayton Antitrust Act
has been used to break up monopolies like Standard Oil and AT&T
Privatisation
British railroads in the 80s - British Rail was dissolved
Increased competition in the transportation industry
More inefficiency and lower quality of service
Merger review
EU merger review process
Fine against monopoly
Taobao fined 1 billion USD
Anti-monopoly legislation
Product differentiaion
MacOS and Windows, Nike, McDonald’s Coconut Milk latte
Monopoly setting prices
Deebers company in South Africa mine 50% of the world’s diamond - their price sets the market price
Legislation to prevent abuse of market power
HK Competition Ordinance
Prevents collusion (cartels, price fixing etc.)
Prevents market power abuse (limiting production, predatory pricing etc)
Regulation to prevent abuse of market power
MTR Fare adjustment mechanism - MTR has no authority over fares, the formula does
Accounts for changes in inflation and productivity
Allows MTR to raise fair regardless of social responsibility and affordability. Also takes the decision away from its shareholders (76% the government). Also risk of an inflationary sprial as other transport fares rise
Transport Department also sets fares for GMBs and buses, and awards licenses. But no new licenses have been issues since 1976
Government ownership in response to abuse of market power
Norway nationalizing the oil industry in 1972
Profits from oil discovery belong to the citizens, also gov revenue
In this case the gov knows what it’s doing but in others it may lack expertise
Monopoly leading to welfare loss
Hong Kong Stock Exchange.
SEHK and its subsidiary HKEX are the only companies allowed to operate a stock exchange
This leads to higher transaction costs and more rigid trading practices. Inefficiency.
Collusive oligopoly
OPEC - they collude very openly to set the price of oil.
HK: Construction idustry. Twenty people were fined a total of $180 mil for bid rigging in a building maintenance project on HKI.
Non-collusive oligopoly
Car industry - they engage in fierce competition but do not collude to set prices
Price competition
Grocery stores having sales. Wellcome’s “Low Prices Locked” campaign etc.
Non-price competition
Cafe de Coral’s “Club 100” membership scheme offers customers weekly rewards (if they meet spending requirements), birthday rewards, electronic vouchers and points that can be redeemed.
Monopolistic competition
Pizza chains - Pizzaexpress, PizzaHut, Paisano’s and Dough Bros all offer slightly different pizzas but they’re all pizza (slight product differentitation)
Price war
Monopoly being good and bad
Hong Kong Jockey Club. They are the only ones legally allowed to operate a lottery.
Provides massive revenue for the government and NGOs, reducing inequities and poverty
Sometimes the revenue is used for projects the government should do anyway (schools etc.), so there’s less transparency
Just a monopoly
Garden Bread supplies basically all of HK with bread, from supermarkets to fast food to high end restaurants.
GDP vs GNI stats
Bangladesh GDP 2017: 250 billion USD
Bangladesh GNI 2017: 120 billion USD
Difference is caused by foreign-owned factories (e.g.H&M) owning productive capacity
High economic growth
India, referred to as the world's fastest growing major economy, around 7%. Growing population, privatisation of oil, coal and airline, tax reform, all helped increase growth.
Low economic growth
Japan - 1.1% in 2022
Economic has been stagnating generally since the 90s
Real wages have stagnated
Government response to asymetric info
Ingredient and nutrition information labels, calorie labels in Canada
But menu costs for producers
Private response to asymetric info
AIA and other insurance comapnies making prospective customers take medical tests to understand the risk
Economic growth and living standards
China
Economy grew at an average of 9.91% per year from 1979-2010, poverty fell by 800 million
Economic growth being bad for the environment
China
World’s second largest polluter, coal-dominated economy
Smog in Beijing so bad that it cancelled schools sometimes
But they are also the biggest producer of solar panels
Economic growth and income distribution
Hong Kong has very high GDP per capita (US$50000), but 23% of households are in poverty
Transfer payments to reduce inequality
CSSA
Reduces inequality by reducing the living costs of the poor
Cons:
Family members are incentivised to move out because it’s calculated on a household basis
Government bureaucrats handling applications were swamped, making them more inefficient and less able to make a good judgement of people’s needs
Expansionary monetary policy
Contractionary monetary policy
Crowding out
Tariff
Donald Trump wins and implements his proposed tariffs—20% on all U.S. imports and 60% on Chinese goods
Pros
Protect domestic industries (political motive for election)
Protect jobs / prevent structural unemployment
Increased gov revenue
Cons
This would cause US GDP to shrink 1%.
It would also decrease growth in Europe
Higher consumer prices
Quota
Subsidy
Administrative barrier
Trading bloc with advantages and disadvantages
Monetary union with advantages and disadvantages
Consequences of exchange rate fluctuation
Expansionary fiscal
Obama post 2008 Putting America to Work campaign
Spent $220 billion in unemployment benefits, allocated $275 billion to federal contracts to create jobs. Helped build consumer confidence after the recession and reduce
Contractionary fiscal
Note 
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