1 Answer | Add Yours
I do not think that the government should be involved in the market for such products to the degree that it does things like subsidizing their production or consumption. It should involve itself to ensure safety and such, but it should not be involved to a greater degree than that. Of course, this is a purely economic point of view. Governments will often make decisions based on political considerations and there are times when it will be politically necessary to get involved even if it is economically counterproductive.
Economically speaking, it is rarely a good idea for a government to subsidize the production or consumption of something that is not a public good. If the government subsidizes the production of sugar, for example, more sugar will be produced than “should” be. The price of sugar will go down. Consumers will buy more sugar than they would if they were actually having to pay the real price of sugar. In economic terms, this results in the misallocation of resources. Resources go to producing and buying sugar that should go to other activities. The sugar industry is propped up and does not have to operate as efficiently as it should. Economically speaking, this is a bad idea.
We’ve answered 330,809 questions. We can answer yours, too.Ask a question