Taxation can be defined as a form of government Levy placed on goods on services that contributes to the state revenue. There are 2 main forms of taxation, direct tax [income tax, CGT tax] and indirect tax [VAT and taxes placed on cigarettes and alcohol].
One of the most common policies that are used to tackle pollution is the green/environmental tax.
This is basically when a form of tax is placed upon a good that damages the environment in an attempt to reduce the level of production or consumption. One example that we can use to evaluate the use of taxes to solve pollution is the recent tax on plastic bags placed by the Irish government.
From this diagram we can see the negative externalities that arise from the use of plastic bags. The MPC curve highlights the private cost of the use of chopping bags and the MSC highlights the cost to society of the use of shopping bags
If there was a form of tax implemented on the production of shopping bags then this would in principle reduce the output of it. The reason for this is that the tax placed on the good would mean that the cost of production would increase. This would then lead to a parallel shift of supply therefore increasing the price of the good and decreasing the supply of shopping bags.
Linking this to the extract it is possible that a form of tax could be placed to reduce the level of spam mail. Spam mail can be seen as a negative externality from these diagrams below.
As the article highlights, the form of tax that can be placed upon spamming mail can be Attention Bonds. If these were implemented then this would mean that the firms who send out spam mail would incur an increase in costs of production in sending out the email, this would then mean that the supply of spam mail would decrease.
This can be seen by the diagram below.
Information pollution can be defined as the contamination of information supply with irrelevant, redundant, unsolicited and low-value information; which is what spam emails mainly consists of. This is caused since the senders, send these emails blindly to everyone while the information is only useful to very few. Due to no costs incurred the senders are able to do this repeatedly with no consequences.
Incomplete information, or commonly known as asymmetric information, can be defined as when one of the consumer/producer has more information about a good/service then the other consumer/producer. It is an example of market failure.
Regarding the issue to do with spam mail, there is a common problem of asymmetric information in this industry. It can be said that in thus example the Spammer has more information than the recipients of the mail.
However in the extract we can see it clearly says that ‘ironically, although spam produces a glut of unwanted information, it is caused by an absence of information about senders and recipients’. This quote shows us how asymmetric information is apparent both with the buyers and sellers. This will...