Friday, June 18, 2010

Bombshell Study: Higher Taxes on Soda Mean Less Consumption

So if you tax something at an exorbitant rate, people will actually buy less of a product? Shocking, indeed. Seems the folks at the New York Times have stumbled upon an inconvenient truth, although I figure when the desired revenue isn't met they'll probably call for higher taxes.
The researchers conducted the experiment at a hospital cafeteria, and they also tested whether an educational campaign explaining the health effects of soda drinking affected consumption. It did not — although when higher prices were combined with an educational campaign, consumption fell more than it did with higher prices alone.

In many ways, this study is not surprising. People respond to significant price changes. That’s true with cigarettes, alcohol and, evidently, soda. But this study is still important, partly because previous research has found that small price increases, via taxes, did not significantly affect soda consumption.
H/T Lisa, who says: "Thank goodness the scientific method could be used to conclude a basic economic fact that most of us learned in fifth grade."

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