PIGOU TAX | Good Tax on Sugary Soda (Updated May 29, 2016)

Illustration of "Taxing Sugar to Fund a City",
Op-Ed, NY Times, May 25, 2016

An Op-Ed by Mark Bittman, who co-founded The Purple Carrot and is a Fellow with the Union of Concerned Scientists, argues that the Berkeley, Calif. popular vote (3 to 1) to tax sugary soda drinks is the wave of the future.

Four other cities in Northern California are also considering such a tax, including the biggest, San Francisco.

So is Philadelphia.

Bernie Sanders opposes such taxes on grocery items because he says they are regressive, i.e., their burden falls on the poor more than the rich.

That is so, not only because poor people spend more of their income on groceries, but also because they are less educated and don't realize how bad for their health is a large intake of sugary drinks.

All the more reason why this tax is especially important for poor people.

Mayor Jim Kenney faces Bernie Sanders' concern about the regressive nature of soda taxes. He is pledging the revenue from the new tax to fund community amenities, especially those for children–universal pre-kindergarten (Head Start for All), community schools, libraries and parks.

So it is win-win for the poor. Either they continue buying the unhealthy soft drinks and support their community projects, or they give up buying the sugared drinks (Pepsi and Coke are offering many  alternatives) and they reduce the demand for health care services.

Comment

So far I have mostly just summarized Bittman's essay. Let me say that I think Bittman is right on this issue. While Bernie Sanders is on target with many of his financial proposals, he is I think wrong on the question of taxing sugary soda.

The illustration to Bittman's essay, of a soda can siphoning into a piggy bank is apt on its own, and is doubly apt when we consider that it is a PIGou Tax.

A tax on things raises their price and reduces their consumption. If the items are potentially socially deleterious, like gambling, tobacco and alcohol, then reducing their usage is a good thing. A Pigou Tax, named after British academic Arthur Cecil Pigou, is one that falls on socially undesirable goods. FDR quickly understood that it was better to permit alcohol and get revenue from it through a "sin tax" than to continue to try to prohibit it.

TECH STARTUPS | Does Location Matter?

Zach Robbins (L) and CEO Stephen
Gill, in Philly.

An article in Forbes by a startup entrepreneur, Zach Robbins, argues that it is not crucial to locate in Silicon Valley or New York City to be successful. (His company is in Philadelphia.)

Correct, although in another article the company expresses  concern that it doesn't have enough "good" applicants for the jobs it needs to fill.

But being in the right place improves your odds. In his case, the company he has co-founded, Leadnomics, describes itself as seeking to improve the market for insurance. "Lead" not as in the heavy metal but as in someone for an insurance agent to try to reach.

Philly is not known as an insurance headquarters (try Hartford, Conn. or Newark, N.J. if you want to avoid Manhattan but stay close to NYC).

But Philadelphia has something else going for it - it is the home of the Wharton School of the University of Pennsylvania, ranked one of the top three business schools in the country (along with Harvard and Stanford).

Robbins refers in general at the end of his article to the value of having a university nearby. But he doesn't just have a university nearby with a top business school. He has a university with a business school program preeminent in the field he is trying to sell to - the Wharton Risk Management and Decision Processes Center. Prof. Howard Kunreuther, for example, is widely known for his studies of imperfections in markets for insurance, such as flood insurance for homeowners.

This program could give his startup some traction. The focus of many economists has shifted to psychology because people don't actually make decisions, for example about insurance, as if they are rational.

A startup that improves the functioning of the insurance marketplace - to begin with, by suggesting the right buyers to the right sellers - would be a great social contribution as well as offering the potential for a good ROI.

UNIONS | Oct. 18–First American Trade Unions, 1648

Shoemakers at work.

Today in 1648, Boston shoemakers and "coopers" (barrel-makers) formed what are considered the first American trade unions.

The colonies had till then failed to import the English tradition of guilds, whereby craftsmen would band together to establish prices, quality standards, apprentice programs and charitable programs. The guilds in England also supported members who had retired or were beset by health or other challenges.

But these two 1648 quasi-guilds were limited to ensuring quality. The Massachusetts General Court prohibited "The Company of Shoomakers" from offering educational or charitable programs, or from fixing prices or settling disputes. 

More than a century later, the independence shown by the Boston shoemakers surfaced, as one of them has been credited with starting the Boston Tea Party.

The Philadelphia carpenter's union, formed some years after 1648, was more aggressive on behalf of its workers, and its printers and shoemakers were also aggressive at an early stage in the city's history. According to the History of Trade Unionism in the United States by Perlman and Selig: “The earliest recorded genuine labor strike in America, in 1786, was over wages paid to Philadelphia printers, who ‘turned out’ to demand a minimum wage of $6 per week." The second strike on record, in 1791, was also in Philadelphia, by house carpenters who struck for a ten-hour day.

In 1796 local shoemakers in Philadelphia organized the Federal Society of Journeymen Cordwainers (shoemakers working with Cordovan leather). Three years later the organization staged a 10-week, successful strike for higher wages, the first strike in the newcounry sanctioned by a union.