Mike Seo – ISP

19 06 2011

Marked Journals

Paying for Grades: A Bad Idea?

Wal-Mart is bad for the economy?

Carbon-tax vs Cap-and-Trade: which is better?

What should we do about our export and income inequality?

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Kiruban Mahadeva – ISP

18 06 2011

Marked ISP Journals

Journal 1: Paying Students to do well: Is it an Ethical Decision?

Journal 2: Are the Prices we Pay for Rational?

Journal 3: It’s Time for Corporations to go Green

Journal 4: Canada’s Concerns for the Future

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Oleksandr Yesikov – ISP

18 06 2011

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Commodity Prices, Oil and Resource Shortages

6 06 2011

Our article can be found here, and statistics on rising oil prices can be found here.

 

Questions:

1. Who do you believe holds responsibility for rising oil prices: Speculators, market commentators, suppliers, or a combination of all of them?

2. How do you think rising oil prices can be reigned in? Should they be reigned in?





Marijuana – Should be legalized!

16 05 2011

Cannabis, also known as marijuana, among many other names, refers to any number of preparations of the Cannabis Plant  intended for use as a psychoactive drug or for medicinal purposes.  Marijuana is being used by kids, teenagers and adults in today’s society. Apparently there is a great demand for this product, yet it is not legalized. There were three million Canadians who used marijuana in 2002, according to Statistics Canada. That’s about 12 per cent of the population older than 15, up from seven per cent in 1989. The Canadian Medical Association estimates that about 1.5 million Canadians smoke marijuana recreationally. Taking a look at these statistics one can just imagine how much revenue Canada’s government has lost due to the illegalization of marijuana.

There sure is a failure in the market for marijuana. People who don’t get it use different and illegal ways to get marijuana. By illegal ways I’m referring to the black market. In this situation we can see the concept of price floor where there is not enough supply and the demand is greater than supply. Consumers in this case use other ways to get what they want. So this has created a black market in Canada for marijuana. People buy marijuana from the black market where products are not taxed due to which the government looses a lot of money.  The government is always trying to catch these people because they loose out on taxes that people are suppose to pay. But then again why not just legalize marijuana if you want taxes?

A study estimates that the average price of 0.5 grams (a unit) of marijuana sold for $8.60 on the street, while its cost of production was only $1.70. It is true that Increased marijuana use can have ill effects on the health of the population but the increased sales bring in more revenue for the government. However, if legalized, governments can control how much marijuana is consumed by increasing or decreasing the taxes on the product. There is a limit to this, however, as setting taxes too high will cause marijuana growers to sell on the black market to avoid excessive taxation.

Just like cigarettes smoking marijuana has some negative externalities as well. The smoke sure does destroy not only your but other people’s health as well. There are many negative effects of marijuana. The short-term effects of marijuana include:

  • Distorted perception (sights, sounds, time, touch)
  • Problems with memory and learning
  • Loss of coordination
  • Trouble with thinking and problem solving
  • Increased heart rate, reduced blood pressure

Sometimes marijuana use can also produce anxiety, fear, distrust, or panic.

Although marijuana has all these effects, so does smoking cigarettes and drinking alcohol. If the government can charge taxes on cigarettes and alcohol then they should do the same for marijuana.

In conclusion, every drug has its own effects on the consumer and the society.  I think marijuana should definitely be treated like alcohol and tobacco in terms of taxation. I’m sure the government can control the consumption of marijuana by implying reasonable taxes. They should use the command and control policy where there are laws imposed on certain things. This is something they should think about.  I think marijuana should be legalized. The government is loosing a lot of money by not legalizing marijuana in fact they are loosing billions of dollars. There should be laws against the consumption of marijuana. It should be treated the same way as alcohol and tobacco. It should be taxed. This way the government will earn vast amount of revenue and people will be happy.





Canada vs. Cannabis: An Economic Showdown (TBM)

15 05 2011

Canadians have a reputation, whether it’s good or bad is debatable, for smoking marijuana all the time, with some of our neighbors down south thinking that it’s legal in the Great White North.  A country full of pot-smoking hippies is all Canada is to most Americans.  What they don’t realize is marijuana is Canada is far from making every Canuck a stoner, and in fact the only way one can get it legally in Canada is through a medical prescription.  The legalization of medical marijuana has been around for 10 years in Canada, available for illnesses like glaucoma and epilepsy, to ease the pain of chemotherapy, and even to induce its infamous “munchies” on patients with little appetite. The question that everyone is asking now is whether Canada should take marijuana to the next level or not.

Right now, the economic system for marijuana is failing, because we have tried to impose a temporary solution on the “problem” of cannabis use for too long.  The prohibition of pot has created a system where the country allows no supply to be made, sold, or used in the country; but just ask 3 out of every 20 Canadians and they will tell you the demand is there, and that consumers are willing to pay for their share.  This system failure is similar to that of a price floor, where there is not enough supply to meet the demand, and consumers must either do without, or turn to another outlet to get what they want.  This has lead to the black market of marijuana trade in Canada.  Canadians have seen this happen before during the alcohol prohibition of the 1920’s, where many Canadians turned to black markets that were selling various alcoholic drinks because they saw the profit that was to be made.  Eventually, alcohol was legalized and taxed, to the profit of the government and the destruction of the black markets.  Legalization solved so many problems, so why wouldn’t it work with marijuana?

If we look at this from an economic standpoint, the trade of cannabis in Canada is an estimated $20 billion per year, creating 250,000 jobs in production alone.  The tax revenue Canada is missing out on is a whopping number.  Not only could the government tax the sales of marijuana in Canada with sales taxes like the GST and PST, or HST (depending on your province), along with an excise tax that could be put on the retail price of marijuana, but the government could also make money through increased volume of income taxes.  The 250,000 people employed by the cannabis industry are not claiming this income due to the illegal practice in which it was acquired, growing and distribution; legalize pot, and that income is not only legal, but nice and taxable.  Looking at HST and excise tax averages for cigarettes across Canada, the estimated tax revenue to be gained via marijuana legalization is approximately $11.8 billion, give or take a couple billion.  The money gained from the cannabis industry would not only be routed away from the black market, but also be used to further the country as a whole by the government.

Some say that marijuana is a drug too dangerous to be let onto the market.  They say the addictive power of the tetrahydrocannabinol (THC) in the pot is addictive, and leads to usage of harder drugs within pot smokers, and that the cancerous properties are too much to risk having out on the shelves of stores for any good to come out of the legalization of cannabis.  What people don’t realize is that compared to other drugs, even alcohol and tobacco, cannabis is safer for the body and the mind.  Cannabis does not cause cancer as often as tobacco, it does not damage the body as severely as alcohol and tobacco do, and it is less addictive than both alcohol and tobacco.  In fact, even caffeine is more addictive than cannabis!  The harm cannabis will do to someone is less than that of other legalized drugs, so there is no reason to exclude it because of that.  The idea that marijuana is a gateway drug is only a problem because the same black markets that push pot on people also try to get users addicted to harder, more addictive drugs like cocaine and heroin.  The destruction of the black markets through legalization would prevent people from being exposed to these hard drugs, and cannabis would no longer be a dangerous gateway drug.  Lastly, concerning laws, alcohol and tobacco laws limit the age of those allowed to use those drugs, and the same would go for weed.  Laws would need to be in place for driving while under the influence of marijuana, along with ways to test on the roadside for such intoxication.  The safety of everyone should not be compromised when legalizing cannabis.

Overall, the prohibition on marijuana is holding the government away for billions of dollars in revenue, and destroying lives through exposure to hard drugs through the black market.  Marijuana should be made legal, with laws to protect the users and those who do not wish to partake, just like alcohol and tobacco laws.  Marijuana should be taxed once legalized, to generate revenue for the government, and discourage use, like the tax on alcohol and tobacco.  It’s a safe drug that we could make a lot of money on, so why not legalize it?





Excise Tax.

25 04 2011

Excise tax is commonly known as an inland tax, a tax on a specific good or service, often imposed on the quantity purchased rather than the value. An excise is an indirect tax which makes the producer or seller pay taxes to the government and try to recover the tax through raising prices. Excise tax is usually imposed in addition to anther indirect tax such as sales tax.

Pros:

Playing on equal grounds:

If companies pay taxes relative to the quantity of goods sold rather than the value of the certain good, the big companies that sell more pay more taxes and those companies that can’t compete to those larger companies don’t have to pay taxes equal to those large companies.

Government revenue:

Excise taxes give government a lot of revenue. These taxes are place on inelastic goods such as cigarettes and gasoline. These goods are sold a lot in quantity and since excise taxes affect the quantity of goods you sell, these companies pay a lot in taxes to the government.

Control Over the consumption of Goods:

Another reason excise taxes are a good thing is to somewhat control what the people are buying. For example since a large population of the people smoke cigarettes and the government wanted to reduce that percentage they can raise the excise taxes of cigarettes and making people pay more to smoke.

Cons:

Unequal Grounds:

Companies that can sell larger quantity of goods face higher tax rates then of those companies that sell less in quantity.

Increase in Taxes as a whole:

Excise is often somewhat similar to other taxes and sometimes doubles up with them. Since the two taxes largely apply to the same types of goods, people are forced to pay tax twice over on the same items once through excise upon purchase and a second time around through customs duties upon transportation.

Increase tax of Medication:

Legal drugs are subjected to taxation in some countries. This has raised controversy about the fact that this tax leads to hugely inflated prices of ordinary and even potentially lifesaving medication.