Finish the Essay 4 with A++++work

1 Unit 6: Illegal Goods In this unit we discuss why some goods may be illegal, and consider the idea of rational addiction. We will discuss consequentialist and other arguments for and against the legalization of illegal goods. We will also discuss the idea of local substitution and examine the effects of the legalization of gambling on local economies.

Book Chapters:

• Chapter 21: “The Line between Legal and Illegal Goods”

• Chapter 43: “The Economic Impact of Casino Gambling”

Assignments:

• Quiz 6

• Essay 5

Concepts: • Externalities:

– Negative Externalities – Taxation and prohibition

enforcement to solve exter- nality problems

• Reasons goods may be illegal

• Obj. v. Sub. preferences and externalities

• Taxation

– Tax pass through rate – Elasticity of demand – Why externality taxes may

be regressive – Positive feedback

• Price and quantity after legaliza- tion

– Supply and demand shifts

• Tradeoff between legalization and prohibition

• Effect of casinos on local economies

• Local substitution

– Relationship to demand elasticity

• Information problems with ille- gal goods

– examples from gam- bling/lotteries

Required Readings:

• None. Please see the textbook for references.

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Sources:

• Gary Becker, Kevin M. Murphy, and Micheal Grossman. The market for illegal goods: The case of drugs. Journal of Political Economy, 114(1):38– 60, February 2006

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• William N. Evans and Julie H. Topoleski. The social and economic impact of native american casinos. NBER Working paper, (w9198), 2002

• Melissa S. Kearney. The economic winners and losers of legalized gambling. NBER Working paper, (w11234), 2005

Prompt: There are several proposals to legalize marijuana in Ohio. Make your own proposal. Your proposal should include:

• Explain why there may be more benefits to legalization compared to keep- ing the good illegal

• What market structure should be used? Perfect competition or a limited number of growers, wholesales or retailers? This should be brief, most proposals have plans to restrict the number of legal growers or wholesalers, and you should decide if you want to do that as well.

• An accounting of the potential negative externalities, and whether or not you would impose a tax. If you impose a tax how will the elasticity of demand of different users effect how the tax burden is distributed?

• An accounting of the potential effects of local substitution.

• An explanation for how the market will change after de-criminalization. Will price rise or fall, and why? (Use economic theory to justify your position)

• You must include at least one figure illustrating your argument concerning one of the above bullets. This should be a supply and demand graph.

• Since we did not specifically discuss marijuana in the lectures you will need to include at least one external source as evidence for your claims–for some claims argue using theory or analogy with other illegal goods we did discuss

You must use a consequentialist ethical framework, and you must include eco- nomic theory explaining predictions, and citations of relevant facts about other markets we discussed in lecture.

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References [1] Gary Becker, Kevin M. Murphy, and Micheal Grossman. The market for

illegal goods: The case of drugs. Journal of Political Economy, 114(1):38– 60, February 2006.

[2] William N. Evans and Julie H. Topoleski. The social and economic impact of native american casinos. NBER Working paper, (w9198), 2002.

[3] Melissa S. Kearney. The economic winners and losers of legalized gambling. NBER Working paper, (w11234), 2005.

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