Saturday, 15 November 2014

Eagle vs Whale

Whaleoil took aim at my former colleague John Gibson.

John received a Marsden grant for some work looking at the elasticity of soda consumption to soft drink taxes. When I saw that John had received the grant, I knew he had to be up to something really interesting, so I dropped him a note asking about it. He told me that a lot of current estimates of the effects of taxes on consumption are confounded by that we use data on total spending as a proxy for consumption, and where consumers can substitute down a price/quality ladder with an excise hike, total consumption may be rather more inelastic than we might have estimated from data based on a consumer's change in spending after a tax: what can look like a drop in spending after a tax hike could be a maintenance of ex ante consumption at a lower price point. Interesting stuff indeed. I hadn't blogged on it yet due to the busy. I wish I had hit it earlier now that I see Whale went after John.

I supposed Whale guessed from the project title that this would be another publicly funded attack on consumer freedom. John's project isn't that, as John later explained in a "right of reply" post. Good on Whale for posting it.

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