Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

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. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Wednesday, March 16, 2005

Charging for Grocery Bags (again)

Several months ago, I argued the price elasticity of demand is so high that a 17-cents per bag charge for plastic grocery bags would dramatically reduce the quantity demanded. Here [h/t to BrianF] is some Australian evidence on the effect of charging for plastic grocery bags.

Hardware chain Bunnings has sold a million of its red and green reusable bags, chief operating officer Peter Davis said.
Since September 2003, when Bunnings imposed a novel 10c levy on plastic bags, customers had used 21 million fewer plastic bags.

Overall, in Australia, use of plastic grocery bags has declined by about 20%, and in grocery stores the use has declined by about 25%. Unfortunately the article does not provide more details about how many other retailers have implemented fees-for-bags programmes. The article does, however, reference this study, which says,

Scenario 1B (a 25 cent legislated levy) achieves the most significant reductions in environmental impact when compared to Scenario 4
(the current Code of Practice), ie.:

  • 63% reduction in primary energy use
  • 65% reduction in global warming impacts
  • 82% reduction in contribution to litter (using persistence as the

Scenario 1A (a 15 cent levy) also achieves significant benefits, ie.:

  • 54% reduction in primary energy use
  • 56% reduction in global warming impacts
  • 71% reduction in contribution to litter (using persistence as the
Unfortunately, the method for calculating these results is far from transparent in the study. My priors would be to attach a wide confidence interval to them. Why didn't they just estimate the price elasticity of demand?
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