Cap and Trade and Soda

A few days ago, my family and I went on vacation. On the way back, my family and I were discussing various things including some matters of politics. One thing that came up was some of New York City mayor Michael Bloomberg's recent actions. I expressed the view that the ban on soft drinks larger than 16 ounces seemed rather heavy-handed. (After reading a little more about the exceptions for fruit drinks along with sales at grocery stores, I'm a little more happy to see that, but I still feel the ban was heavy-handed.) I then heard the argument that even if it is heavy-handed, it does help combat the obesity crisis by reducing access to drinking 16 ounces of soda at a time, because even if it is still technically possible for someone to fill up an 8-ounce cup twice, human psychology is such that said person would only fill up once, because for many people the convenience of filling up once trumps the desire to have as much as possible. I then wondered what other alternatives could be considered. The simplest alternative would seem to be a tax akin to taxes on cigarettes; if the large sodas are taxed heavily at such venues, people would naturally be discouraged from drinking as much. I have taken the class 14.03 — Microeconomic Theory and Public Policy, though, so I have seen that in many cases a Pigovian tax scheme like that may not achieve the most efficient outcome because it is difficult to adjust tax rates to control quantities precisely. Then I also remembered learning about cap and trade schemes to control quantities. Would that work? Let's take a look after the jump.

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