I am not familiar with that paper, but I have printed it out now so I’ll have a think over it, thanks.

@ Brad

I’m not sure it is irrelevant, but I need to think it over more before I’m certain. My initial thought is that it is consumer decisions which determine demand for bags and they face zero MC when MSC is non-zero. Since overseas experience shows demand to be highly elastic, that could be a significant difference which would suggest that social costs are not internalised.

However, the argument that supermarkets face that MC and determine how much to buy still nags at me. I just haven’t yet had that flash of understanding where it all becomes clear!

Surely the fact that consumers don’t pay the marginal private cost of bags is largely irrelevant. The cost of bags to supermarkets has to be pretty close to zero, since they don’t find it worthwhile to charge for them. As things stand, the business doesn’t make the final consumption decision, but it could if it so chose. The relevant consideration is the difference between marginal private and social cost. I doubt that the difference between zero and the marginal private cost of bags is high enough to be policy-relevant. You need to specify some significant externality to even begin to justify intervention. Even then, I don’t see how the MC to shoppers should come into it. Shouldn’t it be enough that supermarkets pay the full MC of bags, without being forced to charge consumers if the transaction costs remain prohibitively high?

I’m still not sure how I feel about this, but I just don’t think I have a good enough grip on it yet to be confident that there’s no reason for intervention.

There are plenty of things which businesses don’t charge consumers for at the margin. Absent a compelling externality argument, the cost of bags are internal to the business, which would charge for them if it were worth the transaction cost. Do you also think the government should tax salt sachets at restaurants, on the grounds that consumers face a marginal cost of zero and consumption will not be optimal?

Fundamentally I don’t see the problem with charging a small amount for a bag (much like you would charge for any other good or service). So if there is no externality, and some consumers are forced to pay a small fee for the convenience of a bag as businesses try to look environmentally friendly, I have no problem. Who knows, consumers might even score some utils off it too. 😛

If there is an externality, and businesses gradually migrate voluntarily to charging for bags, as seems to be the case, compulsion seems to be a bit heavy handed and unnecessary.

Either way, I see no need for the government to direct businesses w.r.t bags.

@ Brad Taylor
There certainly are a lot of people like that; but, as Eric said, it’s OK as long as they make their value judgements clear. (I think I’m channelling Matt here!)

@ goonix

I guess these are just marketing measures to greenwash their businesses. If there’s no case for compulsion then they’re not helping the planet by charging. If they is an externality problem then the idea of solving it via voluntary measures would be a bit ridiculous.