The financial world we live in is just as wild, if not more, than the mountains and woods we walk through. We are told that the fundamentals of our economy are strong, but we can feel that something is wrong. My unique financial background and survival passion make Financial Survivalist and excellent place to learn and share.

Tuesday, May 29, 2012

Sin Tax Causes Sin

Adam Smith, the famous economist and author of Wealth of Nations, wrote that where wine is cheap and easily obtainable it looses it's novelty and drunkenness is not as prevalent as it is in similar circumstances in which wine is rarer and more expensive.

He observed service men from northern France, where wine is slightly more expensive and rarer than in southern France, when stationed in southern France, would take to drinking heavily for a few months due to the inexpensive wine. However, the service men would soon become bored with the cheap wine and would in the end drink less.

It makes sense then, that in Portugal where they have stopped prosecuting drug crimes and all but legalized all drugs, the incidences of drug abuse and addiction have decreased as a result of their drug policies. Not to mention that practically all drug violence has disappeared.

Sin tax doesn't really cause sin. However, it is counterproductive to make a thing more of a novelty and rarity if you desire less abuse of it. By applying strict penalties (financial and or criminal) it increases the allure and novelty of the thing and draws people to it's use.

I am not a sociologist, and these observations may be wrong. I think it is important to point out that Adam Smith also wrote that increasing the price of a thing generally decreases the demand for that thing. However, I feel that it is an important point to consider as we watch the thousands being slaughtered on our boarder over what would otherwise be petty drug use.

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