Carrots, Sticks and Sermons: Policy Instruments and Their Evaluation by John McCormick

Author:John McCormick [McCormick, John]
Language: eng
Format: epub
Tags: Public Policy, Political Science, General
ISBN: 9781351530019
Google: 0iIxDwAAQBAJ
Goodreads: 36079365
Publisher: Routledge
Published: 2017-07-28T00:00:00+00:00

Economic Give-and-Take

Broadly speaking, the above description leads to the following picture of the effectiveness and legitimacy of instruments of the economic control model. Increasing the costs of certain courses of conduct by imposing levies is an effective means of altering the behavior of individuals and their organizations. However, levies arouse too much resistance and are therefore used only sparingly. Increasing the benefits of certain courses of conduct by providing subsidies appears to lessen the resistance to a given policy. By taking with one hand, through the levy, and giving back with the other, through the subsidy, the authorities can increase the feasibility and effectiveness of a policy.

In practice it is virtually impossible to define subsidies and levies if the existing tax structure is not taken into account at the same time (Ricketts 1985). Between the more purely stimulative instrument of the “subsidy on request” on the one hand and the “levy” on the other, there therefore lies a great variety of economically oriented policy instruments such as credits, support, grants, guarantees, tax deductions, asset-sharing, refunds, price measures, tariffs, and taxes. Stimulative and repressive economic instruments are used in combination in various parts of Dutch environmental policy in order to ensure feasibility and effectiveness. Firms are “punished” by means of levies if they pollute the environment and “rewarded” by means of subsidies if they act in the desired manner in order to spare the environment. On the basic premise that “the polluter pays,” the proceeds from all kinds of environmental levies are used to pay subsidies intended to promote the adoption of clean technology.

In 1985, the two-edged sword of levies and subsidies was cleverly applied in the policy designed to introduce “clean” cars with catalytic converters. Fiscal measures were used to promote the sale of clean cars. The rates of the special tax on cars were altered in such a way that buyers of clean cars obtained a discount of between 850 and 1,700 Dutch guilders. The rebate on the tax rates for clean cars was financed by an overall increase in the tax rates for new cars. Klok (1991) notes that this combined system of subsidies and levies was effective. The supply of models fitted with catalytic converters from the various importers increased. The consumers took full advantage of this windfall, and increasing numbers bought cars fitted with catalytic converters. In the first three years, sales of clean cars rose faster than had been anticipated when the policy was formulated in 1985. A market share of 10 percent, 30 percent, and 45 percent had been expected in 1986, 1987 and 1988 respectively. In reality, the market share in these years was 13 percent, 46 percent, and 70 percent.

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