Post by bennett41 on Sept 17, 2011 2:54:25 GMT -5
As is widely seen, the defects of the pricing mechanism may be offset by the government intervening in the market by adjusting its own supply and demand (e.g. by stockpiling agricultural produce and other basic materials, locating its own offices in Development Areas, placing orders with firms in areas prone to high unemployment), by taxing or subsidizing certain activities (e.g. imposing a higher rate of fee or commission on commercial and industrial buildings than on dwellings, subsidizing agriculture through relief in the tax rate) or by making regulations on a general basis (e.g. rent control, general building and fire-precaution regulations). Why, therefore, should it interfere by planning control, which relies mostly on a case-by-case assessment?
In the first place, a centrally determined rate of tax would be general in its application and might not be appropriate for particular cases. Thus the external costs of a proposed development, e.g., extracting minerals in an area of outstanding natural beauty, may in total be so great that any tax imposed ought to be so high as to prevent such a project from being economically viable. But is it certain that this would happen? It is possible that the rate of tax decided centrally on an average basis would be so low as to enable the mineral extraction to proceed. In this particular case, therefore, the rule that an activity should proceed to the point where marginal social benefit equals marginal social cost would be breached.
The difficulty in such a situation is that the external costs incurred can vary in magnitude from one beauty spot to another, for each area differs in character and in the number of visitors it can attract. Taxation, however, would be applied to each area on the same basis, by even preventing mineral extraction where the beauty spot has no outstanding quality and is located in a remote area that it is hardly likely to ever to attract many visitors. Such areas are also now marked as out of bounds for people intending to develop a Home in Kerala . House owners, who built houses near to such destinations before the stringent laws were enacted, are now charged with occupying areas with high natural resources like high quality clay and other minerals.
In the first place, a centrally determined rate of tax would be general in its application and might not be appropriate for particular cases. Thus the external costs of a proposed development, e.g., extracting minerals in an area of outstanding natural beauty, may in total be so great that any tax imposed ought to be so high as to prevent such a project from being economically viable. But is it certain that this would happen? It is possible that the rate of tax decided centrally on an average basis would be so low as to enable the mineral extraction to proceed. In this particular case, therefore, the rule that an activity should proceed to the point where marginal social benefit equals marginal social cost would be breached.
The difficulty in such a situation is that the external costs incurred can vary in magnitude from one beauty spot to another, for each area differs in character and in the number of visitors it can attract. Taxation, however, would be applied to each area on the same basis, by even preventing mineral extraction where the beauty spot has no outstanding quality and is located in a remote area that it is hardly likely to ever to attract many visitors. Such areas are also now marked as out of bounds for people intending to develop a Home in Kerala . House owners, who built houses near to such destinations before the stringent laws were enacted, are now charged with occupying areas with high natural resources like high quality clay and other minerals.
