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NE write up #2 - possible outcomes of certain actions One...

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Yi Ting Chen Economics 110 May 12, 2011 Naked Economics Write-up #2 I carefully read N.E. Chapter 2. People tend to maximize their profits in order to eventually make themselves better off; however, human’s behaviors are far more complex then we can even imagine. Quite often, policymakers strive to come up with some policies which might seem to resolve several problems directly. Nevertheless, the outcomes can be surprising the opposite of what they expected. Policies usually are designed for the welfare of the society, but many unintended results might happen. Take Mexico City for example, the governors intended to provide a better living quality by implementing the policy to eliminate the load of traffic. Unfortunately, this practice did not turned out to be desirable. The pollution was getting worse. A good policy takes advantage of incentives to control people’s behaviors toward a desired result while a bad policy overlooks the importance of incentives and fails to anticipate
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Unformatted text preview: possible outcomes of certain actions. One thing I found very interesting regarding incentive in the book is taxation. Tax is one of the greatest ways to regulate the economy within a country. It is crucial to make sure that the tax policy is properly evaluated before it carries out. A raise in taxes might not increase the revenue the government expects. For instance, if the tax rate gets too extreme to the point where individuals or even companies refuse to follow legal regulation, the tax income of the country might actually decrease. Because the cost of taking the risk avoiding taxes becomes less than paying it, many so called “underground economies” emerge rapidly. Again, in order to better understand economics and make proper adjustment to either maximize welfare or minimize cost, we have to gain more knowledge of people’s behaviors....
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