Issues
Lindahl prices do face some serious drawbacks. First, individual demand curves, and thus individual preferences, are not easily known. Due to the free-rider problem, people have the incentive to hide their true preferences and thus their marginal valuation (However, mechanism design of Groves, which is strongly individually incentive compatible, and Vickrey auctions could be used to overcome this problem).
A second drawback to Lindahl prices is that they may be unfair. Consider a television broadcast antenna that is arbitrarily placed in an area. Those living near the antenna will receive a clear signal while those living farther away will receive a less clear signal. Those living close to the antenna will have a relatively low marginal value for additional wattage (thus paying a lower Lindahl price) compared to those living farther away (thus paying a higher Lindahl price).
Some points still remain unanswered, these form the main issues of Lindahl taxation:
- How much should the government charge(or tax) each individual to cover the cost of supply of the public good?
- In Lindahl pricing everyone is taxed according to the benefit they derive from the public good, this information is difficult to collect, and people also have the incentive to under report.
Read more about this topic: Lindahl Tax
Famous quotes containing the word issues:
“The current flows fast and furious. It issues in a spate of words from the loudspeakers and the politicians. Every day they tell us that we are a free people fighting to defend freedom. That is the current that has whirled the young airman up into the sky and keeps him circulating there among the clouds. Down here, with a roof to cover us and a gasmask handy, it is our business to puncture gasbags and discover the seeds of truth.”
—Virginia Woolf (1882–1941)
“How to attain sufficient clarity of thought to meet the terrifying issues now facing us, before it is too late, is ... important. Of one thing I feel reasonably sure: we can’t stop to discuss whether the table has or hasn’t legs when the house is burning down over our heads. Nor do the classics per se seem to furnish the kind of education which fits people to cope with a fast-changing civilization.”
—Mary Barnett Gilson (1877–?)
“Cynicism formulates issues clearly, but only to dismiss them.”
—Mason Cooley (b. 1927)