Demerit goods are goods whose consumption the public sector discourages, based on a presumption that individuals not adequately weigh all the costs of these goods and thus should be induced to consume less than they otherwise would The consumption of such goods may be prohibited, as in the case of illegal drugs, or taxed heavily, as in the case of cigarettes and alcohol Income Redistribution The proposition that a private market will allocate resources efficiently if the efficiency condition is met always comes with a qualification: the allocation of resources will be efficient given the initial distribution of income If 5% of the people receive 95% of the income, it might be efficient to allocate roughly 95% of the goods and services produced to them But many people (at least 95% of them!) might argue that such a distribution of income is undesirable and that the allocation of resources that emerges from it is undesirable as well There are several reasons to believe that the distribution of income generated by a private economy might not be satisfactory For example, the incomes people earn are in part due to luck Much income results from inherited wealth and thus depends on the family into which one happens to have been born Likewise, talent is distributed in unequal measure Many people suffer handicaps that limit their earning potential Changes in demand and supply can produce huge changes in the values—and the incomes—the market assigns to particular skills Given all this, many people argue that incomes should not be determined solely by the marketplace Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 797