To reduce obesity, a government introduces a high tax on sugar-sweetened beverages. Consequently, consumers substitute these drinks with cheaper, untaxed beverages containing synthetic sweeteners that are later found to have worse long-term health risks.
This outcome is a direct illustration of government failure arising from:
regulatory capture by synthetic chemical manufacturers.
unintended consequences of a policy intervention.
information gaps leading to the underprovision of a merit good.
the free-rider problem in the market for healthcare services.
