Thursday, January 25, 2007

Pigou - Can you?

Apparently the idea of using taxes to curb gasoline consumption is catching on. Take a look at this morning's Marketplace on NPR. There is also a new web site for Pigouvians. And as always the former chair of the council of economic advisors for President Bush is a voice for change.

We will be making heavy use of the Pigouvian tax idea for the next few weeks - And I am very much looking forward to your comments, both in and out of class. Keep up the great work!!

The General

10 comments:

Thomas Gift said...

The fact that the Pigouvian tax is favored by both N. Gregory Mankiw (who comes down solidly on the right of just about every political issue) and Al Gore (who does just about the same on the left) is more than enough to convince me that higher taxes on gasoline aren’t really a matter of partisan politics, but instead a matter of sound economic science. In my judgment, the question shouldn't be if these taxes are implemented by the federal government but rather how, when, where, and to what extent. Let's internalize externalities like nobody's business!

Whitney Dickson said...

I agree with Farrell that innovation is the best way to solve our energy crisis. But is a gas tax a necessary step to encourage new technologies? After reading some of the Blog comments on Mankiw's site, I recognize some of the downfalls of such a tax.
One person compared the European dependence on public transportation to herding sheep. Don't we value the independence and flexibility of owning our own transportation? In the absence of a sustainable alternative, a gas tax would inevitably reduce this freedom (thus the basis of its appeal for some I guess).
Another point made was the jobs and culture that would be lost if the auto industry crashed.
And what rang true the loudest was the fact that no one likes more taxes!
While I definitely see the advantages of a gas tax, I think that it would be best implemented where there is an acceptable alternative. At the least, it should be implemented in progressive stages so as not to turn the long established industry upside-down in one sweep.

kirk jones said...

The very impressive list of members of the Pigou Club displays strong united support for the gasoline tax by some of the world's brightest minds. On the other hand I would assume that these economists would disagree and argue over how to actually implement these taxes. I'm curious if such a tax or something comparable has been or is currently being used somewhere around the world.

sarah tilbor said...

One comment that Whitney said made me think of what kind of economy and life I want to live in. She commented on the idea of people losing jobs because of the auto industry crashing.
While I see the importance of people's jobs, I also think that it would be more beneficial to have a more sustainable industry. While the auto industry does hold much employment opportunity, it is also based on a finite resource. This makes it an unsustainable choice. Why not move those jobs to a more stable and promising form of transportation or another sustainable industry?
Also, I have to disagree with the "herding sheep" comment. I learned to use public transportation, while abroad. And it was not only liberating but also entertaining. It places everyone on the same economical "playing field". Everyone has the opportunity to get to point A. Also, it was the best way to meet people. Like most things in life: it's what you make of it.

lucinda sardinha said...

I agree that what it worries is the speed of the substitution of the fossil fuel, that is finishing. We cannot count only on the traditional sources.

Hartley said...

I think a gas tax might prolong the push to find alternative sources of energy. I think by 2030 the US's energy demand is suppose to double. Gas alone cannto sustain that amount of demand. I do think a tax will help curb the use of gas, but as seen before, people will pay at least $3 a gallon for gas. Will we see the benefit of this tax or at least greater than the cost?

Elisangela Rangel said...

By stimulating the reduction of the consume of gasoline, president Bush end up helping the exportation of brazilian ethanol, because it will also stimulate others countries to copy this new model. Brazil exports about 3.5 billions of liters of ethanol per year.

Juliana da Silva said...

In my opinion, the best alternative would be the combination of the use of Pigouvian taxes with more incentive on the implementation of alternative technologies such as cars that use electric or hydrogen energy.

Elizabeth Garson said...

I agree in thinking that while the Pigouvian tax will have some impact on the way we use gas, it might not have a strong enough effect to find alternative methods. People may choose to buy a car that gets better gas milage to drive consistently and save their gas guzzler to drive only when necessary or they might walk the mile to campus as opposed to drive; however I cannot see the tax having a great enough impact. I think that incentives for using new technologies would complement the Pigouvian tax nicely.

Kris Brake said...

I agree with Elizabeth that people may find other ways around a Pigouvian tax, but the major issue is that it would provide incentives for large firms to invest in research for alternative energy sources. Not only will costs be lowered, but there will be profits to be obtained from using other sources.