Bewajeh

August 9, 2008

Some More on Pigovian Taxation of Oil

Filed under: Economics,Governance,Politics — Bottom's Up @ 2:15 am
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Business week has a nice article, which after everything is said and done, ends up advocating for some sort of Pigovian Taxation on Oil.  Something a lot of analysis against taxation of oil misses is the simple fact that at the moment there is no economic cost associated with polluting the air (through the use of oil et al). Thus if everyone is sharing the common resource which is our atmosphere, some economic cost should be associated with its use/misuse, i.e. the Pigovian Tax on Carbon emission. That is unless you are one of those who believes the earth to behave like a perfect black body which radiates all the heat entering its atmosphere back into space almost instantly, green house gases be damned.

While I am no tree hugger, I am one of those who is happy everytime the price of oil rises – demand reduces, alternatives become affordable and our moronic politicians in Washington see a little more reason to look at that crazy little thing called public transport. Thanks to this article, I feel much less of a tree hugger and in esteemed company.

Also, Greg Mankiw explains here why that absurdity of chopping off the pinkie of the invisible hand aka Windfall Profits Tax is hardly Pigovian. I wonder how much part Jason Furman, a former student Prof Mankiw’s and one of the top people along with Prof Goolsbee on Obama’s economic team, played in this policy. But then, polictics can make even economists change their belief – give the people what they want!

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2 Comments »

  1. A friend of mine just emailed me one of your articles from a while back. I read that one a few more. Really enjoy your blog. Thanks

    Comment by Mike Harmon — August 9, 2008 @ 2:37 am | Reply

  2. Thanks. Which article was this?

    Comment by Benaam — August 9, 2008 @ 2:45 am | Reply


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