On October 13, 2006, in General, by Neil Stevens

Noted academic N. Gregory Mankiw of Harvard is pressing the Pigou Club, his name for a list of people who have publically called for punitive taxation on oil, ‘carbon’, or things like that. His justification is entirely academic: If we knew the ‘cost to society’ of the use of oil, then we could raise taxes by the amount needed to neutralize exactly that cost, and therefore this tax hike would actually be positive for the economy and society, because the revenue could be used to pay that cost.

Of course, the trick is that we don’t know such costs, and on top of that, we already collect a couple trillion dollars every year in federal taxes alone here in the US. Apparently they don’t need more taxes in Canada either, because Terence Cocoran is creating the NoPigou Club in the National Post, and lists good reasons for it:

There is no end to the planning mayhem that could be generated once Pigovian taxes become the economic norm. Taxes on cigarettes have risen hundreds of per cent over the years, in part to offset the alleged externality of rising costs of treating cancer and other diseases caused by smoking. Still people smoke. Anything that can be politically whipped up into an unwanted development — taxes on food to reduce obesity, taxes on alcohol to reduce alcoholism, taxes on babies to reduce population growth — or subsidies on babies to boost population.

There’s nothing new in Pigou, no matter how he’s dressed up by Prof. Mankiw.

Mankiw is right on a lot of things; that’s why I read his site. But I think he’s showing an academic bent on this issue by pressing this correct-in-theory but unnecessary-in-practice idea, unfortunately for the country.


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