December 7, 2006

NEOCONOMISTS VS. PIGGING OUT:

Gas Tax Fans Invoke a Telling Name for Road Hogs (AMITY SHLAES, December 7, 2006, NY Sun)

Arthur Cecil Pigou, pronounced PIG-oo, is not a household name. He lived in Britain and died almost 50 years ago. But Pigou had some novel insights into how people respond to disincentives, including taxes. If you dislike a behavior — smoking, gas guzzling — then you tax it, and people will do it less.

Lately some fairly important names, the sort of people who advise political candidates, have been talking about Pigou in the context of raising gas taxes or a new tax on emitting carbon, one of the byproducts of burning fossil fuels.

The most prominent of the Pigovians, as they are known, is N. Gregory Mankiw, former chairman of the Council of Economic Advisers and a Harvard University professor. Mr. Mankiw has posted a Pigou Club Manifesto on his Web site, laying out the reasons for a gas tax.

Mr. Mankiw has hunted down an impressive list of economists who have also talked about the idea of higher gas or energy taxes at various points in one form or another. Among them are Ken Rogoff of Harvard and Gary Becker of the University of Chicago. So is Martin Feldstein, of the National Bureau of Economic Research, who was mentioned at one point as a possible replacement for the Federal Reserve Board's former chairman, Alan Greenspan.

Mr. Greenspan also has talked about carbon taxes, as has Nobel Prize winner Joseph Stiglitz. Kevin Hassett, my fellow Bloomberg News columnist and director of economic studies at the American Enterprise Institute, is also a club member. Mr. Hassett notes that the light-truck category, comprising sport-utility vehicles, minivans, and pickup trucks, has grown faster than other new vehicle categories — 5.5% a year between 1990 and 2004. "Green taxes are good taxes," Mr. Hassett says.


It's simply good policy to raise revenue in a way that creates disincentives for bad behavior rather than to tax things you favor, like income.

Posted by Orrin Judd at December 7, 2006 8:03 AM
Comments

You'll never starve the beast if you allow it to feed upon some and not others. This is the lesson of C. Nortcote Parkinson's The Law and the Profits, and the intent of the original U.S. Constitution. Greed and covetoousness will alway induce voters to go for benefits they believe others are paying for.

Posted by: Lou Gots at December 7, 2006 8:39 AM

It's not a beast. It's our government. The point is that some should pay more for it than others. Taxing behavior achieves that.

Posted by: oj at December 7, 2006 8:50 AM

And of course Orrin is the sole arbiter of what constitutes "bad behavior."

Posted by: Bryan at December 7, 2006 9:19 AM

No, voters are. Offer folks income tax cuts in exchange for consumption taxes and they'll take the deal.

Posted by: oj at December 7, 2006 9:23 AM

But wait. A tax on motor transport is a tax on, and therefore a discouragement of spatial mobility. Spatial mobility in turn is a necessary part of how our system promotes liberty. If you don't like how the petty tyrants are running your locality, you move. Without this mobility, the market pressure to maintain a livible community is diminished. You are less free to move and commute, and the politicians are less disposed to take your needs into consideration.

"Starving the beast" is an expression which reflects the wisdom of the founders to the effect that if politicians can take our money they will take our money, which they accomplish by tricking the gullible into dreaming that someone else is penalized, and they benefitted, by the system. The only way to restrain them is to keep the cost of government before the eyes of the voters and taxpayers.

Posted by: Lou Gots at December 7, 2006 11:14 AM

Mobility means only the capacity to pick up and relocate, which would be unaffected. Not to wander daily in your car at great cost to society. If you feel footloose, hoof it.

The advantage of consumption taxes over income withholding is obvious by your own criteria.

Posted by: oj at December 7, 2006 2:10 PM

oj, it follows logically then that you believe that only those with kids in the public schools should pay the school tax.

Posted by: erp at December 7, 2006 2:24 PM

Why? The Republic depends on an educated citizenry, which is why we have public education. It doesn't need drivers.

Posted by: oj at December 7, 2006 3:34 PM

A matter of opinion. If for nothing else than to get the little scholars to school?

Posted by: erp at December 7, 2006 4:38 PM

No, it isn't.

Posted by: oj at December 7, 2006 5:41 PM

You're missing it, or pretending to miss it.

City politicians default on their principal responsibility, which is to maintain civil order. Citizens then vote for peace like the WWI Russian Army, with their feet.

Now they--we--do not wish to pay for mobility by forfeiting the advantages of the city, we wish only to remove ourselves and our families from what is a Hobbesian state of nature.

And that is very much what it is, you know. When I venture into Indian country now, I sadly recall Hobbes' words to the effect that those who dispute his warning about unrestrained human nature give the lie to their optimism when they take care to carry a weapon when they travel.

There has been a truly sad episode in our town which illustrates all this. A few days ago, a brand new theater complex was dedicated, with the Governor and Mayor in attendance. The story is at http://www.nbc10.com/news/10479163/detail.html

Does anyone need to look it up to know what happened? Three days after the dedication, "pop-pop-pop-pop," with the citizens so presumptive to think they could go to the movies in their own city flat on the ground, covering their children with their own bodies, listening to that odd whizzing sound of bullets passing near overhead.

Most poignant was the lament of the passers-by that, after waiting generations for a movie house to open once more in their quarter, no prudent person could enjoy it.

The city government having failed in its primary responsibility, what are the citizens to do, but get a car and get out. This is the mobility the petty tyranny of a punitive gas tax would take away.

Posted by: Lou Gots at December 8, 2006 3:04 AM

Yes, a moving truck will get you out of the city. It's a one time expense.

Posted by: oj at December 8, 2006 7:18 AM
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