Wednesday, September 10, 2008

Wacky Taxes

Where I completely agreed with the economic adviser to George W Bush. Five quotes from Greg Mankiw:

1. voters are worse than ignorant about basic economic principles of good policy. Ignorance, at least, would have the virtue of being random and so perhaps would average out to zero in a large population. Instead of being merely ignorant, voters hold onto systematically mistaken beliefs.

2. To many economists [and to me], the basic argument for increased use of Pigovian taxes is so straightforward as to be obvious. But as George Orwell once put it, "We have now sunk to a depth where the restatement of the obvious is the first duty of intelligent men."

3. A carbon tax would provide incentives for people to use less fuel in a multitude of ways. By contrast, merely having more efficient cars encourages more driving.

4. even if God came down today and told us that global warming was a complete hoax, the case for a much higher Pigovian tax on gasoline would survive, for the simple reason that every time you get in your car and drive, you inconvenience other drivers with increased road congestion and you put them at increased risk of being in a traffic accident.

5. dispel a common fear about higher Pigovian taxes, such as taxes on carbon or gasoline--that they will fall disproportionately on the poor.

Exactly what I said.

I should point out that although "I completely agreed with the economic adviser to George W Bush" in this particular case, George W Bush did not agree at all. Obviously. Because although I too get criticism for the same views, the economic advice was perfectly sensible.


Proper Bumhole said...

Looks like you could get a new job in the US administration RNB. Only thing I would disagree with is 4 - I think the risk of traffic accidents is related to education and planning. UK has more cars than ever, and many more than some larger EU states, but has disproportionatly lower number of traffic accidents due mainly to the way we drive (not speed cameras!).

I also believe that being able to afford to travel via car is not a luxury, it's a right, and shouldn't be overpriced or you might start to see some very bad things happening - see gas/elec prices rising to unaffordable levels.

R N B said...

Number 4 was primarily about congestion, noise and local pollution so again more relevant to UK than US, well done to Ken Livingstone for making the right moves though he should have penalised hulking diesels too.

But who are you, Proper Bumhole?

Seamus McCauley said...

Why would ignorance be random?