Thursday, March 15, 2007

Free marketer against Pigou

David Friedman joins the No Pigou Club: In a new post today, he hits on two key reasons to oppose energy tax--nobody can know what the right tax level should be, and he has no confidence the revenue will be used to offset other taxes.

Tuesday, February 13, 2007

Cap-and-trade: Pigovian Bootleggers exposed

For a sharp analysis of the economic muddle behind plans for cap-and-trade carbon schemes, no one beats Fred Smith of Competitive Enterprise Institute in his testimony today before the U.S. Senate Committee on Environment. In the 19th century, laws banning alcohol sales on Sundays were backed by Baptists and Bootleggers. "Thus politicians were able to pose as acting to promote public morality, even while taking contributions from Bootleggers." Smith argues that "environmental pressure groups active in the Climate Action Partnership are the Baptists, providing moral screen to the Bootleggers, in this case the energy and manufacturing companies."
The real problem, he goes on, is that the proposed cap-and-trade carbon systems is in fact '"an ugly combination of two of the greatest ills to affect the market economy over the past 200 years--cartelization and central planning."
Fred Smith is hereby enrolled in the No Pigou Club.
For another note on the use of state pricing to control demand, see my column today (On Gas Taxes, the Voters Know) at the Club site on the continuing wisdom of Canadian and American voters. They've seen what happened to tobacco.
TC

Tuesday, January 30, 2007

What's in a price? The great Pigovian flaw

The plan to nationalize the price of oil
One of the great flaws of Pigovianism is the role reversal imposed on prices. An example of how that flaw plays out appeared in Charles Krauthammer's recent piece for The Washington Post Group on energy policy. Along with other Pigovians on the Right, Krauthammer takes the gas tax plan right to its Pigovian root: Tax gas till it hits US$4 a gallon and then watch the market react. "Raise the price and people change their habits. It's the essence of capitalism." As I note in a column today (The new OPEC) posted at the No Pigou Club site, that's not at all the essence of capitalism. It's the essence of planning and statism.
Pigovian taxes turn the role of prices upside down. The proper view of prices in a market economy is that the price contains thousands of pieces of information about a product: the unmeasurable individual wants of millions of people, the costs of hundreds of inputs, the supply and demand circumstances at a point in time, assessments of future conditions, the relationship of all the prices for similar and competing products, etc. Price is part of a process, jam packed with unmeasurable information, not a fixture in time that just needs to be tweaked to get a desired result. Taxes are not prices.
The Pigovians throw all the real price information out, declare that it's all wrong and claim we need a new price that will incorporate the information we think should be in the price or would be in the price if people only knew what we know. The Pigovians plan to tear down the market price and all the information it contains and impose their own government-regulated price. They plan to nationalize the price gasoline and set prices to get the results they want rather than the results produced by the market.

Monday, January 22, 2007

"Why I can't join Pigou Club"

The No Pigou Club welcomes Russell Roberts! After a podcast interview with Greg Mankiw, Russell concludes that while he likes the theory of Pigou taxes on gasoline, the practice will turn into a political mess. He's on the right track, just not far enough down to realize how off-base the Pigovians are. Greg Mankiw's claim that sometime you have to put up with bad politics to get to good economic policy misses at least part of the main point. If it involves a political move, it likely is bad economic policy.
tc

Did oil price "tip" demand?

Front page of Wall Street Journal on Friday floated the idea that high oil prices hit a 'tipping point' in 2006 that prompted a fall in consumption within OECD nations. It was a big reach, but the Journal managed to turn it into a possible justification for Bush to present Pigovian arguments in favor of energy taxes in State of Union. We shall see. For the No Pigou take on this, visit the Club for a fresh posting.

Thursday, December 21, 2006

Happy New Year to all NoPigou Club members

I know it's been a while since postings, and I apologize. But we will be back in the New Year with fresh blasts at the rising menace of Pigovianism within the intellectual and political classes. There are those who say there's nothing to worry about, because voters will never buy into the idea of a big new tax on gasoline to fight global warming, congestion, smog and what have you. Such complacency is unwarranted. The confluence of popular fear of something like global warming could easily be converted by a sly politician into a mandate to impose major tax increases as part of a grand strategy to save our nations. As such threats mount in the coming year, the voice of the NoPigou Club will be heard!
In the meantime, and on behalf of Peter Foster and William Watson, co-founders of the club, I wish you all a prosperous year.
All the best
Terence Corcoran

Monday, December 04, 2006

Canada's Liberals reject Pigou carbon tax

Attention Republicans and Democrats: Pigovian carbon taxes may be political suicide. Not much of a surprise in that idea, but it took concrete form in Canada over the weekend when the Liberal Party (the Democrats of the North) picked a new leader, Stephane Dion. Mr. Dion is an inducted member of the NoPigou Club, having campaigned against carbon taxes throughout his leadership bid.
Going down to defeat is former Harvard prof and international intellectual Michael Ignatieff, an avid Pigovian. Ignatief even mentioned carbon taxes in his speech to delegates at the convention: "We must put a price 0n pollution and on carbon emissions."
Not great politics. Bad economics, too. Did Ignatieff spend time with his Harvard colleague Greg Mankiw? Ignatieff's leadership bid had other problems, but I would put his Pigovianism on the list of stumbling blocks. When it came down to the final votes, Ignatief would have carried no support from Alberta, Canada's oil province. Dion, meanwhile, would have attracted Alberta suport, even though he's a tough-talking promoter of the Kyoto Protocol.
Terence Corcoran

Thursday, November 30, 2006

Conservative think tank stops thinking

The conservative/free market American Enterprise Institute recently posted a commentary on the need for a U.S. national carbon or gas tax--whatever--for all the usual reasons. For a brief review of the AEI paper, see my column. The authors like the idea of, and seem to think they have found , "the optimal Pigouvian tax on motor fuels." Oh dear. Optimal! Done.