Tuesday, June 27, 2006

Al Gore is a Pigouvian

HybridCars Blog
Walter McManus
June 26, 2006

No, I'm not calling Gore an unclean animal. A Pigouvian is a policy wonk who supports moving to revenue-neutral carbon taxes.

Thanks to Greg Mankiw for the link to the Charlie Rose Show. Fast-forward to 42:45 in the video, when Gore announces that he is a Pigouvian (well, when he endorses carbon taxes).

Cambridge (England) economist Arthur Cecil Pigou (1877-1959) is famous for first recognizing the difference between private and social marginal benefits and costs of activities. The private cost of gasoline, for example, is essentially equal to the price per gallon, while the social cost includes the value of externalities in the form of emissions, crashes, and congestion. Pigou developed the theory that taxes and subsidies can correct the balance and make consumers "internalize the externalities."

Now you will know what it means when our gas receipts include a line labeled "Pigouvian Tax."

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