From the NoPigou Club:
Arthur C. Pigou was an early 20th-century British economist, one of the fathers of welfare economics. He believed governments can shape policy for the better by raising taxes on bad things and subsidizing good ones. In the view of the NoPigou Club, the Pigou approach is just another form of central planning dressed up in free market terminology.
Terence Corcoran, editor of the Financial Post, founded NoPigou Club to counter the ideas of the Pigou Club, an informal assembly of economists and pundits who support the idea of raising gasoline taxes. The main backer of such taxes - known as Pigou taxes - is Harvard University's N. Gregory Mankiw. On his blog, Prof. Mankiw lists the people, Pigou Club members, who support high taxes on gasoline to curb global warming and fight other environmental and economic problems.
From Corcoran's article in the National Post to kick of the NoPigou Club:
With that, [Alan] Greenspan appears to be jumping aboard a campaign by Harvard economist N. Gregory Mankiw to enlist support for higher gas taxes. His blog promotes membership in The Pigou Club, named after Arthur C. Pigou, an early 20th century welfare economist who promoted the idea of using taxes to fix social and other problems allegedly created by a free market economy. Among the backers of Pigovian taxes, especially on gasoline, are economists often associated with Republican governments, including Martin Feldstein and Mr. Mankiw himself. Other not-so-Republican members include Al Gore and Paul Krugman.
Canadians, of course, will recognize the idea as a core element in Liberal leadership candidate Michael Ignatieff's environmental program. A new carbon tax, to be paid at the pump, would reduce demand for gasoline and also provide government with revenue to shift around to subsidize other fuels, ethanol and bio-fuels, and transfer money perhaps to other levels of government.
The Pigovian idea is that you can use the tax system to correct market failures and clear up what economists call "negative externalities." By driving your car around, you leave behind a number of problems you don't pay for: smog, for example, or greenhouse gasses. An added issue in the United States is the high volume of oil imported from largely unstable areas. By raising taxes on gasoline, perhaps to European levels, consumption would fall, improving the environment and relieving the United States of dependence on foreign oil. How that would work is far from clear.
The Pigovian tax concept is based on the same old, same old economic theories that supported the idea that a government can plan and run the economy better than the market. Arthur Pigou was a great interventionist, his premise being that markets fail and in the end we need socialism to put things right. Among his policy prescriptions: deficit spending, public works projects, nationalized industries and major taxes and redistribution.
With Mr. Greenspan enlisted in Mr. Mankiw's Pigou Club, and with the Times column circulating, the idea of a gasoline tax is likely to sweep the econosphere. Whether it will sell politically is another matter. In the meantime, it is time to start up a little opposition to Mr. Mankiw's operation. If nobody in the United States does it, let me offer up the services of the National Post. The NoPigou Club starts here. To join, e-mail nopigouclub@nationalpost.com.
Good reading, especially to arm yourself with material to use to debate people you know who think we should double the price of gasoline and plow the money into public transit and subsidized bicycles.
