Pigou, or Pig in a Poke?
Gabriel Mihalache objects to Greg Mankiw‘s frequent invocation of Pigou in support of energy taxes he’d like to see enacted. In a thoughtful and eloquent rant, he makes an important point about the impossibility of implementing an optimal tax “scientifically”:
[T]hey draw you in under the pretense of restoring efficiency—what’s fair is fair, right?—who would argue against efficiency? That’s like saying you don’t like puppies!
But once they get you with the externalities/Pigou/efficiency argument, surprise! They don’t provide you with a practical formula for Lindahl pricing, an econometric/empirical test—this does not exist (yet)—and instead each of the members of the Pigou Club starts pushing his own political agenda: some, like Becker or Greenspan, want to see reliance on foreign authoritarians regimes reduced, others, like Mike Moffatt, want to equal-out the marginal effect of taxes, etc. But guess what, all these otherwise noble political causes have nothing to do with Pigou’s work.
…I must strongly object to purely political proposals dressed-up as positive welfare economics/science.
[italics are Gabriel's]
Read the whole thing (as well as my, er, eh-hem, lengthy and erudite comments) here.