Recent Posts
(Note: Page numbers referenced in posts prior to June 1, 2011 refer to 5th edition)
A Reading for the Pigou Club
In theory, a corrective tax and tradable pollution permits can have the same effect on pollution. In practice, tradable pollution permits have performed poorly, due to unpredictable fluctuations in their prices, inefficient bureaucracy, and corruption.
Textbook References:
Pages 202-209 “Public Policies toward Externalities”A Reading for the Pigou Club
Ben Schreckinger explains why even people who generally dislike taxes should like a carbon tax.
Textbook References:
Pages 203-205 “Market-Based Policy 1: Corrective Taxes and Subsidies”A Reading for the Pigou Club
Adam Davidson asks, "Should we tax people for being annoying?"
Textbook References:
Pages 203-205 “Market-Based Policy 1: Corrective Taxes and Subsidies”A Cartoon for the Pigou Club
A cartoon suggests that a carbon tax could significantly reduce our debt problem and fight global warming.
Textbook References:
Pages 203-205 “Market-Based Policy 1: Corrective Taxes and Subsidies”A Reading for the Pigou Club
An article in The New Yorker explains why we need a carbon tax.
Textbook References:
Pages 203-205 “Market-Based Policy 1: Corrective Taxes and Subsidies”A Reading for the Pigou Club
As a means to reduce fuel consumption, car mileage requirements are far more expensive than a gasoline tax.
Textbook References:
Pages 202-209 “Public Policies toward Externalities”A Reading for the Pigou Club
Yoram Bauman and Shi-Ling Hsu argue that replacing current taxes with a carbon tax is a "no-brainer." Most taxes distort markets and are a drag on the economy. A Carbon tax improves the efficiency of markets.
Textbook References:
Pages 203-205 “Market-Based Policy 1: Corrective Taxes and Subsidies”Pigou Club News
A bar has named a drink the "Pigou Club." More importantly, Australia has imposed a carbon tax.
Textbook References:
Pages 203-205 “Market-Based Policy 1: Corrective Taxes and Subsidies”The Price of Parking
San Francisco is attempting to reduce congestion and make parking places easier to find.
Textbook References:
Pages 203-205 “Market-Based Policy 1: Corrective Taxes and Subsidies”What is Chu-Mankiw convergence?
Energy Secretary Steven Chu and Mankiw agree that we should tax gasoline more heavily.
Textbook References:
Pages 203-205 “Market-Based Policy 1: Corrective Taxes and Subsidies”February 5
Do Manufacturers Need Special Treatment?
Christina Romer refutes the idea that manufacturers need special tax breaks and support from the government.
Textbook References:
Pages10-11 “Principle 6: Markets Are Usually A Good Way To Organize Economic Activity”Pages 11-13 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Pages 201-202 “Technology Spillovers, Industrial Policy, and Patent Protection”
On SOPA
The Stop Online Piracy Act is an attempt to stop the theft of intellectual property. The details about how the Act would work are worth worrying about, but it is important that property rights be protected.
Textbook References:
Pages 201-202 “Technology Spillovers, Industrial Policy, and Patent Protection”Page 229 “Conclusion: The Importance of Property Rights”
Pages 301-302 “Government-Created Monopolies”
January 10
How to Reduce Traffic Congestion
A toll on the Highway 520 Bridge near Seattle has substantially reduced congestion.
Textbook References:
Pages 203-205 “Market-Based Policy 1: Corrective Taxes and Subsidies”Pages 226-227 “The Case for Toll Roads”
Pigovian Taxes Save Lives
Philip Cook and Christine Durrance exam the effects of the 1991 increase in the federal excise tax on alcohol. They discover that it reduced traffic fatalities, violent crime, and property crime.
Textbook References:
Pages 203-205 “Market-Based Policy 1: Corrective Taxes and Subsidies”November 12
The Long, Sad History of Industrial Policy
Government attempts to foster alternative energy technologies have a long history of failure.
Textbook References:
Pages10-11 “Principle 6: Markets Are Usually A Good Way To Organize Economic Activity”Pages 201-202 “Technology Spillovers, Industrial Policy, and Patent Protection”
October 20
Nordhaus on Energy Economics
William Nordhaus argues that taxes on energy externalities would bring substantial long-run economic and environmental benefits.
Textbook References:
Pages 202-209 “Public Policies toward Externalities”August 15
A reading for the Pigou Club
British Columbia has imposed a carbon tax and used the proceeds to cut income taxes. It is not only efficient, but popular too!
Textbook References:
Pages 203-205 “Market-Based Policy 1: Corrective Taxes and Subsidies”Pages 208-209 “Cap and Trade”
August 1
An Externality
Actions that impose costs or benefits on bystanders can take a variety of forms.
Textbook References:
Chapter 10 “Externalities”July 25
The Light Bulb Ban
Is the ban on incandescent bulbs a good idea?
Textbook References:
Pages10-11 “Principle 6: Markets Are Usually A Good Way To Organize Economic Activity”Pages 11-13 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Page 203 “Command-and-control Policies: Regulation”
July 23
Spending in Disguise
Donald Marron explains how a significant amount of government spending is hidden in the tax code.
Textbook References:
Chapter 10 “The Design of the Tax System”Pages 568-572 “Policy 3: Government Budget Deficits and Surpluses”
June 25
Crazy Public Policy: A Case Study
Ethanol subsidies drive up the cost of food and do not benefit the environment.
Textbook References:
Pages 32-34 “Why Economists' Advice Is Not Always Followed”Pages 202-209 “Public Policies toward Externalities”
April 19
A Free Book Well Worth Your Time
Mankiw recommends Policy and Choice: Public Finance through the Lens of Behavioral Economics by William J. Congdon, Jeffrey R. Kling, and Sendhil Mullainathan. A link allows you to download the book for free.
Textbook References:
Chapter 10 “Externalities”Chapter 11 “Public Goods and Common Resources”
Chapter 12 “The Design of the Tax System”
Pages 484-489 “Asymmetric Information”
March 18
The Coase Theorem in Action
A "Dilbert" cartoon illustrates the Coase Theorem.
Textbook References:
Pages 217-218 “The Coase Theorem”March 12
NPR Disses the Pigou Club
National Public Radio confuses Pigouvian taxes with sin taxes.
Textbook References:
Pages 210-212 “Based Policy 1: Corrective Taxes and Subsidies”Pages 216-217 “The Case for Taxing Carbon”
Pages 234-235 “The Bloomburg Plan”
February 15
Smog-Eating Roof Tiles
A company has developed roof tiles that eliminate nitrogen oxides, a component of air pollution.
Textbook References:
Pages 209-215 “Public Policies Toward Externalities”February 5
The Lucky Break of Rent Control
An article discusses the practice of making cash payments to get people in rent-controlled apartments to leave.
Textbook References:
Pages 114-118 “How Price Ceilings Affect Market Outcomes”Pages 217-218 “The Coase Theorem”
December 16
The Economics of Seinfeld
Clips from the TV show "Seinfeld" are used to illustrate a variety of economic concepts.
Textbook References:
Pages 4-5 “Principle 1: People Face Trade-offs”Pages 5-6 “Principle 2: The Cost of Something is What You Give Up to Get It”
Page 6 “Principle 3: Rational People Think at the Margin”
Pages 7-8 “Principle 4: People Respond to Incentives”
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Chapter 3 “Interdependence and the Gains from Trade”
Pages 67-72 “Demand”
Pages 73-76 “Supply”
Pages 144-153 “Controls on Prices”
Chapter 10 “Externalities”
Pages 226-227 “The Different Kinds of Goods”
Pages 227-232 “Public Goods”
Pages 230-232 “The Difficult Job of Cost-Benefit Analysis”
Pages 232-237 “Common Resources”
Pages 274-275 “Fixed and Variable Costs”
Page 281 “Economies and Diseconomies of Scale”
Pages 312-315 “Why Monopolies Arise”
Chapter 16 “Monopolistic Competition”
Pages 370-378 “The Economics of Cooperation”
Pages 399-400 “The Supply of Labor”
Page 414 “Compensating Differentials”
Page 442 “Utility”
Page 465 “Utility: An Alternative Way to Describe Preferences and Optimization”
Pages 484-489 “Asymmetric Information”
Pages 556-558 “Technological Knowledge”
Pages 578-580 “Financial Intermediaries”
Pages 598-600 “Present Value: Measuring the Time Value of Money”
Pages 603-604 “Diversification of Firm-Specific Risk”
Pages 606-609 “The Efficient Market Hypothesis”
Pages 630-631 “The Economics of Unions”
Pages 703-705 “The Prices for International Transactions: Real and Nominal Exchange Rates”
Pages 707-708 “The Basic Logic of Purchasing Power Parity”
Page 833 “Time Inconsistency”
December 9
How Economics Saved Christmas
Art Carden rewites "How the Grinch Stole Christmas" to illustrate Pigovian taxes and the Coase theorem.
Textbook References:
Pages 210-212 “Market-Based Policy 1: Corrective Taxes and Subsidies”Pages 217-218 “The Coase Theorem”
July 27
Readings for the Pigou Club
Gilbert Metcalf and USA Today both make the case for a carbon tax.
Textbook References:
Pages 210-212 “Market-Based Policy 1: Corrective Taxes and Subsidies”Pages 216-217 “The Case for Taxing Carbon”
July 15
The Problem With Biofuels
The Congressional Budget Office reports that it is very expensive to replace gasoline with biofuels.
Textbook References:
Pages 216-217 “The Case for Taxing Carbon”July 13
The Return of Command and Control
The U.S. government appears to be moving away from market-based policy to control pollution. Instead, it will rely more on direct government control.
Textbook References:
Pages 209-215 “Public Policies Toward Externalities”July 4
The Ubiquitous Ken Rogoff
Ken Rogoff makes the case for taxing carbon. There is also a profile of Rogoff and Carmen Reinhart and their book, "This Time It's Different."
Textbook References:
Pages 210-212 “Market-Based Policy 1: Corrective Taxes and Subsidies”Pages 216-217 “The Case for Taxing Carbon”
Pages 654-655 “The Financial Crisis of 2008”
June 5
Soda and Other Sins
Mankiw considers the question of whether decisions that do not impose external costs on others may impose external costs on future versions of ourselves. He also asks us if we "trust the government enough to appoint it your guardian?"
Textbook References:
Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”Pages 204-209 “Externalities and Market Inefficiency”
Pages 210-212 “Market-Based Policy 1: Corrective Taxes and Subsidies”
Page 251 “Should Income or Consumption Be Taxed?”
June 1
Lessons from the BP Spill
Kenneth Rogoff argues that "when there is huge uncertainty about catastrophic risks, it is dangerous to rely too much on the price mechanism to get incentives right." But he also warns that we do not know "how to adapt regulation over time to complex systems with constantly evolving risks."
Textbook References:
Pages 8-10 “Principle 6: Markets Are Usually A Good Way To Organize Economic Activity”Pages 10-12 “Principle 7: Governments Can Sometimes Improve Market Outcomes”
Chapter 10 “Externalities”
May 13
Who Gets the Goodies?
Ted Gayer points out that the Senate will auction off less than 25 percent of pollution permits in its cap-and-trade bill. As he puts it, "the Senate bill sacrifices economic gain for political support from interest groups."
Textbook References:
Pages 32-33 “Why Economists' Advice Is Not Always Followed”
Pages 212 to 214 “Market-Based Policy 2: Tradable Pollution Permits”
May 12
Pigovian Logic
Holman Jenkins argues that the best way to reduce gasoline use is to raise its price.
Textbook References:
Pages 210-212 “Market-Based Policy 1: Corrective Taxes and Subsidies”Pages 216-217 “The Case for Taxing Carbon”
May 1
How to Solve Inbox Congestion
A blog reader suggests a tax on email as a way to reduce the volume of unwanted email.
Textbook References:
Pages 7-8 “Principle 4: People Respond to Incentives”Pages 210-212 “Market-Based Policy 1: Corrective Taxes and Subsidies”