Lynne Kiesling
I have to embed myself in Deep Thought today on a paper for a conference in September, so will have to content myself with offering you these links for your consideration:
- Patri Friedman's Catallarchy post "Pigouvian taxes are not efficient if the money gets wasted". This is a hugely important point, and is one reason why, unlike Greg Mankiw, I am not a member of the Pigou Club. Top-down governments cannot determine the "optimal" Pigouvian tax, except by accident; furthermore, through political economy and public choice dynamics, that tax revenue frequently gets wasted, as Patri notes. I would argue that if instead government policy focuses on reducing transaction costs that prevent parties from negotiating, and implementing cap-and-trade markets in situations where those transaction costs are prohibitive, then we can all become members of the Coase Club.
- Chicago Fed economist Bill Testa notes on their blog the new Midwest economy website at the Chicago Fed. Full of good, relevant, local economic information.
- I didn't realize Jeff Miron had a blog until recently. Jeff's work on the economics of alcohol prohibition in the US in the 1920s is phenomenal.
- I am not an expert in the trade/budget "twin deficit" area, so I find Don Boudreaux's response to Nouriel Roubini's analyses of the issue helpful and illuminating, particularly if you read through the set of linked articles.
- Want to wear your "free trade is mutually beneficial" heart on your wrist? Then get one of these wristbands from the Adam Smith Institute. Although the post doesn't specify, I assume that ASI purchased them from a vendor that sources them from a poor country ;-). Oh, yes, I just noted from Tim Worstall that my assumption is correct.
- In the wake of last week's Chicago City Council vote to enact the "big box minimum wage" (which is an affront to efficiency, equity, morality, and individual liberty), Lowe's joins Wal-Mart and Target in shelving plans to open stores in the city. I can't believe the extent to which my adopted hometown has become the standard-bearer for the Nanny State, between this item, the foie gras rule, the car cell phone rule, the proposed trans fat rule, the proposed dog chip implantation rule ...
- If you are interested in the types of issues covered here at KP, you should also be checking out Organizations and Markets.
ASI is very late to the plastic wristband "game". There are already so many "cause" wristbands that you can't tell what a wristband signifies without reading it. I am not ready to start asking people if I can read their wristbands.
I'm only interested in what you believe or what you're promoting if I know you well enough to care personally. Otherwise, you can remain as anonymous as you were without the wristband.
I do not now and likely will not ever own such a wrist band. I am mildly curious what percentage of wristband wearers are really committed to and active in the causes represented by their wristbands.
It seems incongruous that a place that promotes the "hidden hand" would give out wristbands. Maybe the hand is hidden but the wrist isn't.
Cap and Trade? Government can't figure out the right cap any more than it can the right tax. All you need to home in on a tax is the marginal net external cost curve. Set a tax, and adjust until you are where you need to be. To get a cap you need that, plus more info about internalized cost(S) and internalized benefit(D) curves. You can use flexible caps and such to get to the right place, but it is no easier than the tax. Cap and trade has as much, or more, bookkeeping as taxation for the polluter, as well - no efficiency gain there.
In the real world (the one where worries about waste are relevant) cap and trade is anti-competitive, because it creates an 'in' toward bureaucratic capture in the initial credit allocation process by interested parties. Any allocation process creates transaction costs, which are the same for small fry as they are for big players - whether you need 1 credit or 1 million, the cost of attending an auction or entering a market is roughly the same - a state of affairs which benefits big incumbents to the detriment of small, probably cleaner, entrants with new technology. If the small fry grows faster than expected, he will be trying to buy credits on the (rarely liquid) aftermarket - credits owned by companies which would dearly love to see him bankrupt, or to sell out to them at firesale prices. It is in the interest of the (probably politically powerful) incumbents to make the FIXED cost of entry to the market as high as possible, to create an additional barrier to entry. The incentives created for them to adopt new tech may be good, but the cost is an inefficiently small number of competitors in the marketplace.
The waste issue is a good reason to argue that other, less efficient taxes be cut, not that the Pig Tax not be imposed. Tax dollars are fungible, there is no reason to attribute any given bit of government spending to it, rather than other taxes, and most of us would say at least some government is warranted - arresting murderers or defending borders or whatever. Pig Taxes should be the first imposed and the last cut. Worry about waste only when all government tax revenues are coming from efficient taxation forms, and there are no less efficient taxes left to cut.