Thursday, October 4, 2007

Bloggers on Carbon Taxes

From Common Tragedies:

Ryan Avent wonders whether Americans understand a carbon tax; Megan McArdle claims that they do. My sense is that Ryan and Megan more or less agree about how Americans understand a carbon tax; the problem is that this understanding is a kind of misunderstanding.

Ryan says that:
I think opposition can be explained almost entirely by
lack of public understanding and by a real absence of any marketing of the idea.
…while wonks love carbon taxes, few politicians have embraced the policy, so few
people are out there publicly making the case for such a tax.

Of the Democratic presidential contenders, only Mike Gravel has really
stood up for higher gas taxes….
Thinking about it a bit more, though, I think
that opposition also stems from the fact that most Americans can’t respond all
that well to higher gas prices.

Megan says that:
I’d say they understand it all too well: a tax will make it
more expensive for them to drive, forcing them to do less of it. If they didn’t
like driving right now, they wouldn’t be doing so much of it.

Note that these statements are two ways of saying the same thing: if you raise gas taxes a little bit, people don’t respond much and emissions aren’t cut; if you raise gas taxes enough to substantively cut emissions, it will be expensive and painful. In other words, demand for driving (and gas) is relatively inelastic. This point is uncontroversial. Part of the misunderstanding, I would say, is the all-too-common conflation of a carbon tax and a gas tax.