Saturday, January 17, 2009

[President-elect] Obama's (Gas) Taxing Problem. And: Traders in a Stupor

As Professor Mankiw* put it:
Obama rejects the Pigou Club

From the Washington Post's Energy Wire blog:

Goodness knows, President-elect Obama has his legislative hands full. Maybe that explains why he has taken the idea of increasing gasoline taxes off the table, saying that Americans had enough economic burdens at the moment. Nominees like Steven Chu, the Nobel Prize winning physicist who will become Energy Secretary, dutifully echoed Obama's view even though in Chu's case he has long supported higher fuel taxes.

But by failing to raise the gasoline tax, the president-elect risks complicating another problem: Fixing the U.S. automobile industry.

Here's the problem. Obama and leading members of Congress keep saying they want ailing automakers to make more fuel-efficient vehicles. But the automakers in the past made more money on the guzzlers; in the future, they will have trouble charging enough to make money on new cars using costly new technologies for plug-in or hybrid cars. So the car company of the future may be a money-losing operation, just like the car company of the present....MORE including "(Full disclosure: I have known Mankiw since grade school.) "

*I had meant to link to this last week:

The Brain Science of Irrational Exuberance

David Brooks reports:

As Andrew Lo of M.I.T. has demonstrated, if stock traders make a series of apparently good picks, the dopamine released into their brains creates a stupor that causes them to underperceive danger ahead.