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Disagreeing on Pigou



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Again, I appeal to Seldon:

Pigou and other economists advocated a system of taxes to discourage activities that generated external detriments and subsidies to encourage and extend activities that generated benefits.

Price rises discourage activity, after all. If people are willing to absorb the cost, as Tim suggests they might, then the detriments remain. The fact the government has more money to blow on other things – hypothecation is not often mentioned in this regard – does nothing to reduce the costs imposed. In the end, they have to be about altering behavior or they are worthless (except to the Taxman).

Pigou taxes remind me of the old line about an economist: “I don’t care how it works in practice, tell me how it works in theory.”



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