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Pigouvian taxes for the rest of us.

August 26, 2009

For those of you who don’t know Pigouvian taxes are taxes on activities with negative externalities designed to make actors act as though they are taking into consideration the full impact of their actions.

When most people think of Pigouvian taxes, they think of something government imposes on firms. This is likely because they think of taxes as a transfer of wealth. I often think of taxes as a cost imposed on someone, regardless of anyone’s benefit, and so I see taxation as something that anyone can do.

If someone is imposing external costs on others you have the power as a citizen to impose some small cost on them. I’m thinking specifically of congressmen, who impose a great deal of external costs on others. For this reason I support citizens imposing costs on them. Of course I don’t expect you to go out of your way (say by actually taking their money from their pay check without their permission, or making them pay for services they don’t use such as welfare or a case of beer for you and your friends), so do things that have low cost to you, or from which you gain utility.

The next time you’re near a congressman, please let out that fart you’ve been holding in; maybe even go in for a hug and then wet yourself in their arms. If you like baking, make a pie; then huck it at your mayor. Eggs are fine too. On Halloween, T.P. your local education board chair’s house first! If you’re at some kind of social event, try to corner them, then tell them all about nothing; describe your day and try to bore them to tears all while insisting that you’re getting to the point you just need a minute more. Also fart a lot while you’ve got them cornered.

Happy taxing!

Disclaimer: You are responsible for your actions. Don’t go to jail and don’t sue me! I’m just kidding (except about the farting).

3 Comments leave one →
  1. Neil permalink
    January 25, 2010 6:33 pm

    I have some questions that I would like to see your perspective on:

    1) I agree that the government are not the best at wealth transferring. In fact, I think we should not have involuntary wealth transferring at all, but what do you propose to foster charity?

    2) People have a general tendency to form groups. Groups have the tendency to wage wars on individuals to either destroy them or threaten them enough to join the group and expand its power. If there is a major group, this group becomes the evil one, but this evil keeps external conflicts at a low level, since there will not be much other groups to conflict with. In a sense, a major government is evil, but some government might be necessary. Where to draw the line? and how can any private group be kept out of total control and become a government? (maybe wal-mart ready atomic bombs would help)

    • January 29, 2010 3:08 pm

      I do not propose that we foster charity at all. Charity is up to the individual and should be left as such. If I put a gun to your head and demand that you give to charity, you haven’t done something commendable, you were coerced.

      Individuals rarely exist completely independently (even homesteaders usually have family). For protective groups, there are economies of scale (related to force), but there are also diseconomies (related to politics). If nuclear bombs were readily available, the economies of scale would be less significant, as smaller groups would be better able to defend against larger countries. Of course, that’s an awful lot of power in an awful lot of hands, and that makes a lot of people nervous (read: Greenpeace). It would be interesting to do an experiment that allowed the use of virtual H-bombs (maybe something like Skarbek’s Nozickian treatment, but with a bomb that would take a huge chunk out of several players and where if three bombs are used, the experiment ends).

      Randy Holcolmbe has a paper “Government: Unnecessary but Inevitable” ( where he argues that although gov’t is not needed, inevitably a government will try to take over a region. The one valuable thing a government can do (that it has comparative advantage in) is keeping out other governments.


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