Would We Be Better Off With $8 Gas?

Joel Stein wishes that we were more like Europe:

If the U.S. were to slowly jack up gas taxes until we’re in the $8 range, life would be better. We’d not only be safer and have reduced greenhouse-gas emissions, we’d probably be happier too. Studies show that the only thing that consistently increases personal happiness is social interaction; high gas prices have led to real estate prices falling faster in suburbs and exurbs than in cities, so we may soon have more content downtown-dwellers. Those same studies show that the thing that makes people least happy is commuting, and telecommuting is way up this year. We could use the tax revenue to fund public transportation. And we’d go back to the days when driving a car was a way to show people what a rich jerk you were. In other words, we would no longer need SUVs for that.

I have stated my opposition to Pigouvian taxes many times (see, for example, here and here). However, this paragraph highlights a major pet peeve of mine with respect to such taxation. Let’s take it point-by-point:

1. “[L]ife would be better.” For whom? Simply stating that lives would be saved on the roadways or that greenhouse gas emissions would be reduced is not enough to automatically assume that life would be better. These benefits must be weighed against the costs (author’s note: I know that it sounds crude to quantify the benefits of extended an individual’s life, but we do this all the time).

2. “Studies show that the only thing that consistently increases personal happiness is social interaction…” I will outsource my thoughts on happiness research in general to Will Wilkinson.

3. Public transportation should never be mentioned in the same paragraph with making people happier. Personally, I would not be happier to know that every gallon of gasoline that I purchased was being used to subsidize an inefficient government-operated system of transportation. I similarly fail to see why having more people live downtown is better for society. Perhaps in Stein’s mind.

Overall, I am opposed to Pigouvian taxation because I think that there is a fundamental knowledge problem that must be overcome in order to set the proper rate of taxation as well as the potential to succumb the public choice problem. Our experiences with taxes on tobacco provide an excellent example of my reasoning. States routinely raise taxes on cigarettes and other tobacco products to close budget shortfalls. This means that one of my points must be fundamentally correct. Either politicians are unable to identify the correct rate of taxation or they simply use the social cost of smoking as the whipping boy to raise tax revenue.

More than anything, however, I do not like the elitist, social planner tone that has come to dominate those who favor the Pigouvian taxation. I am fine with the idea of a debate regarding efficiency and optimal taxation. However, this meme of promoting an ideal society strikes me as elitist and self-serving. Perhaps we should put a tax on Stein’s column.

6 responses to “Would We Be Better Off With $8 Gas?

  1. “inefficient government-operated system of transportation”

    so you prefer the current system of individual transportation in which the efficiency of the whole system depends upon the performance of the least common denominator?

    i bike past you guys while you’re stuck in traffic because some dumb f*** on his cellphone rear ended a soccer mom.

    have fun with that.

  2. Does Joel understand that $8 gas would have people cutting back on luxuries like a daily LA Times?

  3. One problem with this: $8 gas is way too high a Pigou Tax. The Stern Review thought that around 90 cents a gallon would be about right (yes, I know we do have that calculation problem).

  4. Sorry, 90 cents as the Pigou Tax.

  5. Great post. If everybody is better off living downtown and riding public transport, then “everybody” certainly can.

    I do not trust Mr., Stein, the Stern review, or our 535 benighted economists-in-chief to find and implement the perfect Pigou tax. Taxes are for raising revenue, leave salvation to the clergy.

  6. Interesting that I had just had several conversations with those who “propose” paying more to government either in Pigou fashion or for other reasons. Typically they are QUITE hypocritical.

    One has to wonder if someone like Stein doesn’t whine about other rising costs associated with fuel, or Buffet, who suggests that even HE does not pay enough taxes can get away with that claim particularly in light of the absence of voluntary higher taxes paid by him, and those who speak out in favor of higher taxes.

    The responses I get when I suggest such ideas, is that it wont make a difference unless everyone is forced to do that same. To be fair.


    To those who wish us an excess of burdens designed to “make us happy” or controlled in some manner, I say donate your own efforts, your own time, and swim to the moon for all I care. Show me YOU are willing to do it alone and lead by example.

    In fact, when you go buy your tofu, and other food staples, be sure to pay 3-4 times what the going rate is. Insert yourself in the process so you can feel good about it. AND if you cannot afford to pay the price for your food, please I insist… don’t eat.

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