More Thoughts on Pigou

Yesterday I posted a remark about the Mankiw Pigou Club and Congressman Inglis proposal. Let me go back and review.

1. The objective is to reduce carbon emissions.

2. The approach is to tax them. But the tax is placed at the point of generation not at the point of consumption.

3. The generators of electricity, for example, pay the tax, then pass it down to the consumer. This is about $3,000 per HH per year.

4. Inglis then posits that the Government will give the money back so that the consumer is unhurt. Here I would depart from reality if anyone would in their wildest dreams believe this, but give the man his due, after all he is a Republican from South Carolina.

5. Now how does this change anything? The consumer is revenue neutral. If this thing ever works. The consumer brings no demands on the producer.

6. The produce increases revenue, and keeps the profit margin fixed and thus has no motivation to change. After all they are all monopolies! Somehow these economic geniuses have seemed to let that fact fall through the cracks. There is no alternative.

7. Thus there is no incentive to change.

8. If the carbon tax was not made revenue neutral then there still would be de minimis change since again the producers are monopolists and the consumer has no alternative. The current Administration knows this and is relying upon this revenue to pay for all their plans.

9. Every system conceived has a natural response mechanism. Any adverse effect will cause some anti-body reaction as well as developing secondary pathways to avoid the adverse effects. Thus this Pigou proposal is just that, a pig proposal!