Pooh Pooh Pigou, Redux

As my readers know I am not a fan of the Pigou Tax despite the many eminent economists who propose it. Now here is a great video from Cafe Hayek discussing the Pigou Tax and why it makes no sense and there is a good reference to the Coase argument.

Now at the heart of the Pigou Tax is two assumptions:

1. That Government knows the right rate. Well have we ever seen Government ever get anything right? No so we dismiss that one.

2. That it solves the externality problem. Well consider the two cases. One, carbon emissions. Now that is not fixed since we cannot move people or have them use alternative means of transportation, at least not in any reasonable time frame. It just becomes another tax on the poor. Second, obesity. Now here we possibly could do something. One need just look at the video, the problem is not the noise it is obesity, the externality is that the third party pays for the obesity related diseases. Thus we could actually get an almost exact tax for obesity. Really, it works and almost real time. Stop those chips and then watch the disease costs decrease.

Now the argument I made above as regards the chips was not part of the video but it should be part of the discussion.