11.17.2007

AND REMEMBER, THIS IS TWO CONSERVATIVES TALKING

Having turned to Greg Mankiw's blog for evidence that gas prices should be higher, I turn there again to make another unlikely argument, this time in favor of the immediate introduction of a carbon tax: "Climate Change as Repeated Prisoners' Dilemma". In both cases, the price is wrong - "wrong" meaning artificially low, leading to over-consumption without regard to the "negative externality" associated with its consumption (i.e. pollution, which everyone pays for, including our children and their children) - and a tax will help make it more right - "right" meaning closer to an equilibrium level in which consumers are considering the cost their consumption imposes on others. (Btw, I also appreciated the reference to the "Prisoner's Dilemma," a concept I learned in freshman year econ and thought was fascinating yet hokey, and yet which people have won Nobel Prizes exploring - who woulda thunk it?)
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