Part of the issue is that there’s rarely a natural way of pricing Pigouvian taxes. You can make price estimates based on how people hypothetically judge the harm to themselves, but there’s always going to be huge disagreements.
This flaw is a reasonable cause for concern. Suppose you were in a group house where half of the people worked remotely and the other half did not. The people who worked remotely might be biased (at least rhetorically) towards the proposition that the Pigouvian tax should be high, and the people who work in-person might be biased in the other direction. Why? Because if someone doesn’t expect to have to pay the tax, but does expect to receive the revenue, they may be inclined to overestimate the harm of COVID-19, as a way of benefiting from the tax, and vice versa.
In regards to carbon taxes, it’s often true that policies sound like the “obvious” thing to do, but actually have major implementation flaws upon closer examination. This can help explain why societies don’t do it, even if it seems rational. Noah Smith outlines the case against a carbon tax here,
This isn’t just politics; economists have forgotten basic Econ 101. Voters instinctively know what economists, for some mystifying reason, have seemed to ignore — the people who pay the costs of a carbon tax don’t reap the benefits. Carbon taxes are enacted locally, but climate change is a global phenomenon. That means that if Washington state taxes carbon, its own residents pay, but most of the benefit is reaped by people in other countries and other states. Thus, jurisdictions that choose not to enact carbon taxes can simply hope that someone else shoulders the cost of combating climate change. So no one ends up paying the cost.
Of course, this argument shouldn’t stop a perfectly altruistic community from implementing a carbon tax. But if the community was perfectly altruistic, the carbon tax would be unnecessary.
In regards to carbon taxes, it’s often true that policies sound like the “obvious” thing to do, but actually have major implementation flaws upon closer examination.
Tbc, I’m pretty sympathetic to this response to the general class of arguments that “society is incompetent because they don’t do X” (and it is the response I would usually make).
You can make price estimates based on how people hypothetically judge the harm to themselves, but there’s always going to be huge disagreements.
Yeah, I agree that in theory this could be a reason not to do it (though similar arguments also apply to other methods, e.g. in a budgeting system, people with remote jobs can push for a lower budget).
My real question though is: did people actually do this? Did they consider the possibility of a tax, discuss it, realize they couldn’t come to an agreement on price, and then implement something else? If so, that would answer my question, but I don’t think this is what happened.
My real question though is: did people actually do this? Did they consider the possibility of a tax, discuss it, realize they couldn’t come to an agreement on price, and then implement something else?
Probably not, although they lived in a society in which the response “just use Pigouvian taxes” was not as salient as it otherwise could have been in their minds. This reduced saliency was, I believe, at least partly due to fact that Pigouvian taxes have standard implementation issues. I meant to contribute one of these issues as a partial explanation, rather than respond to your question more directly.
Makes sense, thanks. I still feel confused about why they weren’t salient to EAs / rationalists, but I agree that the fact they aren’t salient more broadly is something-like-a-partial-explanation.
TBH I think what made the uCOVID tax work was that once you did some math, it was super hard to justify levels that would imply anything like the existing risk-avoidance behaviour. So the “active ingredient” was probably just getting people to put numbers on the cost-benefit analysis.
I feel like Noah’s argument implies that states won’t incur any costs to reduce CO2 emissions, which is wrong. IMO, the argument for a Pigouvian tax in this context is that for a given amount of CO2 reduction that you want, the tax is a cheaper way of getting it than e.g. regulating which technologies people can or can’t use.
IMO, the argument for a Pigouvian tax in this context is that for a given amount of CO2 reduction that you want, the tax is a cheaper way of getting it
Since the argument about internalizing externalities fails in this case (as the tax is local), arguably the best way of modeling the problem is viewing each community as having some degree of altruism. Then, just as EAs might say “donate 10% of your income in a cause neutral way” the argument is that communities should just spend their “climate change money” reducing carbon in the way that’s most effective, even if it’s not rationalized in some sort of cost internalization framework. And Noah pointed out in his article (though not in the part I quoted) that R&D spending is probably more effective than imposing carbon taxes.
Part of the issue is that there’s rarely a natural way of pricing Pigouvian taxes. You can make price estimates based on how people hypothetically judge the harm to themselves, but there’s always going to be huge disagreements.
This flaw is a reasonable cause for concern. Suppose you were in a group house where half of the people worked remotely and the other half did not. The people who worked remotely might be biased (at least rhetorically) towards the proposition that the Pigouvian tax should be high, and the people who work in-person might be biased in the other direction. Why? Because if someone doesn’t expect to have to pay the tax, but does expect to receive the revenue, they may be inclined to overestimate the harm of COVID-19, as a way of benefiting from the tax, and vice versa.
In regards to carbon taxes, it’s often true that policies sound like the “obvious” thing to do, but actually have major implementation flaws upon closer examination. This can help explain why societies don’t do it, even if it seems rational. Noah Smith outlines the case against a carbon tax here,
Of course, this argument shouldn’t stop a perfectly altruistic community from implementing a carbon tax. But if the community was perfectly altruistic, the carbon tax would be unnecessary.
Tbc, I’m pretty sympathetic to this response to the general class of arguments that “society is incompetent because they don’t do X” (and it is the response I would usually make).
Yeah, I agree that in theory this could be a reason not to do it (though similar arguments also apply to other methods, e.g. in a budgeting system, people with remote jobs can push for a lower budget).
My real question though is: did people actually do this? Did they consider the possibility of a tax, discuss it, realize they couldn’t come to an agreement on price, and then implement something else? If so, that would answer my question, but I don’t think this is what happened.
Probably not, although they lived in a society in which the response “just use Pigouvian taxes” was not as salient as it otherwise could have been in their minds. This reduced saliency was, I believe, at least partly due to fact that Pigouvian taxes have standard implementation issues. I meant to contribute one of these issues as a partial explanation, rather than respond to your question more directly.
Makes sense, thanks. I still feel confused about why they weren’t salient to EAs / rationalists, but I agree that the fact they aren’t salient more broadly is something-like-a-partial-explanation.
TBH I think what made the uCOVID tax work was that once you did some math, it was super hard to justify levels that would imply anything like the existing risk-avoidance behaviour. So the “active ingredient” was probably just getting people to put numbers on the cost-benefit analysis.
[context note: I proposed the EH uCOVID tax]
I feel like Noah’s argument implies that states won’t incur any costs to reduce CO2 emissions, which is wrong. IMO, the argument for a Pigouvian tax in this context is that for a given amount of CO2 reduction that you want, the tax is a cheaper way of getting it than e.g. regulating which technologies people can or can’t use.
Since the argument about internalizing externalities fails in this case (as the tax is local), arguably the best way of modeling the problem is viewing each community as having some degree of altruism. Then, just as EAs might say “donate 10% of your income in a cause neutral way” the argument is that communities should just spend their “climate change money” reducing carbon in the way that’s most effective, even if it’s not rationalized in some sort of cost internalization framework. And Noah pointed out in his article (though not in the part I quoted) that R&D spending is probably more effective than imposing carbon taxes.