Pigou Club Debunked
Everyday Economist debunks Pigou Club in his latest post:
- Most people use their cars to drive to work, the store, and to see friends and family. If the tax on gasoline was raised, Mankiw argues, individuals would consume less. However, individuals would still have to go to work, pick up the groceries, and presumably visit with family. Thus there would be little wiggle room for reducing consumption.
Lets try to find some wiggle room 
This cool Ford F-150 gets 13 miles per gallon
Wiggle room
Toyota Prius gets 47 miles per gallon
Perhaps there is some room for improvement after all..
January 28th, 2007 at 4:44 pm
It would be useful to continue reading:
“Further, many drivers are locked into contracts — whether it be through a lease or some sort of financing. Therefore there would be a high cost for individuals to switch to a more fuel efficient vehicles. In the short run, we would see very little shifting to more fuel efficient vehicles and those who are locked into the contracts would begin paying a high price immediately.”
There is a cost associated with switching to a more fuel efficient vehicle. Also, while some may drive trucks and SUVs for pleasure, others use them because they are much more practical for their job or to transport their family.
February 8th, 2007 at 7:26 pm
“There is a cost associated with switching to a more fuel efficient vehicle. Also, while some may drive trucks and SUVs for pleasure, others use them because they are much more practical for their job or to transport their family.”
There is also a cost for not switching to a more fuel efficient vehicle. Also, pleasure has a cost. If people looked at fuel in more than one way, they would recognize it’s other dimentions. Pollution and geopolitical risks, not just as a power source for their vehicle. People know this, they just don’t want to sacrafice.
May 1st, 2007 at 3:46 pm
Sounds like everyone should go BUY a New car that gets 30 miles per gallon??? Forget The People locked in to leases or long term purcases ,The half of the masses that don’t make a 6 figure salery that have to drive an older car that does get good milage because thats what they can aford to drive 40 miles to a job that makes $8.00 an hour (i’m in cali thats not alot)raise the tax > Until the price of doing the “right” thing is the same as doing what youve been doing it just wont happen
July 3rd, 2007 at 8:29 am
I think in your example above, the market has already provided an alternative to the gasoline price problem.
However, we seen to scorn the abstract and the unquantifiable.
Why do people go out and buy fuel guzzling SUV’s when they could ‘rationally’ buy a great toyota prius ?
Are we missing the opportunity cost that social status and the joyful experience of driving an suv can afford us ?
Unfortunatelly we cant quantify this, so I’m really are not sure how much of a tax will make it worth buying the Prius.
November 26th, 2007 at 6:32 pm
I think the example above should be looked into more carefully. Too many people today assume they know about the automobile industry’s methods of production, but in this case many are misgiven. To fully understand the depth and breadth of any particular product’s impact on the environment, we have to look not only to the finished product, but also to the production process. While the Toyota Prius get an extremely efficient gas usage rate, it is powered by batteries made in Canada out of nickel. This nickel plant in Canada is surrounded by barren land in all diretions; nothing can grow near it because of nickel’s environmentally volatile nature. When the cost of building and operating a Prius is totalled, its environmental footprint for its average expected working life far overshadows that of an H2 Hummer.