Tuesday, June 24, 2008

Greg Mankiw's Blog: A Reading for the Pigou Club

Greg Mankiw's Blog: A Reading for the Pigou Club
McCain should spend ten minutes with his adviser Douglas Holtz-Eakin, who I would guess is still recovering from his embarrassment at McCain's call for a cut in gasoline taxes, to discuss the opposite: a tax on oil products, especially gasoline and heating oil. This doesn't mean abandoning his opposition to higher taxes. Indeed, the point is not to raise federal revenues. Every dollar that comes in should be rebated, perhaps by reducing the payroll taxes of everyone earning less than, say, $50,000 per year, the group Obama intends to benefit by raising taxes on those energetic small-business owners. The beneficiaries of the McCain shift in taxes from work to polluting, imported gasoline would see the reduction in taxes immediately--when they received their first salary check after the new regime was in place. But the main point is this: The money that the Saudis and other supporters of jihadists would otherwise get would be reducing the taxes of hard-pressed Middle America. Take that, Barack Obama. It's called straight talk.

Public Goods and Externalities - by Tyler Cowen --
Externalities occur when one person's actions affect another person's well-being and the relevant costs and benefits are not reflected in market prices. A positive externality arises when my neighbors benefit from my cleaning up my yard. If I cannot charge them for these benefits, I will not clean the yard as often as they would like. (Note that the free-rider problem and positive externalities are two sides of the same coin.) A negative externality arises when one person's actions harm another. When polluting, factory owners may not consider the costs that pollution imposes on others. Policy debates usually focus on free-rider and externalities problems, which are considered more serious problems than nonrivalrous consumption.

...Well-defined property rights can solve public goods problems in other environmental areas, such as land use and species preservation. The buffalo neared extinction and the cow did not because cows could be privately owned and husbanded for profit. Today, private property rights in elephants, whales, and other species could solve the tragedy of their near extinction. In Africa, for instance, elephant populations are growing in Zimbabwe, Malawi, Namibia, and Botswana, all of which allow commercial harvesting of elephants. Since 1979 Zimbabwe's elephant population rose from 30,000 to almost 70,000 today, and Botswana's went from 20,000 to 68,000. On the other hand, in countries that ban elephant hunting—Kenya, Tanzania, and Uganda, for example—there is little incentive to breed elephants but great incentive to poach them. In those countries elephants are disappearing. The result is that Kenya has only 16,000 elephants today versus 140,000 when its government banned hunting. Since 1970, Tanzania's elephant herd has shrunk from 250,000 to 61,000; Uganda's from 20,000 to only 1,600...

Check it out Tyler Cowen's Website, heap of things you can dig in here! --

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