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Would Americans pay more for gasoline?

Andrew Sullivan quotes Jim Manzi, who argues that a carbon tax is pure fantasy: The idealized carbon tax is an almost perfect example of what Coase famously called “blackboard economics”: abstract economic theory that proceeds by ignoring a detailed knowledge of the actual economic system. You can’t separate the “merits” of a carbon tax from ...

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Andrew Sullivan quotes Jim Manzi, who argues that a carbon tax is pure fantasy:

The idealized carbon tax is an almost perfect example of what Coase famously called “blackboard economics”: abstract economic theory that proceeds by ignoring a detailed knowledge of the actual economic system. You can’t separate the “merits” of a carbon tax from the “politics” unless you want to compare the kind of carbon tax you could create in the imaginary world where you are absolute dictator to the alternative policies that have to be developed in the real, messy world of democratic politics. It is this practical recognition that explains why all those “dumb” politicians are blind to the incredible elegance of this academic creation.

Manzi raises a number of serious questions, among them the most crucial one of all: political viability. It’s true that the need for a carbon tax might be difficult to explain to voters and a challenge to enact, but that’s why you have public advocacy campaigns. That’s what presidential leadership is for. And a gas tax, at least, is hardly fantasy. Consider this NYT/CBS poll from February 2006:

It remains an open question, though, as to whether having to pay more for gas would lead U.S. consumers to drive their freedom capsules any less or switch en masse to hybrid vehicles—and thereby reduce energy consumption and dependency on foreign oil. Consider this new study by economists Dora Gicheva, Justine Hastings, and Sofia Villas-Boas, who say that Americans just cut back on grocery bills when the price of gas goes up:

On average, consumers are able to decrease the net price paid per grocery item by 5-11% in response to a 100% increase in gasoline prices. Our results show that consumers respond to permanent changes in income from gasoline prices by substituting towards lower-cost food at the grocery store and lower priced items within grocery category.

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