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As in Pigovian Taxes, of course. I’d like to throw the term around like I know what I’m talking about, but the truth is I just learned it and had to go to wikipedia to figure it out. It comes from Greg Mankiw’s post, The Pigou Club Manifesto. It’s almost two years old, but it’s new to me, so I thought I’d echo it again.  An argument for taxing gas consumption. He also has a more recent post about why the much more popular “windfall profits” tax on oil companies is NOT just as good.

I’d like to add road tolls as a much better way to pay for highway systems. They are paid for by taxes anyway, but the up front lump sum has no effect on people’s driving decisions; paying per trip would. It wouldn’t have to change revenue, but it could encourage more efficient use of roads, lower congestion, and those who used it more would pay more. With today’s high-speed toll lanes, it doesn’t even require a lot of toll booth lanes and extra delays to pay. Just drive through at 70, and the transponder on your windshield beeps to let you know you’ve just paid.  Plus, rates can be adjusted for areas of high congestion, or during peak times to spread the load.

It came up in a recent conversation that Sweden was an example of socialism working. At the time, I really didn’t know a thing about Swedish politics or economics, so I left it alone. I’ve done a bit of research, and I don’t think Sweden is a socialist state at all. At least not as I interpret the word.

Webster’s defines Socialism as:

“Any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods.”

And this seems to be not at all what sweden is. Industry in Sweden is primarily privately owned. Even energy production is largely privatized (with very little fossil fuel usage, BTW). It ranks #1 on The Economist’s Index of Democracy. The new face of Swedish socialism on Forbes.com contrasts the “socialist facade” with a booming economy with low inflation and a lot of entrepreneurial growth. The Sweden Wikipedia article and related articles also give a good overview.

I think few will disagree that Socialism as defined above has not worked out well historically. Alan Greenspan captures why this is very effectively in his book, “The Age of Turbulence“. It is because a centrally planned economy relies on the central planners to set prices, allocate production resources, etc. They simply can’t do this effectively. Markets can. When lots of people are acting individually, using price signals to determine the best way to deploy the capitol under their control, they can arrive at a more optimum distribution of resources. Additionally,private property rights must be guarantee, or there really isn’t any reason for anybody to invest themselves or their resources (which they don’t really have in the first place) in anything.

There is little doubt that markets are an excellent tool for optimizing resource allocation and determining prices, and private ownership is required to maximize motivation to succeed. However, what people so often call socialism in sweden, includes both of these things. Okay, some services, such as health care and education, are “socialized”. It is certainly a welfare state by anyone’s definition, with guaranteed health and education services for everything, extensive unemployment support, and a tax burden higher than any other industrialized country (as percent GDP). But these taxes are used to provide services that Swedes apparantly think are worth paying for. They’ve decided that it is worthwhile to pay for health care for everyone. And socializing a service doesn’t mean the government is going to screw it up. Since 1992, Sweden has implemented a school voucher system, where the state will pay full tuition costs to the for-profit private school of the parent’s choice. Schools must compete for students providing the motivation for excellence, yet equal access is still guaranteed for all citizens.

I’m not suggesting that Sweden is a perfect model of government that the U.S. or any other country should strive for. I just want to make two points:

1) I wish people would stop throwing around the word Socialism or Socialist every time someone suggests the government provide health services for the WHOLE public. They are just trying to associate an old stigma, that really doesn’t apply at all. We are not talking about abolishing private property, compromising democracy, or throwing away free markets.

2) Tax-payer funded health care and education (among other things) can work, and has in several countries, Sweden included. As far as I can see, it is the only way to guarantee equal access. The real question people should be asking themselves is if they are willing to pay a bit extra in taxes in order to provide it. The same goes double for education. We ALL benefit from a well educated public.

Honda is preparing to release 200 fuel cell powered vehicles, called the FCX Clarity, on Southern California and Japan. I think I want one. They claim 270 miles distance between fillings, and they apparently are working on a home based electrolysis system so you can refill in your own garage! The cost is $600/month to lease. Not cheap, but not as high as I would have guessed.

Just one more reason I smile every time I see the cost of gas rise.

Check out this BBC article, or Honda’s FCX Clarity Page.

So I finally took the little notebook I keep in my car inside tonight to dump the data I’ve been scribbling down into excel. So far, two lessons learned:

1) I really suck at keeping consistent notes. Miss a tank here, leave off a date here and there, yada yada.

2) Gas is getting more expensive.

My gas purchase history. The first entry is in VA, the others in CA.

Of course, you already knew that. But I thought it was cool to see anyway. I can’t remember where I managed to get that sweet deal in March. Maybe I just wrote it down wrong.

Now on to the MPG examination….

This video is both funny and dead on (as long as you aren’t being too literal minded). A summer gas tax holiday is a really dumb idea, and it is just pandering to (large numbers of) stupid people. If you want to lower consumption, the last thing you should do is lower the cost to the consumer. About the only winners there are people selling the gas. I propose a summer gas tax hike! If more American voter’s could pull themselves away from American Idol Smarter than a 5th Grader Oprah whatever mind numbing thing they are watching on TV long enough to think straight and look a bit into the future that just might even be politically feasible.

I’ve long thought that gasoline (and petroleum products in general) should be taxed a lot more than they are. People love to talk about the need to ween America off oil. You know, CO2 emissions, dependence on less than stable, not always friendly, developing nations, and all that. Every presidential candidate says it. But you can’t just say it and make it so! If you want to make alternatives more attractive, or if you think there are costs and risks embedded in the use of gasoline not accounted for in the price, the cost has to be increased! Yet, in the last Virginia Gubernatorial race, both candidates were promising explicitly NOT to raise gasoline taxes (I for one would have gladly voted for anyone willing to come out in favor, but the truth I’m afraid, is that most would not).

I was pleasantly surprised to hear Alan Greenspan, in his book, “The Age of Turbulence”, advocating a gas tax of $3/gallon or more.

I come very reluctantly to taxes as an alternative way to accomplish what competitive markets could do. But while oil markets are high competitive in the developed world, the market approach is clearly vulnerable in a world where a single act of terrorism can shut down massive chunks of oil production and cripple the global economy. There is no insurance, or hedging strategy, that can defend against that. We often forget that to function effectively, a competitive market must be voluntary and free of significant threats of violence, and that trade must be unencumbered. Remember, markets are not ends in themselves. They are constructs to assist populations in achieving the optimum allocation of resources.

And I really liked this:

I consider the argument that gasoline tax hikes are politically infeasible irrelevant. Sometimes the duty of political leadership is to convince constituencies that they are just plain wrong. Leaders who do not do that are followers.

He also advocated an increase in nuclear generation, which I think is great. The fear of nuclear power is significantly overstated.

There is, certainly, a short term economic cost to any increase in fuel pricing, just like there are losers for every economic shift (“Creative destruction”, to borrow Greenspan’s term). But, the fact is, it is going to have to happen, sooner is better than later, and talking about it won’t do it. America burns one out of every seven barrels of petroleum produced worldwide on its highways! That is a big chunk that could be significantly decreased fairly quickly.

On a related note: Greenspan is a really smart man, with a lot of experience, and his book is definitely worth a read. He covers everything from history, to current events, even looking a bit towards the future. It is a bit long, and has taken me a while to get through, but it has been more interesting than the couple other books I set aside in favor of it.

“The Age of Turbulence” at Amazon.com