Talk:Pigouvian tax

Negative Pigovian tax

Would a minimum wage be an example of a Negative Pigovian tax? DOR (HK) (talk) 02:52, 23 October 2009 (UTC)

What do you mean by "Negative Pigovian tax"? There's such a thing as a Pigovian subsidy for positive externalities, but that's not what minimum wage is, since the government doesn't pay for the increase in wages. Minimum wage is a "Price Floor". —Preceding unsigned comment added by 168.16.132.59 (talk) 22:10, 3 May 2010 (UTC)

A Pigovian subsidy for labor could replace a minimum wage. At $10,830 for single person, and 2080 hours (40 hours per week x 52 weeks per year), that would be about $5.21/hr. Of course, that would require original research -- and a heck of a lot of tax dollars. :) —Preceding unsigned comment added by 68.186.116.6 (talk) 16:00, 12 January 2011 (UTC)

It's not really clear to me what a "pigovian subsidy for labor" would be -- that's more like redistribution than anything about an externality. Austinecon (talk) 19:07, 14 July 2011 (UTC)

Higher employment tends to reduce negative externalities like crime, a benefit that is external to the economic interaction between employer and employed. If the current workforce is at less than full employment -- and it would be hard to find anyone who claims otherwise -- it may be more economically efficient for taxpayers to subsidize employment than pay for things like additional courts and prisons, thus fitting the definition of a Pigovian subsidy. — Preceding unsigned comment added by 184.100.30.198 (talk) 21:22, 10 September 2011 (UTC)

There's not much empirical evidence that crime is countercyclical (that it increases during recessions), and some that goes the other way. And would a (necessarily broad-based) labor subsidy be literally less costly than other methods of reducing crime? There might be an argument for such subsidies (as I suggested above), but I'm not sure this is the strongest one. In any event, even assuming that's all the case, we generally think of Pigovian taxes & subsidies as direct taxes & subsidies on the good causing the externality. Though this may be an overly pedantic point. Austinecon (talk) 14:19, 21 September 2011 (UTC)

I realize this is absurdly old, but there are externalities with compensation that is below a living wage, even if the pay rate is at market. A prime example is Walmart, where a large percentage of their employees receive public assistance because they are paid less than a living wage. Thus the difference between living wages and actual wages has economic and social costs.

The economic costs include increased use of social safety nets like TANF, SNAP, health insurance subsidies (ACA, Medicaid, CHIP), housing (FPHA or "Section 8"), EITC, as well as industry subsidies (FCC's Lifeline, LIHEAP & state energy programs). There is also the very real cost of underpaying payroll taxes including FUTA and SUTA.

Since an externality is a cost borne by an indirect third party, these increased expenses imposed on taxpayers are an impact of companies underpaying employees and thus one of several externalities of low wages. Externalities don't have to be soft costs, like pollution, as long as they are costs not borne by the original transaction.

We could lay on further costs - employee income is artificially low, thus their consumption is lower, which means GDP & its growth are under-measured. Someone else can go through the argument of how economic growth is a public good CountryMama27 (talk) 19:27, 2 July 2023 (UTC)

Pincites to Pigou

Author of article needs to provide more clarity for assertions based on Pigou's The Economics of Welfare. Broad cites to a 800+ page text are not helpful or authoritative. — Preceding unsigned comment added by 128.205.132.193 (talk) 19:32, 13 March 2012 (UTC)

"Pigouvian" is the preferred spelling.

Google smackdown 2012 0501:

Pigouvian tax - About 175,000 results

Pigovian tax - About 96,600 results --?

Google Books smackdown 2013-06-13:

Pigouvian tax - About 13,800 results

Pigovian tax - About 9,400 results

And, it seems to me that a tax named after Pigou should include the 'u'. Changing the article content. If it sticks, we can move the page.--Elvey (talk) 18:51, 13 June 2013 (UTC)

Google 2018:

"Pigouvian tax" - About 99,000 results

"Pigovian tax" - About 35,500 results

The use of "Pigovian" seems like a case of over-americanisation.

Incomprehensible

The topic paragraph of this article is pretty much incomprehensible. Full of jargon. What are "externalities," for example. Please rewrite!

192.249.47.201 (talk) 18:50, 15 August 2012 (UTC)

Did you read the linked article "externality" which explains the term? Mindmatrix 20:46, 15 August 2012 (UTC)

Do we have to read every article in order to understand any article? I'm going to put something in. OsamaBinLogin (talk) 16:49, 19 October 2013 (UTC)

Neutral tone?

Does this page maintain a neutral tone throughout? Particularly the subheading regarding political obstacles? 71.59.147.83 (talk) 01:09, 22 March 2013 (UTC)

pronunciation

do you really say "pig-ovian"? At first I thought the word derived from the word 'pig', as in a barnyard animal. OK, "Arthur Pigou". Did he really survive grammar school with a last name pronounced "pig-oo"? Or is it more like pizhou? OsamaBinLogin (talk) 16:49, 19 October 2013 (UTC)

When I was an undergrad, my professors pronounced his name as "PEE-goo." I've heard worse. "PI-zheu" would be a French, rather than Brit, pronunciation. CountryMama27 (talk) 19:33, 2 July 2023 (UTC)

Link to Coase theorem

In http://en.wikipedia.org/wiki/Pigovian_tax#No_intervention_.28direct_negotiation_between_parties.29 there should be a link to http://en.wikipedia.org/wiki/Coase_theorem — Preceding unsigned comment added by 181.29.131.116 (talk) 01:58, 13 July 2014 (UTC)

Sumptuary tax

Sumptuary tax redirects here, yet the term does not appear in the text. 216.8.172.35 (talk) 21:18, 26 November 2014 (UTC)

Dr. Franckx's comment on this article

Dr. Franckx has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:

I think the main issue with this page is that it is heavily biased towards some rather specialized or ideologically sensitive issues, and omits a discussion of some basic problems.

I think the article is right to discuss the measurement problem (which is of very high practical relevance) and the issues of second-best taxation and of tax interactions (although, again, there is too much focus on specific papers). There is no discussion at all of Pigovian taxation when other market imperfections such as monopoly power are present. The fundamental asymmetry between taxing pollution and subsidizing pollution reduction (which is discussed at length in Baumol and Oates class handbook) is missing completely.

A comparison between Pigouvian taxes and cap-and-trade probably requires a Wikipedia page in its own right. However, the political advantage of grandfathered permits is a very important argument in favour of this instrument (which is one of the key reasons why the European Union uses cap-and-trade for greenhouse gasses). The fundamental asymmetry between taxes and tradable permits when abatement costs are unknown, and which has been identified first by Weitzman, should also be included, or at least referred to.

The text says that Pigovian taxes are commonly used - after all these years in the field, I would be interested in seeing a "real" tax in action. In reality, environmental taxes are often based on easily measurable inputs to the production process (such as fuels) rather than on emissions.

The discussion of Coase is, in my opinion, completely wrong, and may be ideologically inspired. The main point made by Coase was that economists should study the transaction costs involved in any arrangement. He never wrote that negotiated solutions would always be superior, he only pointed to their possibility and used practical examples to show that common law, could in some instances substitute for regulation. For almost all environmental problems that are currently relevant (such as climate change or biodiversity loss), the Coasian bargaining approach is totally unfeasible. It is quite telling that the examples given in the article barely belong to what we would nowadays consider to be 'environmental' problems. It would do justice to the work of Coase if this specific section would be completely re-written by someone with a deeper knowledge of the man's work. It should also discuss the issue of the allocation of property rights, which was discussed at length in Coase, and is really the fundamental issue at stake.

Another basic issue that should be discussed is the comparison between Pigouvian taxes and command-and-control approaches to regulating pollution. The discussion should at least mention that (a) in a first world setting, with no distortionary taxation, Pigouvian taxes are more efficient than command-and-control (b) despite their higher efficiency, Pigouvian taxes lead to higher costs for firms because the taxes are a high cost to the firm (but are no social cost because they are just a transfer from the firms to the government if taxation is not distortionary). Again, all this is discussed in the classical textbook of Baumol and Oates.

We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

Dr. Franckx has published scholarly research which seems to be relevant to this Wikipedia article:

• Reference : Laurent Franckx & Alessio DAmato, Isabelle Brose & Isabelle Brose, 2004. "Multi Pollutant Yardstick Schemes as Environmental Policy Tools," Energy, Transport and Environment Working Papers Series ete0416, Katholieke Universiteit Leuven, Centrum voor Economische Studien, Energy, Transport and Environment.

ExpertIdeasBot (talk) 02:42, 28 May 2016 (UTC)

Are there no papers discussing the substitution effect?

The only focus seems to be on how a higher price cuts output by implied lower demand.

But the real action of a pigovian tax is in the substitution of cleaner alternatives.

Coal costs 1 while natural gas costs 1.4 for the same resulting output but at half the pollution, so a tax of 1 per unit of pollution will make coal cost 2 while natural gas costs 1.9. Not only does the higher price cut demand per unit of energy, it also cuts demand for coal while increasing demand for gas. But if wind costs 1.8 with no pollution, then it will cut demand for gas which can quickly track varying wind production, so coal demand is cut while gas production capacity is increased but gas burned is cut if wind is available. Coal demand is eliminated even though wind and natural gas cost more without the pollution tax.

Currently, coal costs 1 while natural gas in areas of high supply, meaning pipelines, gas costs .8 while in areas lacking pipeline capacity, gas costs 1.2, except natural gas generation is faster to build and more versatile and thus has lower capital cost than coal (or nuke, hydro, wind). That's why gas gained and coal fell even before gas became cheaper than coal in some markets - price is more for a given transaction, but capital costs must be spread over many transactions.

Remember, economists must use both hands, on one hand ..., but on the other hand .... Mulp (talk) 03:14, 23 October 2016 (UTC)

Reciprocal cost discussion is dubious

The point of strict regulatory isn't efficiency per se, it is determining a safe level of pollution and enforcing it uniformly. The healthy level of smoke is fixed, independent of the total damage it does to neighbors. Note that excess pollution isn't only a nuisance; it can be lethal. In such case, the aggrieved party can't collect a fee because he is dead.

The real issue isn't the number of neighbors, it's the number of factories. With one factory, only limited pollution controls are necessary. (The 1948 Donora smog event proved even one factory is enough to be fatal.) Assertions of inefficiency when regulations are applied to total industrial pollution are not well founded by the arguments presented here. The solution isn't to limit the total number of factories, it's to improve the pollution controls on the individual ones. Yes, this decreases the total market in number of goods, though it increases the market in pollution control. — Preceding unsigned comment added by 67.100.123.107 (talk) 15:38, 29 March 2017 (UTC)

spending the tax receipts on mitigation?

If manufacturing has an associated negative externality of pollution, and so manufacturing is taxed to include the cost of the pollution as a cost of manufacturing to get the market price of the manufactured goods where it belongs... but the government then spends the tax receipts on education: yes, you've mitigated the pollution level somewhat, but you still have a level of pollution, pollution that is now an economic byproduct of education. You need to spend the tax receipts to clean up the pollution or you have not corrected the externality. Wish I had a citation for you, but this is how it works. 98.7.201.234 (talk) 16:07, 15 November 2019 (UTC)

Coase Theorem

"Economist Ronald Coase argued that individuals can come to an agreement with an efficient result without the need for a third party when transaction costs are low."

This section seems to support a misreading of The Problem of Social Cost. The point of the paper is that because transaction costs are large enough and property rights are ambiguous that you don't see this in practice.I'd maybe rewrite this as "Economist Ronald Coase argued that when transaction costs are low individuals can come to an agreement with an efficient result without the need for a third party."to emphasize this point better. A more extensive rewrite might be warranted.--TheWhiteGuar (talk) 02:10, 3 December 2019 (UTC)

Vacant property (or empty homes) tax

To call a vacant property (or empty homes) tax can for Pigouvian requires some more justification. — Preceding unsigned comment added by Northwind Arrow (talk • contribs) 11:07, 26 March 2020 (UTC)

Requested move 16 November 2022

The following is a closed discussion of a requested move. Please do not modify it. Subsequent comments should be made in a new section on the talk page. Editors desiring to contest the closing decision should consider a move review after discussing it on the closer's talk page. No further edits should be made to this discussion.

The result of the move request was: moved. Per consensus. (closed by non-admin page mover) – robertsky (talk) 13:59, 23 November 2022 (UTC)

---

Pigovian tax → Pigouvian tax – "Pigouvian" is more common in Google Ngram Viewer long-term although only slightly so recently; also, the economist is called "Pigou" so "Pigovian" seems to make less sense; double check: Britannica has "Pigouvian"; general Google search has more "Pigouvian" than "Pigovian"; in Google Scholar, "Pigouvian" is a clear winner. Dan Polansky (talk) 08:43, 16 November 2022 (UTC)

• Support per nom. Article title should reflect the spelling of its namesake's surname. -- CommonKnowledgeCreator (talk) 14:56, 18 November 2022 (UTC)
• What is more "natural" makes more sense about adding a V to the end of the name Pigou before tacking on the suffice -ian? Isn't it far more natural to harden the soft u into a v? "Pigovian" makes more sense to me than "Pigouvian". Sounds better too. Srnec (talk) 21:41, 18 November 2022 (UTC)

  Not sure about "natural"; I do not know any morphological process that changes "u" into "v", but maybe there is one. Do you have some example words using that putative process? In Wiktionary:Category:English terms interfixed with -v- there are "Rousseauvian", "Thoreauvian", "Peruvian", etc. The -v- interfix entry: "Used before -ian, when the base word ends in certain vowels, especially ⟨o⟩ or ⟨u⟩." Going by frequency seems fine per WP:COMMONNAME and given the spelling is in Britannica, my guess is the numerical majority is not linguistically "wrong". --Dan Polansky (talk) 18:24, 19 November 2022 (UTC)

  Interesting find. I note that Breslavian, Moose Javian, Marlovian and Ludlovian all follow the "rule" I suggested where what would otherwise be a /w/ becomes /v/. (Pigouian would obviously have this sound.) In Breslavian and Moose Javian, it also results in a change in pronunciation of the preceding vowel, as it does in Pigovian. Srnec (talk) 18:50, 19 November 2022 (UTC)

  Interesting. I would have expected "Marlowian", but it is rare and "Marlovian" is common[1]. "Ludlowian" is not all that uncommon even if rarer[2]. The question still remains whether one wants to make an original linguistic analysis, or whether one wants to go by frequency and Britannica; I don't know whether there is any policy or guideline on that.

  "Pigouvian tax" is in Dictionary.com[3], The Free Dictionary[4], and in OECD glossary[5]. I have no confidence about what is linguistically "better"; my original hunch in this nomination was based on the spelling, on the idea that "u" should not disappear when affixing, which the example of "Marlovian" puts into doubt, even if what disappears there is "w" rather than "u". --Dan Polansky (talk) 09:04, 20 November 2022 (UTC)

• Support, per WP:COMMONNAME. Pilaz (talk) 15:55, 19 November 2022 (UTC)
• Comment: Caution, this is reverting a cut-and-paste move. The article history of the target needs to be merged to preserve attribution of the text. Andrewa (talk) 10:54, 23 November 2022 (UTC)

The discussion above is closed. Please do not modify it. Subsequent comments should be made on the appropriate discussion page. No further edits should be made to this discussion.

Amakuru, would histmerge be appropriate for the early edits as raised by Andrewa? – robertsky (talk) 14:03, 23 November 2022 (UTC)

@Robertsky: it was actually more like a merge than a cut-and-paste move, as there were versions of both articles from before the merge: [6][7]. We could argue that the latter (the original history of the current page) is lower in content, but probably best just to use the {{merged from}} and {{merged to}} tags to preserve the history on both sides. Cheers  — Amakuru (talk) 14:52, 23 November 2022 (UTC)

First paragraph too jargon heavy and not understandable

I've got a Masters in Economics and I found the first paragraph unreadable. Not "unreadable" but "not able to be digested in 4 seconds to refresh my knowledge of the definition".

The lead paragraph needs to be understandable to non-economists. If you need a target audience, imagine a politician who heard the term from an economist and wants to know what it is. It should be short and simple and jargon free. (Or as little jargon as possible.) I started to write one and ran out of time. Here's what I got so far:

A Pigouvian tax (also spelled Pigovian tax) is a tax on a product (or service) with a negative externality. The tax lessens the amount of product (or service) purchased and, therefore, lessens the negative externality. For example, cigarettes cause lung cancer, so a tax on cigarettes would mean fewer cigarettes get purchased and fewer people get lung cancer. A good pigouvian tax includes the exact cost of the negative externality in the purchase, making the market efficient.

Mdnahas (talk) 15:43, 2 January 2023 (UTC)

Agreed this is still the case. So let's clean it up bit by bit. I also think the comments from Dr. Franckx, though I'm not familiar with his work, are quite valid. Simplifying and narrowing the scope of this article and allowing some of the other points to perhaps be moved to their own article(s) would be important first steps. I found the article to be both messy organizationally and grammatically with run-on sentences and tangental points. CountryMama27 (talk) 19:37, 2 July 2023 (UTC)

References