$4/gal. gas makes a lot of sense
Via Mankiw via Thoma:
From the MIT News Office (via Mark Thoma), econ prof Bob Pindyck is interviewed about the two candidates' energy policies. An excerpt:
The favorite sentence of the Pigou Club:Q: Would either candidate's energy proposals make much impact on energy costs in the short term?
A: Neither of the candidate's plans would have any impact. The one exception would be McCain's proposal to eliminate tariffs on the importation of Brazilian ethanol. It would immediately reduce the cost of ethanol.
Q: How so?
A: We have a tariff on imported ethanol from Brazil, which is made from sugar cane. Ethanol here is usually made from corn. Sugar cane ethanol is about eight times more efficient than that made from corn. By removing the tariff, Brazilian ethanol becomes cheaper and will make ethanol-gasoline blends cheaper.
Look, what are going to be needed ultimately is a tax on carbon and a tax on gasoline -- a large one.
Crossed in the ether! I just posted on the same interview:
http://www.knowledgeproblem.com/archives/002634.html
Posted by: lkiesling | August 20, 2008 at 11:09 AM
Lynne,
I read the blogs in alpha order in Google Reader. Greg comes before Knowledge. I would much rather have linked to yours!
Posted by: John Whitehead | August 20, 2008 at 11:15 AM
"makes sense" ???
Prices should not make sense, they should strike an equilibrium between supply and demand.
We sure did learn that $4-5 gas will change behavior in miles driven and choices of cars purchased.
Less congestion and less need for new roads, less deaths on the highway, less air pollution, and less money going to terrorist regimes.
Lets put another dollar or two of taxes on a gallon and then reduce the income tax to the whole thing is revenue neutral. That makes sense.
Posted by: Jim | August 20, 2008 at 03:53 PM
"makes sense" ???
Prices should not make sense, they should strike an equilibrium between supply and demand.
We sure did learn that $4-5 gas will change behavior in miles driven and choices of cars purchased.
Less congestion and less need for new roads, less deaths on the highway, less air pollution, and less money going to terrorist regimes.
Lets put another dollar or two of taxes on a gallon and then reduce the income tax to the whole thing is revenue neutral. That makes sense.
Posted by: Jim | August 20, 2008 at 03:54 PM