The Pigou-Brennan-Buchanan club

Greg Mankiw asks for members in the Pigou club and lists a growing and illustrious set of people.  I’ll opt in, though I would wish to change the name of the club.  Geoff Brennan and James Buchanan, in their The Power to Tax, wrote one of the best and most important books on public finance in the twentieth century.  Their message is simple: if you don’t always trust government, beware of "efficient taxes."  Those same taxes will make it easier for government to extract excess revenue from the population.  For instance lump sum taxation is not in every way a dream come true.  It can turn into outright confiscation beyond reasonable levels.

I’ll fess up to the following.  We have been fiscally irresponsible and must pay the bills.  Global warming is a major problem and a carbon tax is at least possibly a partial solution.  So the Brennan and Buchanan point, circa USA 2006, is less relevant than at many other times or in many other places.  But hey, clubs are universal and forever and forever (at least my treehouse club was, when I was six).  I’ll join, but I suspect Greg would not be fully on board with Pigou’s politics.  There is a reason why Pigou taxes come from…Pigou.  That same reason is why the concept should be broadened just a wee bit…

Comments

"So the Brennan and Buchanan point, circa USA 2006, is less relevant than at many other times or in many other places."

Sorry, Tyler. You're losing your faith. Yep, the US government spends too much. Buchanan explains that too. Pigou was just plain wrong. Governments never have enough information, or the inclination to get it right. Pigou was an idealist. Re-read 'Cost and Choice', Hayek and Coase.

I will agree that "global warming" is a major political problem. But no one knows whether it's real (Say, what is the "temperature of the Earth" anyway? What does that even mean? And do you trust the person who's telling you?) and whether anything can be done about it and if it will cause any real problems at all within anyone's lifetime. It's all hot air! I can't believe otherwise sensible people are falling for this nonsense.

A "Power to Tax" which is too easy to wield may be used rashly, to our harm. In the instance of the carbon tax, it would lower the amount of carbon dioxide produced, but to what effect? Lower global temperatures? Mean temperatures are correlated with variations in the sun's energy output, as measured by the length of its magnetic cycles. Is that not a better explanation for Greenlands's habitability hundreds of years before the Industrial Revolution, but not since?

However, I think that I would join a Pigou Club nonetheless (though perhaps not forever and ever). Efficient and transparent taxes are that much easier to police by the voters, and when mistakes are found, they are more easily corrected. If you really want to marry Pigou with Mankiw, favor instead Robert Heilein's dictum that (Pigovian) tax legislation should require a 2/3 majority to pass, but only a 1/3 minority to repeal.

http://www.oism.org/pproject/s33p36.htm (See Fig.3)

Brock,

Heinlein sounds nice, but we are already in a sticky wicket
fiscally because politically cutting taxes is easy as pie,
but raising them is a political killer, while raising spending
is easy as pie and cutting is hard, if not quite the political
killer that raising taxes is. Hey, last time there was a noticeable
tax increase, no Republicans voted for it, and they got themselves
in control of Congress while loudly forecasting that the just-passed
tax increase would lead to a horrible recession. Instead, we had
a boom and a stock market bubble thanks partly to the low interest
rates Greenspan delivered as a cookie for all that fiscal
responsibility.

Barkley Rosser,

Perhaps then we should only require a 1/3 minority to veto spending too, non?

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