Guest Post by Willis Eschenbach
Inspired (as I often am) by either the insights or the foolishness of a guest post at Judith Curry’s always-provocative blog, I decided to take a look at the relationship between fuel price and miles driven. My inspiration came from my amusement at the guest author’s use of the following graph to establish a relationship between fuel cost and how much people use their cars. I think a relationship exists, but the graph used by the author doesn’t show it. Figure 1 shows that graph:
Figure 1. Per capita fuel use, compared to the fuel price, for the OECD countries. SOURCE
Now, it certainly looks like there’s a clear relationship there, but that’s an illusion. My objection to the graph was, the countries divide into two groups. On the bottom right you have the European OECD countries, plus Japan. Plus one fish.
On the top left, you have the US, Australia, Canada, and New Zealand. What’s not to like?
Well, ignoring fuel price for the moment, who would you think would drive more miles—a citizen of the US, or a citizen of Japan? An Aussie, or a Belgian? A Canadian, or an Italian? So all the guest author has shown in that graph is that the folks in large countries, with miles and miles between cities, drive more than Europeans and Japanese.
But of course, I couldn’t leave it there, so I linked to the following lovely graph of automobile use in the US that I ran across during my research. It shows, year by year since 1956, how many miles Americans have driven, and what the gas price was during that year.
Figure 2. Miles driven compared to the fuel price. Click to embiggen. SOURCE
Now that shows some very interesting patterns. The main oddity I noticed is that there is what might be termed a price shock effect—in the year of a big jump in prices, for example 1974, the mileage driven drops compared to the previous year. But then look what happens from 1974 to 1978 … the price stays stable, but the number of miles driven each year goes up steadily, without reversal.
But of course, I couldn’t leave it there. I digitized the data, to see what kind of relationships I could understand and reveal through further analysis. And as usual, I was surprised by what I found.
First, taking the data as it is given, there is no statistically significant relationship between the two variables, pump price and miles driven. The R2 is only 0.03. (“R2” is a measure of the relationship between two datasets, where an R2 of 1.0 indicates a perfectly linear relationship between the two, and an R2 of 0.00 indicates no relationship. So an R2 of 0.03 is … well … pathetic. So as far as a direct relationship between prices and miles driven, not happening.
Once I saw that, I wondered, well, what if I include a temporal trend in the linear regression? The way that I usually do that is simply to include the date as a variable. And to my surprise, the R2 went from 0.03 up to 0.98 … Figure 3 shows an emulation (multiple linear regression result) of the number of miles that Americans drive, versus the value estimated based on year and pump price.
Figure 3. The emulation is a multiple linear regression, using the year and the pump price as independent variables, and the actual average miles driven by Americans as the dependent variable. R2 = 0.98
Dang, sez I … that’s pretty impressive.
But of course, I couldn’t leave it there. A fixed annual increment, a simple trend like I used, is just a way to understand the data. It’s not an explanation involving some plausible mechanism. And more to the point, I also didn’t like those two years up at the top right of Figure 3, which are 2009 and 2010. In those years, Americans drove about a thousand miles less than expected. So I though about why that might be, and even a bear of little brain would go “global financial meltdown, duh”. And that made sense overall as well, because how far I drive doesn’t just depend on the pump price. It also depends in part on how much money I have in my jeans. When I’m flush I drive more, and when times get hard, I drive less regardless of the price of gas.
So I thought that instead of using the year, I’d try using the per-capita GDP as the second independent variable. Figure 4 shows those results.
Figure 4. The emulation is a multiple linear regression, using the real per capita GDP and the pump price as independent variables, and the actual average miles driven by Americans as the dependent variable. R^2 = 0.98 GDP SOURCE
Yowzah! Now that’s what I call shaving with Occam’s razor. It turns out that pump price and per capita GDP do an excellent job of estimating the number of miles driven, with very little error.
So, what does the magic equation that gives us the excellent results shown in Figure 4 say about the relationship between miles driven on the one hand, and gas price and per capita GDP on the other?
Well, it says that for every twenty-five-cent increase in the pump price of gas, Americans drive about a hundred miles less. Gas price goes up, miles driven go down. Makes sense.
And it says that for every $430 increase in per capita GDP, Americans drive about a hundred miles more. Wealth goes up, miles driven goes up. Also makes sense.
Now, the “carbon taxes” I’ve seen discussed are on the order of $20-$30 per tonne of CO2. And by coincidence, $28 per tonne of CO2 emitted is equal to twenty-five cents per gallon of gasoline. So if a $28/tonne carbon tax is imposed on gasoline, how much less might Americans drive?
Well … a hundred miles less … wow, such a stupendous gain, be still, my beating heart …
And how much actual change in our driving habits is a hundred miles less per year?
Well … since Americans drive about 10,000 miles per year, it’s a gigantic, massive reduction in miles driven of one percent.
And that, dear friends, is all the bang you get for your twenty-five-cent per gallon carbon based energy tax. A one percent reduction in miles driven. One freaking percent, and they want to impoverish the poor for that? Grrrr ….
So … what does this mean for the debate on carbon-based energy taxes?
First, it means that in the American situation, there is no way that the benefits of energy taxes are worth the cost. Why? Because the effect of a typical CO2-based energy tax on miles driven is minuscule, only a 1% reduction for a $28 per tonne of CO2 energy tax.
Next, a very slight increase in per capita GDP will nullify the energy tax entirely. Also by coincidence, it turns out that if the current per capita GDP goes up by about 1% (~$430), that will increase the mileage driven by 100 miles … so a 1% increase in per capita GDP will completely nullify a $28 per tonne of CO2 energy tax. And the GDP goes up by one percent all the time …
Next, it means that in order to have more than a one-year effect, the tax will have to continually rise.
The problem with a carbon based energy tax can be seen by thinking back to Figure 2, where I noted the “shock effect”, and how after the slight reduction in miles driven as a result of the 1974 big jump in pump price, after that one-year reduction the miles driven went right back to increasing year after year, with no change in the gas price.
So a one-time jump in the price will make little difference, just a one-year reduction in the miles driven. But by the next year or two, assuming that the per-capita GDP continues to rise as it has in the past, the miles driven will be rising again.
Next, it means that a carbon-based gasoline tax is wildly regressive. To see why, let me start with a slight digression, by bringing in a concept from accounting, that of “fixed”, “variable”, and “semi-variable” costs.
Fixed costs are those costs you can’t do anything about. The amounts are fixed, you can’t reduce them, you just have to pay them.. Maybe rent. Taxes.
Variable costs are costs that are entirely optional. Think maybe eating at restaurants. You don’t have to spend a penny on that if you don’t want to.
Semi-variable costs are costs that you can change, but you can’t eliminate entirely. These would be things like food costs. You can run them up or down, but you can’t eliminate them.
Now, think about the corresponding concepts as applied to the subject at hand—fixed, variable, and semi-variable miles driven.
Fixed miles are things like a commute to work. Short of changing your job or your residence, you can’t change that. You just rack up those miles every year.
Variable miles are things on the order of visiting Grandma in Arizona. You love to do it, but you don’t have to go.
Semi-variable miles are things like going to the post office to get your mail. You can cut the trips down, but not to zero.
What this graph shows me is that any energy tax on gasoline will hit the hardest on the poorest, the people who mostly use their car to get to work. The problem is not just that more of the wages of the poor go to energy, although that is also a problem.
But in addition to the higher percentage of their wages going to energy, the majority of their miles are fixed miles, so they can’t cut back on them. They have to drive them, so they have to pay the tax.
For the wealthy, on the other hand, lots of their miles driven are variable or semi-variable, so they can just scale down a bit. The energy tax means nothing to them. But for the poor, it can be a budget-buster.
This is one of the many reason why energy taxes are so regressive—because for the poor, fixed costs for everything squeeze them all the time, not just fixed fuel costs but also the other bills they have to pay every month. So when energy prices go up, Al Gore and James Hansen just cut back on visiting the grandchildren they love to talk about, no problem for them.
But the single mom whose gas budget barely covers getting to work, she can’t cut back on her gas use, it’s already cut to the bone. So when she pays the energy tax, she is forced to cut back on something for either the kids or herself.
And all of that for a pathetic 1% reduction in miles driven. That’s criminal.
Now please, folks, don’t insult my intelligence by claiming that it’s OK to harm the poor because of that well-worn fantasy, the fabulous claim that wealth redistribution will make it all OK. It won’t. Anyone who believes it will make it all OK has not spent enough time around government programs.
To start with, even the best-intentioned programs only reach a percentage of those most affected. Next, the poorer that people are, the less likely they are to hear about such programs. Think people living in apartments versus people living in their cars. Next, the paperwork required is all too often complex, confusing, and intrusive. Next, many of the poorest people are mistrustful of government. Also, immigrants are often equally fearful of government, and many don’t speak the language. Next, the people who end up getting the most benefits are often not those who suffered the most losses. Next, administering such a program requires a large expensive workforce of bureaucrats and paper pushers to make it function. And of course, they’re all Union, can’t be fired, plus we’ll be stuck paying these pluted bloatocrats their megabucks in retirement money ’til they shuffle off to a warmer place … and I’m not thinking Florida. Next, as with any government program, waste will consume more than you imagine. Think IRS conferences in Las Vegas and thousand dollar hammers. Next, parasitic rent-seekers like lawyers and consultants will be circling the honey-pot and making off with some of that good honey. And finally, there’s never been a government program that people didn’t scam, game, and cheat, so somewhere between a little and a lot of money will simply be stolen.
So no, wealth distribution will only make things worse, or on the best day with a following wind it might “break even” by taking from one bunch of the poor and giving to another bunch … and meanwhile the people at the bottom of the economic pile are hit the hardest. And whether you are a conservative or a liberal, that should appall you.
And finally … we’re going to create all that pain and create a giant bureaucracy and waste piles of money for a crappy 1% reduction in miles driven, a temporary reduction that will be wiped out by the next 1% increase in per capita GDP?
Really? That’s the brilliant plan? Screw the poor and the economy for a 1% reduction in miles driven?
Spare me. That’s more than foolish, that’s a crime against the indigent and everyone else in the country. Almost any other conceivable response to the imagined horrors of CO2 would be preferable. Taxes on energy are destructive and damaging to individuals, to businesses, to the environment, to the economy, and more than anything to the poor, and to turn it from mindless idiocy to criminal tragedy, there is nothing to show for it at the end of the day but a temporary 1% reduction in miles driven—from an energy tax, there’s no lasting gain, only lasting pain.
w.
DATA: The spreadsheet with the data and graphs is here.
[UPDATE] I just wondered, how much will the $28 per tonne of CO2 gasoline tax cost per year? Average fuel economy of the US fleet, cars and trucks, is about twenty mpg. Average person drives ten thousand miles, at twenty mpg that’s five hundred gallons. The tax at twenty-five cents per gallon on five hundred gallons is $125 per year.
In response to that tax, we can expect people to cut fuel use by 1%, or 5 gallons per year. Gas is around four bucks a gallon, so that’s $20 worth.
So the plan is to charge the average driver $125 per year in gas tax, and in response to that he’ll use $20 less gas, reducing his bill at the pump from $2,000 per year to $1,980 per year and cutting his CO2 emissions by a whacking great 1% … who thinks these plans up, and how can we catch them and stop them?
[UPDATE 2] I also got to wondering, just how much CO2 would a $28 per tonne of CO2 applied to gasoline consumption actually save? There’s 8.9 kg (19.6 pounds) of CO2 in a gallon of gasoline. Crazy but true, it’s the extra weight of the oxygen. So we’d be saving one whole percent of that, or .089 kg per gallon. Multiply that by the number of gallons of gasoline burned in the US, about 134E+9 gallons, and we end up with 0.01 gigatonnes (billion metric tonnes, E+9 tonnes) of CO2 saved.
And compared to a hundredth of a gigatonne, how large are the global CO2 emissions? Well, it’s about 9 gigatonnes of carbon C emitted per year, so as CO2 the mass is (16 + 16 + 12) / 12 of that to allow for the extra weight of the oxygen, or 33 gigatonnes of CO2 per year.
And the $28 carbon based energy tax would reduce that by 0.01 gigatonnes of CO2, which is a reduction of three hundredths of one percent (0.03%) … folks, have we truly gone so mad that such a trivial gain, three hundredth of one percent reduction in CO2 emissions, so small as to be absolutely unmeasurable, is used to justify this crazy tax?
John says:
July 10, 2013 at 2:12 am
In short term the increase of price will hurt the poor, but in long run they would be forced to change their habits and they may even benefit from the increase.
And the use of the word “forced” is the difference between Europe and America. Freedom means not being force by a government to do something whether good for your or not. As long a socialists think force is a proper way to treat citizens then please stay on your side of the Atlantic.
John – I must apologize for saying this but Europeans smugly telling me that I should bicycle to work like they do because I like in a city like they do. I live in Dallas Texas a major city. However my workplace is 32km from my home. This in not unusual, nor is the fact that although Dallas has both a train and bus service there is no realistic way to make that commute. My wife might seem a more likely candidate as her office is only 10km from our home, and there IS bus service between our neighborhood and her workplace area.
I examined this idea as she doesn’t particularly like driving. It turned out that her 10km commute would take more than 1.5 hours and involve 2 transfers. More surprising was that it turned out to be as expensive or more so than driving, when comparing fuel and insurance cost (her car is paid for). Finally we must add in the weather factor – the temp today will be 38°C. This is not unusualc and will be the average for the next 45 days. My 45 kilo executive wife is not going to bicycle 10 km in her dress , nor is she going to walk 1/2 km to the bus station and then wait in the heat.
you will no dout say that these things are functions of our (relative) wealth and location, however I will give you one more ancedote: as manager of a major distribution center in Virginia where the climate is cooler, I bullied the local bus service for months to get them to provide bus service for our 1200 employees. I argued that -being in an industrial park among other companies-there would be plenty of passengers. They agreed to a one-month test. We did plenty of advertising for amonth in advance and made bus passes available in the center…at the end of the one month test, the ridership turned out to be exactly zero..
The thing, I’m not a Troll. I’m just tired to see people making bad decisions and later to complain about it.
Oh, You could easily cycle to work. I cycle by average 25 km a day and I’m perfectly fine and actually I save time compared to car. If I would have a need I could cycle up to 20 km or about 12 miles each way. The time is not wasted compared to time driving.
You could also find a friend who goes the same direction and both of You would save half. Even if You did it once a week You would save more than increase of price. If there are 3 friends Yous ave even more. All You need is good communication with others.
Could You please ask to Yourself why nobody use public transport? Because it is expensive. Why it is expensive, because nobody use it. As well, You most likely consider only short term marginal costs to car and public transport. If so, of course car wins. However You need to buy a car, to maintain it, to place it somewhere. How much does it cost to ride to work if You include all these costs.
And if You really need a car for a day, You can hire one.
Finally, the author could be right, the demand of petrol wouldn’t change much in USA even the price would double. It is twice bigger in most of Europe, but there are freaks who drive a car to work, when there are convenient and cheap public transport. Socially bad activities should be punished and economical means are the most effective.
There are about 10 to 25% of people who will always need a car, while most of people need it because of habit, culture and lack of infrastructure, not because car is necessity.
Okay, it’s official. John is a troll. I particularly like the one about finding a friend and driving half way… it’s actually gotvme giggling.
John says…
Speaking from ignorance of geography, or population density, or any other kind of reality will leave you looking like an idiot. You’ve accomplished it in spades.
No doubt the Luddites (look it up) were fine folks. No doubt the Amish can make it work. But the current reality of the twenty first century cannot be solved by references back to a time when 38% of the workforce was farming. Why not refer back to 1800 when about 90% of the workforce was farming. Certainly they were making things work. Didn’t need mass transit or automobiles.
What does that have to do with 2013 when farm labor is approaching 2% of the total labor force in the United States? Whale oil lamps and horse drawn plows were very labor intensive ways of living, but they have no application in our time, especially in the west. Total miles of railroad track peaked in the early 1900’s at around 250,000 miles. Today it is less than 100,000. The very infrastructure for mass transit would have to magically restored for you scheme to have any hope of working. But it doesn’t. People cherish and defend the freedom to be able to travel when, where and how they would like. And they don’t need or want to have more of their hard earned dollars stolen from their pockets to fund stupid schemes at carbon reduction.
I write this as I sit on a commuter train. I like mass transit. But it is not a solution to higher taxes that hurt the poor. Come on down from the ivory tower. The view from behind the wheel of a car worn thin in the commute to work may just adjust your attitude…or not if you truly believe your utopia might be the answer in the here and now.
pbh
fhhaynie says:
July 10, 2013 at 5:45 am
“One possibly significant variable that you could have included in your multi-linear regression is miles/gallon. It may be covarient with GDP. Both have gradually increased with time. It is certainly a more cost effective way of reducing CO2 emissions than increasing price.”
There is no cost effective way to reduce CO2, because there is “no benefit” from reducing man made CO2. The payback on more fuel efficient cars is so bad(hybrids are the worst) that our big government nannies are compelled to force us to do the right thing. That’s socialism.
@John-
What is it with you Europeans; always ready to send someone around with guns to force me into a situation I did not choose for myself? Why do I say “With guns”? Because that’s ultimately what happens with government, when they “force” people into something, as if you hadn’t noticed…
It would be interesting to run a correlation test with gravity as a variable. I think you will find that the more your country sux the less likely you are to want to drive around in it.
Pertinax says: “Public transportation? Costs more than driving. ”
True and you got me going…!
Boston’s MBTA carries about 1.8 billion passenger miles per year at a cost of about $1.3 billion per year or 72 cents a passenger mile, (over 2/3 of which is taxpayer subsidized).
http://metrobostondatacommon.org/site_media/weave_thumbnails/852.png
http://www.mbta.com/uploadedfiles/About_the_T/Financials/Stats%20Presentation%209-7-11.pdf
According to AAA, cost per VEHICLE-mile is 61 cents, cost passenger mile is under 30 cents from another site I found but unable to confirm.
Now imagine if we car owners were SUBSIDIZED like the MBTA? Someone “ELSE” would pay for 2/3 of your gasoline, 2/3 of your car payments and 2/3 of your insurance and maintenance!
John says later…
I’ve been to the UK. I enjoyed riding the trains there. But even in the UK many of the small rail lines that made the use of mass transit for the common folks possible is long gone.
I love my bicycle. in some years my riding has gone over the 10,000 mile mark. But using a bike to ride 80 miles each way to work? Stupid thought, isn’t it.
Just because you have opportunities to live a life style that suits you and saves money doesn’t mean that it will fit for anyone else, much less for everyone else. Are you volunteering to pay for that lack of infrastructure you so glibly ramble on about? Standard rail track costs in excess of five million dollars per mile. Electrified rail track is nearly an order of magnitude higher. Who will pay for it…and how?
Crunch a few number and get back to us. Airy fairy hand waving will not produce the infrastructure. If the infrastructure was in place it would be under used. 40 million people in California is plenty for me. I don’t think the added population density to make your scheme possible would in any way add to my joy of living.
Go back to the troll cave. It is research time.
Dear RCM,
My intention was to show that arguments of some people were not valid, not that some people should do something else. It’s everybody’s’ own decision. I’m not a socialist for Europe’s standard, but I could be one for USA standard.
You gave valid examples, it is almost impossible to use any alternatives for both of You. The cycling is not possible two months a year. Regarding costs, of ridership You skip significant costs, Your family don’t have to pay for it, but somebody have to do that.
Regarding example You gave, it perfectly well characterize the culture. Americans ride a car and no cost savings would be an argument. If we can agree that it is bad to waste fuel or anything else, than we can argue that riding a car, when it is unnecessary, is socially unfavorable action. Thus those people who act wrongly for whole society should be somehow motivated, a tax could be rather good motivator.
dp says: ” I think you will find that the more your country sux the less likely you are to want to drive around in it.”
But a true pessimist could say that the worse it is wherever you live – the more you drive to be away from wherever that is.
On Update 2: if there are 8.9Kg CO2 in a gallon of gas, one percent of that is 0.089Kg not 0.89Kg as currently stated. Assuming the error carried in to the rest of the calculation, net benefit is only 10% of the original result. If 0.89Kg was a typo for 0.089Kg, then maybe that should be corrected.
[Thanks, fixed. It was just a typo. -w.]
I wanted to show other perspective, but it appears that nobody is interested. Very sad.
“John says:
July 10, 2013 at 5:43 am
Patrick, do You have any alternatives as effective as computer, phone, electricity, pharmaceuticals? I guess no, however commuting with car has alternatives.”
I guess you have not seen the alternatives available. WOW! a bicycle? Can I have food please, bicycles give me gas? John, you have no idea what you are talking about regarding poor, people in abject poverty. You want to deprive them the luxury you enjoyed getting to where you are now.
Lil Fella from OZ says:July 10, 2013 at 2:47 am “Australia is a big country with a relative low population which means auto travel is essential” and “You simply cannot get around auto use.”
That is right. There is practically no public transport except in the centre of large cities (state capitals). Anyone one in the country or even in the outer suburbs needs a car or families even two to go to work, go shopping, go see a medical doctor etc. Some say that Sydney (NSW) is the largest city in area in the world. It stretches about 60km north, south and west (east is the ocean) I lived in an outer suburb (no public transport within 15km, 40km to theCBD) I travelled about 35-40,000 km /yr just going to work, my wife in her car travelled about 20,000 km/yr part-time teaching. When the three daughters were going to University 30km away (40 minutes in peak hour traffic) they each had their own car (five car family then). They would have averaged 15,000km each. Around where we lived two incomes were necessary to support kids going to University.and pay the mortgage on the house.
“John says:
July 10, 2013 at 6:28 am”
If you live in a world where you have the choice, private bicycle, private car or some form of public transport I guarantee you there are MILLIONS in Africa, even India and China, right now that would trade places with you in an instant. Talk about a different perspective, my guess is you have never experienced poverty let alone seen it in reality!
John’s critique (July 10, 2013 at 2:12 am ) of the article is misplaced. Even if most people live in densely populated states, those states are relatively larger than European countries. Moreover, a significant number of people live outside of the major cities. For example,New York State is not just New York City. In Upstate NY there are five relatively large metropolitan areas: Buffalo, Rochester, Syracuse, Utica, and Albany, Schnectady & Troy stretching about 300 miles west to east. Travel within each of those areas is primarily cars and, importantly, travel between them is also by car.
Another point to keep in mind is that these areas once (prior to 1930) had public transit that was comparable to European cities. Extensive trolley within the cities and interurban trains between the four western cities were available. Add in extensive train services and it was possible to live and work without having a car. That has all changed and now it is extremely inconvenient to not have a car. In theory I could use public transit to commute to work but I estimate it roughly doubles the time in transit and the sparse options available means that schedules have to be arranged around the time available to the point that public transit is not a practical option.
I agree with Willis that an energy tax is regressive and would practically achieve little or nothing.
Public transport (PT) works in large density populations. Take New York, London, Hong Kong, central Sydney, Melbourne, Perth etc. Once the population density starts to disperse, PT becomes expensive (Beyond taxpayer subsidies, and in Sydney, prices are subsidised to the tune of ~75% by he taxpayer).
Mikeyj says:
July 10, 2013 at 6:10 am
Don’t get so upset. I didn’t say trying to control anthropogenic emissions was economically benificial. It isn’t. Click on my name to discover one reason.
Thinking a bit more and shifting into Jonathan Swift mode… if a government wants less of something, tax it. If a government wants more of something, subsidize it. So of course it makes sense for a government to tax fuel for driving and then give the money to those who don’t drive. It reduces the number of people who drive and increases the number of people who don’t drive.
I’m all over that. Starting now, all of ya’ll who drove in to work today can each send me five bucks for each day you drive ’cause I just quit my job and quit driving.
I’ve got it all figured out. I’ll have everything delivered; food, clothing, pharmaceuticals. I’ll have my clubs delivered to the golf course down the road and they can keep them there for me so I’ll have them available whenever I bike down for 9 or 18 holes. I can hike the 1/2 mile to the reservoir for some fishing whenever the mood strikes. I can get all my reading material online and do a little online-gambling from time to time, depending on how big my non-driver subsidy checks are. I’ll upgrade my cable to get all the premium movie channels and put in a home theatre. I’ll have to give up downhill skiing and stick to cross-country in the winter, but I suppose it’s inevitable I’ll have to make a few sacrifices.
Yup. This will work out great! Let’s all do it. And think of how much better off the poor will be with a fuel tax after they quit driving altogether. We’ll ALL be rich.
Taxing fuel is the way to go if you want to eliminate poverty.
John says:
July 10, 2013 at 6:28 am
“I wanted to show other perspective, but it appears that nobody is interested. Very sad.”
Not true. Most were interested enough to read what you wrote. It appears most of the readers here disagree with you. Happy pedaling.
Of course they would like to change with me, because I’ve made decisions to give me a choice.
I just can’t see how it relates to those who drive a car, because they can’t be poor when they can afford to have a car even a 20 year’s old one.
John says: ” If we can agree that it is bad to waste fuel or anything else, than we can argue that riding a car, when it is unnecessary, is socially unfavorable action. Thus those people who act wrongly for whole society…”
‘bad to waste fuel’ – In free market capitalism, the ONLY person to make the FREE decision whether or not a particular use of the fuel is ‘bad’ is – the one who PAID for it.
‘people who act wrongly for whole society’ – WHO gets to make the determination whether or not a given act is wrong? You? Some dictator? In FREE countries we elect representatives to write laws that determine what acts are “wrong” and those representative are even further RESTRICTED by our Constitution as to what laws they can write. So in our FREE country, WE THE PEOPLE collectively have ultimate control of what laws we wish to have hanging over us.
Individual freedom is the main reason more people immigrate to the USA than the total of those to ALL other countries combined.
Wills Eschenbach: “[A]ny energy tax on gasoline will hit the hardest on the poorest.”
If a “carbon” tax really did accurately price a valid externality, and if the the tax’s proceeds were distributed in a neutral (I’m thinking per capita, but I’m open to being convinced otherwise) way, it would still be true that the tax would “hit the hardest on the poorest.” Yet I for one would be comfortable with such a tax, since it would contribute to the accuracy of the price signal, making resource allocation more efficient–and thereby raising some otherwise poor people out of poverty.
Of course, the preceding paragraph relates to a parallel universe that none of us inhabits; the externality such a tax addresses is illusory. But I raise the point to caution against arguments based on the proposition that a given price change “hits the poor the hardest.” All too often that’s not an argument so much as a tautology: suffering from price increases is almost the definition of being poor.
Now, you may argue–and I may agree with you–that some prices affect the poor more than others; it’s at least plausible that increasing the cost of, say, milk or sugar will have a greater impact on the poor than raising the Tesla’s cost. But basing choices among among goods and services to tax on how much we–or, more likely, those boys and girls in Washington–think the tax will affect the poor is almost certain to result in worsening our allocation of resources; the economy is too interconnected for any of us to know accurately who will ultimately be affected and how.
Yes, a “carbon” tax is a terrible idea. And the reason is that it will make us poorer as a group and thereby make more poor. But if such a tax really did remedy an externality as its proponents claim, the result would be a more-productive allocation of resources and a consequent reduction in poverty. It could therefore be desirable even if, for the reasons Mr. Eschenbach sets forth, it can be characterized as in some sense “hit[ting] the hardest on the poorest.”
So, although Mr. Eschenbach’s post is interesting as usual, I don’t find the quoted aspect particularly compelling.