11 Jul 2008

Pigouvian Libertarians

DS asks "Is Pigovian code for anti-Libertarian?"

Pigouvian taxes on activities with negative externalities are meant to internalize the costs of those externalities so that people choose the "right" level of that activity. As such, they are libertarian -- since they do not restrict action but do reduce the cost of one's action on others. OTOH, people who dislike government and taxes dislike Pigou because he created a new rationale for government intervention. In that sense, these idealist libertarians (government can do no good) dislike Pigouvian taxes...

Bottom Line: Every idea can be abused. (Marx disavowed at least one version of "Marxism"!)