Thursday, December 21, 2006

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My governor-elect needs some economics tutors... badly.

Greg Mankiw explains.

posted by Dan on 12.21.06 at 06:27 PM


Not everyone thinks taxes should be used for "social engineering." Why do we always look to taxes to manipulate people and markets?

Just 'cause Mankiw says it does not make it correct.

posted by: save_the_rustbelt on 12.21.06 at 06:27 PM [permalink]

Mankiw is being a political hack.

Your governor-elect correctly recognizes there is no free lunch and that if cutting taxes can lead to an increase in tax revenues -- the supply side miracle -- then raising taxes can also lead to a drop in revenues. He is the one who is being realistic while Mankiw is off in some fantasty world reserved for republican hacks.

posted by: spencer on 12.21.06 at 06:27 PM [permalink]

Spencer, consult the lesson on elasticity in the econ textbook that both you and Deval (who I still like despite this absurdity) ought to reread.

posted by: anon on 12.21.06 at 06:27 PM [permalink]

Anon are you giving the same advice to Mankiw who claims that a higher gasoline tax will lead to a massive drop in gas consumption.

posted by: spencer on 12.21.06 at 06:27 PM [permalink]

That is what is so bad about the Mankiw comments on Deval. Mankiw has been running a very serious campaign for a "Pigou" tax on gasoline advocating that it would lead to a drop in gasoline consumption.

Then he turns around and puts down Deval for agreeing with him that a "Pigou" tax on gasoline would lead to a drop in gasoline sales and so would make revenue estimates uncertain.

Can you think of anything being more of a political hack then putting someone down for having an analysis that is essentially identical
to what the hack has been advocating.

posted by: spencer on 12.21.06 at 06:27 PM [permalink]

No, spencer is the hack. Mankiw has made it abundantly clear that he wants to raise gas taxes to cause a reduction in gas consumption. (I'm personally not crazy about this idea.) Patrick has assented to the goal of reducing gas consumption. Yet he then opposes a gas tax because it will either reduce consumption a lot (and hence not generate much revenue) or it will not reduce consumption very much (and hence generate revenue that can be used for road-building).

The most likely interpretation of this statement is that Patrick is not confused--he knows that gas taxes are unpopular and doesn't want to propose them for that reason (and so is also a hack, but a smart one). More charitably, Patrick has a sophisticated public choice model in mind where he believes that once the legislature has an excuse to raise gas taxes, they will do so only up to the revenue-maximizing level and not all the way to the optimal pollution-reducing level because they will be addicted to the spending it allows. But in any case, we know that Patrick's suggestion of raising energy-efficiency standards, which has the effect of lowering the energy cost of consumption, does not tend to reduce total consumption as people drive more, etc. So Mankiw's exasperation is understandable.

posted by: srp on 12.21.06 at 06:27 PM [permalink]

In this particular case Deval was seeking a way to fund the maintenance of bridges and roads --
something massively underfunded under Romney.

Because he agreed with Mankiw that a higher gas tax would lead to lower consumption he concluded he could not use a higher gas tax to fund bridge and road repairs.

It still obvious that Mankiw was making fun of Deval for reaching the same conclusion that Mankiw reached.

posted by: spencer on 12.21.06 at 06:27 PM [permalink]

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