The Pigou Problem

6 Pages Posted: 22 Aug 2008

See all articles by John V. Nye

John V. Nye

George Mason University - Department of Economics; Mercatus Center; National Research University Higher School of Economics (Moscow)

Date Written: August, 20 2008


This article calls into question the Pigovian justifications for higher taxes on goods and services that generate negative externalities. Insisting on a Pigovian tax as a precautionary measure only makes sense if it replaces all preexisting subsidies, taxes, and regulations rather than being added on top of existing arrangements. The relevant issue is whether the activities causing the externality are at their socially optimal level.

Keywords: Pigovian tax, Pigou, taxation, tax, externalities, externality, transfers, regulation, global warming, pollution, gasoline, coase,

JEL Classification: D00, D6, D62, H00, H2, H20, H21, H23

Suggested Citation

Nye, John V. C., The Pigou Problem (August, 20 2008). Regulation, Vol. 31, No. 2, Summer 2008, Available at SSRN:

John V. C. Nye (Contact Author)

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
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703-993-4272 (Phone)

Mercatus Center ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
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National Research University Higher School of Economics (Moscow)

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Moscow, Moscow 119017

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