Toward a Pigouvian State

55 Pages Posted: 4 Feb 2015 Last revised: 1 Dec 2015

Jonathan S. Masur

University of Chicago - Law School

Eric A. Posner

University of Chicago - Law School

Date Written: February 2, 2015

Abstract

Most economists believe that the government should impose Pigouvian taxes on firms that produce negative externalities like pollution, yet regulatory agencies hardly ever use their authority to create Pigouvian taxes. Instead, they issue command-and-control regulations. Our major point is that, contrary to the conventional wisdom, regulators typically have legal authority to create Pigouvian taxes — they just do not use it. While regulators may hesitate to impose Pigouvian taxes for a range of political and symbolic reasons, we argue that these reasons do not justify this massive failure of regulatory efficiency. It is time for the regulatory state to take a Pigouvian turn.

Keywords: Pigou, Pigovian, Pigouvian, taxes, gas tax, carbon tax, cap and trade, regulation, EPA, administrative law, financial regulation

Suggested Citation

Masur, Jonathan S. and Posner, Eric A., Toward a Pigouvian State (February 2, 2015). University of Pennsylvania Law Review, Vol. 164, p. 93 (2015); University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 716 (2d Series); U of Chicago, Public Law Working Paper No. 503. Available at SSRN: https://ssrn.com/abstract=2559393 or http://dx.doi.org/10.2139/ssrn.2559393

Jonathan S. Masur (Contact Author)

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States
773.702.5188 (Phone)

HOME PAGE: http://www.law.uchicago.edu/faculty/masur/

Eric A. Posner

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States
773-702-0425 (Phone)
773-702-0730 (Fax)

HOME PAGE: http://www.law.uchicago.edu/faculty/posner-e/

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