Please tax me more! Seriously!

January 24, 2007

I am not an economic theorist. But sometimes I like to pretend that I "get" economics. And that I get political theory. So I'm going to talk about government regulations for a moment. If that sounds boring... well, yes it is, but these are things that make the world go round.

So simply put we have this market thing out there that we generally don't like the government interfering with. If the government tries to put a cap on prices for a commodity it tends to skew the supply and demand curve. Same if they try to put a floor on a commodity's price. And then the economy gets out of whack in some way — leading to inflation, stagnation, etc.

I'm not generally a utilitarian who thinks that the ends always justifies the means. You need right ends and right means — that's a big part of the Buddha's 8-fold path — but in some cases I'm willing to bend a bit. I understand that regulation of economics is a tricky thing that indirectly impacts individuals' lives. But we have to do something to force ourselves to use fewer resources. That's what this article boils down to: needing to use fewer resources.

Bush talks about spurring ethanol use. This skews the corn market. Maybe that's okay. I'd rather go the other way though and create a disincentive for purchasing gasoline — through a gas tax or a carbon tax on the vehicle using it. This is a back-handed way of creating a price floor, with the benefit that you can spend the tax money — for instance, on further research on alternative fuels and efficiency, on further mitigation of climate change and other factors harming our environment.

Another example of a market in need of direct manipulation is paper. Why is there so little recycled paper out there? Because it costs more to recycle paper than to cut down another tree. That is ridiculous. We need to skew the paper market so that recycled paper is more competitive. Truth be told, when a tree costs less than the equivalent recycled paper stock, I suspect that is because some people are doing a terrible job of understanding the ultimate cost of their decision to cut that tree — cost in terms of soil degradation, changes in water systems, loss of habitat, etc. So putting a tax on cutting down trees for paper would help swiftly rectify the mis-calculation of true cost.