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Wednesday, August 8, 2007

Are there significant externalities to marijuana smoking?

I comment on this at Mike Moffat's blog (about.com).

I think it's pretty obvious that there are some negative and positive externalities...the question is, which is dominant, and is that dominance substantial? I'd love to hear your thoughts on that....

In general though, Mike is right - people who don't support the carbon tax should either help contribute to a solution to our environmental issues, dependency on gas (to live basically), etc...or, just keep silent. Saying the pigou club is wrong without offering an alternative to our current policies (which doesn't appear to be working) is not particularly useful.

This also though points to a general problem with Pigovian taxation (despite its benefits to efficiency) and that is, we almost never know what the social costs or benefits are to an externality - and often our studies can be biased one way or the other, or grossly miscalculating the benefits or cost...this makes using pigovian taxation tricky.

If you under-tax - you may be adding little benefit to reducing a negative externality at the expense of a higher tax that may or may not be passed back to consumers.

If you over-tax, you are likely doing more harm than good.