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Sunday, June 12, 2005

Pigovian fees

I had earlier mentioned about government intervention in the case of polluting by firms. One way to intervene is by imposing a tax. So i am introducing the concept of Pigovian tax. But there are more efficient ways of regulating pollution, one of the comments i recieved state a more market friendly way of reducing pollution; which i agree to.
Early in the 20th century, the English economist Arthur C. Pigou argued for the imposotion of taxes on generators of pollution. Since the social cost of pollution is in excess of the private cost (it is a negative cost since they save money by polluting) to the pollutor, the government should intervene with a tax, making pollution more costly to the pollutor. If the pollution is more costly to produce, the pollutor will produce less pollution. This tax has come to be called a Pigovian fee or Pigovian tax. The fee is generally paid to the government. The Pigovian fee is not any emission fee; it is the marginal savings from pollution at the optimum pollution level.
This fee is not a market friendly way of controlling pollution. It is imposed on the people. Offering these firms incentives on reducing their emission levels would help more rather than imposing a tax.

9 comments:

Domo said...

uhm , i am not sure what you mean?

alex said...

Well i meant that instead of imposing a tax, the government could provide incentives as in giving them credits(or i would suggest even reducing their tax) to motivate them to pollute less.

Domo said...

haha, no no... you said, "how do you post under economics"? what do you mean by that?

and that's quite fast for a reply! :)

alex said...

Oops sorry for the wrong reply!This entry was posted on Saturday, June 11th, 2005 at 2:24 pm and is filed under Economics, Web
How do i get htis done, meaning when i search for game theory, pigovian fees or economics, my blog is not listed???

Domo said...

You blog is not listed where? On technorati?

Domo said...

Oh... I think you mean, how do you get those categories set up?

Well. It came with my software, all I do is select which category my post belongs to. I am sure blogger has something similar try doing search in their help.

Domo said...

Hi Alex, do you mind adding my blog to your Links section?

Domo said...

Thanks! :)

Domo said...

You busy lately? No posts... :(