Hubris and Carbon Taxes
1) It is hard enough to get the direction of effects correct. There is a debate right now over global warming and what share might be attributable to man. Only a tiny fraction of greenhouse gases (may be a percentage point or so) is due to mankind. Of course, there are other causes such as energy output from the sun that we don't control at all. Even if we agree on manmade global warming being significant, there is still the next question of whether there is a net cost from it. Sea levels might possibly go up by a foot or so over the next hundred years, but human disease will decline and there will be more food. Probably even in the worst case scenario, a small effect on global warming has a small effect on net costs.
2) Even if we get the point estimate of the size of the externality correct, there is the problem of assuming that the government will impose the right tax. Having too high of a tax is just as bad as having too small of a tax. Why do we believe that the government will actually pass legislation that has the right tax?
3) We already have high gasoline taxes. How do we know that the level of taxes are not already too high? Possibly we should be lowering the gas tax, not raising it. Taxes on gasoline are very high as it is.
4) What is the cost of getting this wrong? The cost is that we will be poorer, and there are lots of coststo being poorer, included a lower life expectancy.
Mankiw is an advisor to Romney, which makes me worry about him some. Today is a reminder about the Democrats in the Washington Post today.