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Main Title: Pigou in the 21st Century: a tribute on the occasion of the 100th anniversary of the publication of The Economics of Welfare
Author(s): Edenhofer, Ottmar
Franks, Max
Kalkuhl, Matthias
Type: Article
Abstract: The year 2020 marks the centennial of the publication of Arthur Cecil Pigou’s magnum opus The Economics of Welfare . Pigou’s pricing principles have had an enduring influence on the academic debate, with a widespread consensus having emerged among economists that Pigouvian taxes or subsidies are theoretically desirable, but politically infeasible. In this article, we revisit Pigou’s contribution and argue that this consensus is somewhat spurious, particularly in two ways: (1) Economists are too quick to ignore the theoretical problems and subtleties that Pigouvian pricing still faces; (2) The wholesale skepticism concerning the political viability of Pigouvian pricing is at odds with its recent practical achievements. These two points are made by, first, outlining the theoretical and political challenges that include uncertainty about the social cost of carbon, the unclear relationship between the cost–benefit and cost-effectiveness approaches, distributional concerns, fragmented ministerial responsibilities, an unstable tax base, commitment problems, lack of acceptance and trust between government and citizens as well as incomplete international cooperation. Secondly, we discuss the recent political success of Pigouvian pricing, as evidenced by the German government’s 2019 climate policy reform and the EU’s Green Deal. We conclude by presenting a research agenda for addressing the remaining barriers that need to be overcome to make Pigouvian pricing a common political practice.
Subject(s): carbon pricing
climate change economics
economic policy
environmental economics
Pigouvian taxation
Issue Date: 19-Jan-2021
Date Available: 6-Dec-2021
Language Code: en
DDC Class: 330 Wirtschaft
Sponsor/Funder: TU Berlin, Open-Access-Mittel – 2021
Journal Title: International Tax and Public Finance
Publisher: Springer Nature
Volume: 28
Issue: 5
Publisher DOI: 10.1007/s10797-020-09653-y
Page Start: 1090
Page End: 1121
EISSN: 1573-6970
ISSN: 0927-5940
TU Affiliation(s): Fak. 6 Planen Bauen Umwelt » Inst. Landschaftsarchitektur und Umweltplanung » FG Ökonomie des Klimawandels
Appears in Collections:Technische Universität Berlin » Publications

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