Clifford Cobb

Classical Economics is Based on Assumptions About a System in Equilibrium. We Live in an Economic System That is in Disequilibrium

Since the Second World War, automobile traffic has increased enormously, and per capita ridership on public transit has declined. While this change in local transportation patterns has given households much greater mobility and freedom than in the past, the rise of the car culture has also caused environmental, social, economic, and political damage because private vehicles have not had to pay their own way

A revenue-neutral tax shift that raised the price of driving and other socially damaging behavior while lowering taxes on productive effort would have important impacts on these problems. Such a policy would likely influence how much people drive and the kinds of cars they use, where people choose to live in relation to their jobs, and their willingness to use public transit. The purpose of this paper is to explore these effects.

This paper estimates the full social cost of driving above and beyond the amount motorists pay today. Specifically, it estimates the amount of a gasoline tax that would be needed to compensate society for the social costs associated with driving and projects the effects of this higher price on vehicle use, fuel efficiency, urban form, transit, carpooling, telecommuting, and more. Because significantly higher gas prices would have a far-reaching impact that cannot be entirely foreseen, this report is not intended as a specific policy proposal, and it does not attempt to determine the magnitude of tax increase that would be politically possible. Of course, any increase in the gasoline tax of the magnitude considered in the paper would need to be phased in over time and adjusted as information about driver response became available.

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