Quote of the Day: Please Fool Me

| Mon Oct. 25, 2010 11:43 AM EDT

From Adam Ozimek:

Our desire to have costs hidden from us is a very expensive preference.

He is reacting to a study showing that CAFE mileage standards are a less efficient way of reducing gasoline use than simply raising gasoline taxes. In the end, we all pay more for CAFE increases than we would if we just accepted the need for higher taxes.

I'll confess that I'm not sure I'm convinced about this specific argument, though it's pretty conventional economics. Largely this is because CAFE standards are more permanent than taxes and don't suffer from the problem that people just get used to them and revert to their old behavior. If CAFE standards are higher, then they're higher forever and gasoline use is reduced forever. Conversely, people react pretty weakly to higher gasoline prices in the short term, and we don't really know all that much about how they react in the long term. So I'd be careful here. Ditching CAFE for higher gasoline taxes may be orthodox economics, but it might have social and political shortcomings even aside from our unwillingness to consider it in the first place.

Still, there's a pretty good chance the study is right, and certainly this argument is right in general. We do an awful lot of inefficient revenue raising in this country because we're not willing to simply raise taxes in a transparent way. Republicans don't seem to have figured this out yet.

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