An “efficient” carbon tax — one that truly solves the so-called “market failure” problem — requires that government officials first divine the optimal rate of emissions and then set the tax at a level that will result in this rate of emissions. But, to repeat, it is utterly unrealistic to suppose that politicians will achieve this outcome. Put differently, while the determination of actual “efficient” prices requires only that each party to each proposed exchange choose whether or not to make that exchange, using his or her own property, on the proposed terms, determining “optimal taxes” requires that politicians become godlike in their knowledge and saintly in their motivations.
Here’s the abstract of a new paper – titled “The Failure of Free Entry” – by Germán Gutiérrez and Thomas Philippon:
We study the entry and exit of firms across U.S. industries over the past 40 years. The elasticity of entry with respect to Tobin’s Q was positive and significant until the late 1990s but declined to zero afterwards. Standard macroeconomic models suggest two potential explanations: rising entry costs or rising returns to scale. We find that neither returns to scale nor technological costs can explain the decline in the Q- elasticity of entry, but lobbying and regulations can. We reconcile conflicting results in the literature and show that regulations drive down the entry and growth of small firms relative to large ones, particularly in industries with high lobbying expenditures. We conclude that lobbying and regulations have caused free entry to fail.
Megan McArdle busts some myths about Obamacare.
Joel Kotkin writes wisely about race in America. A slice:
Fortunately, these fashionable racial obsessions do not reflect the on the ground reality in most of America. Housing segregation, for example, has declined in most metropolitan areas, with the notable, and somewhat ironic, exception the most “progressive” cities such as San Francisco, Seattle and Portland.
James Pethokoukis is correct: Trump’s war on “Big Tech” is getting dumber – and more frightening.
Alberto Mingardi endorses Steve Davies’s endorsement of the term “individualism.”
