Wall Street Journal: High Gas Prices Make Sense

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We noted last week how high gas prices were affecting demand; The WSJ recently noted that some economists suggest that it would be smart for the government to keep gas prices high, to reduce consumption and modify behaviour. "Taxes can change long-term behavior, as long as taxpayers believe the levies are here to stay. Pregnant women, for instance, sharply cut back on smoking after cigarette taxes rose steadily in the 1990s, according to a study by three New York City economists." One economist suggested that if prices stay high SUV sales will fall by up to 28%. Another economist, Mark Zandi, suggests a floating gas tax to keep the price around $3 per gallon, saying that stability and predictablity will encourage people to make appropriate choices. ::Wall Street Journal via ::Environmental Economics