Steven Levitt says Hurray For High Gas Prices!, because “there are all sorts of costs associated with my driving that I don’t pay”:
Three possible externalities associated with driving are the following:
- My driving increases congestion for other drivers;
- I might crash into other cars or pedestrians;
- My driving contributes to global warming.
If you had to guess, which of those three considerations provides the strongest justification for a bigger tax on gasoline?
The answer, at least based on the evidence I could find, may surprise you.