Pigouvian Taxes in Economics

This video discusses the concept of a Pigouvian Tax in economics.  Pigouvian taxes are a corrective tax that are used to address market failures brought about by a negative externality (e.g., smoking).  By setting a per-unit tax equal to the marginal external cost (the cost to people other than the smoker), one can achieve the socially efficient outcome (the optimal amount of smoking, considering the costs and benefits of all people in society).  This video uses a graph to show a Pigouvian tax yields the socially efficient quantity of a good or service.  The video also discusses the double dividend of Pigouvian taxes:  in addition to bringing about the socially optimal outcome, Pigouvian taxes also yield tax revenue that can be used for other projects.

This video was funded by a Civic Engagement Fund grant from the Gephardt Institute for Civic and Community Engagement at Washington University in St. Louis.
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• #pigouvian
• #pigovian
• #tax
• #corrective_tax
• #externality
• #externalities
• #economics
• #carbon_tax
• #cap_and_trade
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