30.12.03

PIGOUVIAN COMPLEMENTS. Professor Varian (via Newmark's Door) seeks to end the positional arms race by which people overinvest in their own safety by purchasing dangerous passenger trucks. His proposal involves insurance premiums linked to gasoline purchases, which is an interesting variation on the corrective tax. Wouldn't it be simpler to modify the fuel intensity standards, to reduce the incentive not to build station wagons and larger sedans?

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