Hannes H. Gissurarson: “Against Pigovian Taxes”

Professor Hannes H. Gissurarson gave a lecture at the University of Iceland 26 October 2012 on “What Political Economy Can Tell Us About Icelandic Money Smell”. This is the smell emitted by fish processing plants in fishing villages in Iceland. Professor Gissurarson contrasted the approaches of English economist A.C. Pigou and Nobel Laureate R.H. Coase to this and other problems of a similar kind, namely when the economic activity of one man created uncontracted costs or benefits for other people. Pigou wanted government to step in and solve the problem with some kinds of corrective taxes, whereas Coase held that often the problem was caused by high transaction costs which could be lowered by defining more clearly individual use or property rights. In the case of the Icelandic “Money Smell”, there were positive as well as negative effects of the economic activity in question, as the name suggests. However, recent developments seem to suggest the formation of some kinds of use rights to clean air.

Gissurarson Slides 26.10.2012