Pigouvian alcohol taxes

Wow. According to the research cited here, the externalities from alcohol consumption (the cost to society from DUI, health care, etc) should quadruple the alcohol tax (assuming we use the money to compensate for those costs - called Pigouvian taxes for anyone reading my blog). That would make a 6-pack of Bud, currently about $6 int...o $10.

The research also shows that light drinkers (the ones who don't cause the societal costs) would reduce their drinking because of the increased cost but the heavy drinkers wouldn't by very much. So we would still have the drunks driving around and getting liver disease, but the rest of us would lose out on the enjoyment of a good scotch after dinner.

I am a strong proponent of Pigouvian tax strategies, but I am not sure about this tradeoff.

BP spill

I haven't posted a public policy post lately, but the Congressional hearings on the BP skill are driving me a bit crazy.

Yeah, I know I know these things are always about demogogueing and pounding the podium for campaign material, not actual fact finding. But the questions they are asking are just ridiculous.

If you are hiring a CEO for a huge corporation, what would you tell him or her to spend his/her time focused on:

• making large strategic decisions about the company's future
• second guessing the technical experts about technical decisions
• studying the technical decisions so you understand them

I vote for #1. #2 is definitely off the table. And #3 sounds good, but it would take all day so I would rather skip it and stick with #1.

So why ask the BP CEO why they went with this kind of collar and grade of steel v another? What they should be asking him is how the balance between safety, cost, and profit potential was established and how it was communicated and implemented to the technical experts. Were they rewarded for taking short cuts? Were they discouraged from looking into the risks of shortcuts they took? How were risk mgmt procedures selected and managed?

This is what the CEO should either know or be able to find out. If they want to know about the collars, they need to bring in the BP technicians and ask them how and why they chose. Ask them how they justify the reduced safety of their choices. What were the tradeoffs they made at those times?