Submitted by Ivan Kitov, Apr 23, 2007 08:14

Economics, as other soft sciences and in a larger part - hard sciences, lacks axiomatic approach, which can potentially resolve any theoretical contradiction. Therefore, theoretical problems are mainly resolved by practical application. In hard sciences, there is a power tool - experiment. One can exclude any other influence except that is under study and vary this defining parameter in a wide range, and decide on the forces driving or not driving the process. In soft sciences, such an opportunity is absent. Nobody can conduct a real experiment changing defining parameters such as population age structure, weather, etc. So, the problem "to be or not to be" a Pigovian becomes theoretically obsolete. There is no unique solution for everybody, but there are individual solutions. For example, if you are a relatively young university professor with an average income of $150,000 (approximately 6% of the working age population) (see Mankiw's posts) you are mainly interested to pay for those simple things which are scarce rather to stay in a long line. As a result, you are a Pigovian. On the other hand, if you are also relatively rich and do not need to enter the city every day, but have a decease which may be treated only in future, you will be very interested in a substantial decrease in taxes on pharmaceutical companies. Such a decrease can potentially boost investments in new research and close the day of relief. Everybody balance such things individually and individual opinions are aggregated (with corresponding weights on the Mankiw's opinion and , for example, mine). There is no quick outcome of such aggregation channeled through various mechanisms to decisions of political authorities. So, we observe long-term traction and discussions, like in the mentioned blogs. This is a good thing, but, of course, not enough for a quick reaction of policy making bodies and the adequate assessment of such actions as proposed by the New-York major.

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