Negative Externality and The Case for Higher Gas Prices. Or, Why Salesmen Love My Mother

I went out car shopping with my mother yesterday and realized that she is the ideal client for any car salesman.

Why? Not only is she polite and inquisitive, but she is also very easily impressed. Any car she gets into she finds something to like. If the salesman says that the contoured seats provide extra support, she starts wriggling around a little bit and then exclaims "I really like these seats." Later that night she will be on the phone with my dad extolling the virtues of the contoured, supportive seats of the Honda Civic and how they are vastly superior to those of the Dodge Neon. You can easily change the volume from the steering wheel? Ingenious. Imagine all of the accidents that will save. She'll take it.

Here is just what a typical conversation with the salesman was like:

Salesman-- As you can see the wheel has the tilt function, allowing you to tilt it up or down to comfortably handle the vehicle.
Mother--Oohh. Yeah, I like that. That can sometimes be tiring if it's not adjusted correctly. Probably even a little bit dangerous, arthritically speaking.
Salesman, pushing button-- Here is the button for the wipers. . .
Mother-- Does it have a rear wiper?
Salesman-- You bet
Mother, exceedingly happy-- I really like rear wipers.

That's what you need to sell a car to my mother. A rear wiper. Nothing more important than a rear wiper.

So the best thing about all of this is that I think my mom wants to get a Prius (because of the ample glove compartment space), which gets around 60 mpg according to Toyota.

Why is this good? Well, not only do I feel that the price of gas will continue to increase, but I feel that it should continue to increase. When this happens, they'll be set.

So why should the price of gas continue to increase? One reason is negative externality. Say it. Don't you love the way that it rolls off your tongue? Negative externality.

I originally ran across this freakonomics post at the John Deeth Blog (a fellow Iowan) and liked it so much I figured I'd pass it on. Here's a taste of the reasoning:

The reason we need high gas taxes is that there are all sorts of costs associated with my driving that I don’t pay — someone else pays them. This is what economists call a “negative externality.” Because I don’t pay the full costs of my driving, I drive too much. Ideally, the government could correct this problem through a gas tax that aligns my own private incentive to drive with the social costs of driving.

I've always understood this as a concept but didn't know that it had such a cool sounding name. Negative externality. It might not cost me much to buy a bottle of bleach and dump it in my friend's milk, but it's sure going to cost my friend a lot. The "tax" to discourage this kind of behavior is called "life in prison."