23 Jan 2015

Murphy vs. Krauthammer on Gas Tax

Economics, Oil, Shameless Self-Promotion, Tax policy 58 Comments

My latest at IER. For you folks, here’s the part I want to highlight:

First, let’s use a trick from the minimum wage debate, which I’m sure Krauthammer and other Fox contributors will appreciate. When a progressive says how great boosting the minimum wage to (say) $10/hour would be, the easiest way to show the weakness in the argument is to ask, “Okay, then why not boost the minimum wage to $100 per hour?!” It’s not that this is the end of the story, period, but the rhetorical question shows that the typical progressive hasn’t even considered the downsides of the proposal, and thus is caught flat-footed when challenged in this way.

We can use the same rhetorical device against Krauthammer. In his article, he doesn’t list a single downside of raising the gas tax. It is safe to assume that he pulled that $1 per gallon figure out of thin air—it’s not the result of a careful weighing of pros and cons. So the wise reader can go back and plug a $10 per gallon tax on gasoline into Krauthammer’s piece, and see if it still makes sense.

Here’s a hint: It won’t.

Now there was some pushback last year from the free-market camp, along the lines of, “Hey guys, we really need to stop doing the extreme ‘why not make it $100 an hour?!’ argument in the minimum wage debate.”

I strongly disagree. If someone makes an argument for X, but that same argument would prove 10X is much better, then it must be a bad argument if in fact we can all agree 10X would be terrible. We haven’t of course proven that X is bad, but we’ve definitely established that the original argument for X is bad.

Robert Nozick apparently was converted away from typical interventionist notions with just such an argument. (I say “apparently” because I’ve heard people repeat this; I never read him saying this in his own words, I don’t think.) When critics said, “If you support a modest hike in the minimum wage, why not a massive one?” the people Nozick used to regard as heroes didn’t have a good response. That’s when he realized he should stop taking cues from them on economic policy, and began reading others.

So anyway, it’s the same thing with Krauthammer’s call for a $1 per gallon hike in the gas tax. He didn’t arrive at that figure as the optimal stopping point; he just picked it out of the air, and then listed some benefits from it, without any discussion of the costs (let alone demonstrating that the benefits outweighed the costs). That is a terrible argument for an economic policy.

58 Responses to “Murphy vs. Krauthammer on Gas Tax”

  1. Cosmo Kramer says:

    Cenk Yygur (The Young Turks) argues that a “modest” increase works in the minimum wage because those receiving the raise spend the extra funds. If it was raised too high, they would begin saving the additional income.

    Basically, the working class have a job. Their job is not to save, or invest. Their job is to consume. The solution from Progressives is to give them a raise, but only one big enough so that their job as consumers isn’t affected.

    And we’re the bad guys?

    • Andrew_FL says:

      One wonders what happens to the consumption of those who lose their jobs. Raising the minimum wage doesn’t give them a raise, it cuts their income down to zero.

      Most of them I’d think are young people in entry level jobs, probably specifically spending for themselves for the first time, previously relying entirely on Mommy and Daddy’s income. I’d guess their consumption reverts to that which Mommy and Daddy pay for, which wouldn’t include the stuff teenagers would by for themselves. In other words, their income drops to zero, and so does their consumption (in terms of their own spending).

      Bah, who cares about the people you hurt! Don’t you see we’re trying to help people?

      • Major.Freedom says:

        Bad analogy, because people do die from earning a higher wage.

        Wage are not like temperature.

        If you cannot respond without invoking some kind of analogy to the natural sciences, then you are just saying you are unable to give an answer.

        • Major.Freedom says:

          Sorry, that response was for Anonymous below.

    • guest says:

      We don’t want them to actually *achieve* the ends of their labor: alieviating their felt uneasiness. We want to make them run on mouse wheels, instead.

  2. Dennis Foster says:

    I used this same argument on a member of my local city council a few years ago – although I think I used $50. He had an answer was quite pleased to be able to use it. “Ah, moderation in everything.” I am sure he was trying to make this into a food analogy, but I shot back, “How can we be content to only moderately help poor people?” He didn’t have a reply to that.

  3. Daniel Kuehn says:

    I don’t know, you’re expecting a badly constructed reductio to win points over a maybe bad argument, maybe good argument with many points implicit.

    I suppose if you think the vast majority of the arguments you’re arguing against are actually bad arguments it might be a winning proposition for you, but it doesn’t seem very advisable.

    And what do you do if someone who does not have a good response to the minimum wage argument responds to the minimum wage reductio by saying “well that’s crazy – $100 is obviously way too high” with no elaboration. Who wins that in the court of public opinion? Well he does in most cases, because he makes a very reasonable point and agrees with you and nobody is really sure why his original argument was so bad. He can clearly hold it and still think a $100 minimum wage is obviously dumb.

    • Andrew_FL says:

      In theory, it’s a good response to Krauthammer because he should immediately recognize the argument you’re making, and what you’re trying to say about his argument. At least, in theory.

      On the other hand, someone on the other side of the minimum wage debate, wouldn’t understand what you’re trying to tell them about the gas tax any more than what you’re trying to tell them about the minimum wage.

    • Andrew says:

      Well, if someone responded that way, we could ask, “How do you know that $100/hour is too high? And how do you know that what you are proposing is not also too high?”

      • Daniel Kuehn says:

        Totally agree Andrew. In a conversation it’s much easier use it to work out better arguments. I suspect most people actually have good underlying arguments (or can come up with one), but that judgement call is up to the debaters 🙂

    • Bob Murphy says:

      Daniel, if someone says, “Well that’s obviously way too high, duh,” then I will follow with, “Good, I’m glad we agree on that. Now tell me WHY it’s too high. What bad things kick in?”

      That at least warms the audience up to the fact that there are definitely downsides. It goes from, “I want to take $$ from rich capitalists and help workers” to “whoa we need to be careful with this.”

      • Daniel Kuehn says:

        Yep, see above.

      • Daniel Kuehn says:

        * by which I mean see my response to Andrew

  4. Daniel Kuehn says:

    It also clutters the battlefield. You some good Neumarks and Waschers or even (on a good day) Don Boudreaux’s making your case not a bunch of people chanting “what about $100!”.* That’s inegalitarian I suppose, but to the extent those arguments are better understood I think everyone’s better off.

    * He of course resorts to badly constructed reductios too.

    • Bob Murphy says:

      Daniel, the average supporter of the minimum wage isn’t familiar with panel data. He or she thinks there is a huge margin of profit and that the measure is simply a transfer payment from rich owners to poor workers. So yes, just getting these people to realize that their analysis is leaving out something huge, is a great first step.

      • Daniel Kuehn says:

        I suppose, but I think you are way too pessimistic on the average supporter of the minimum wage. I’m not saying describe panel regressions – certainly put it in easy to understand terms.

        I think the average supporter of the minimum wage knows that $100 would be too high and they know that it’s because the arguments they make are non-linear – that something gives out at some point. I mean I suppose it’s good to make the conversation progress that far but I’d think that’s implicit/understood by most anyone you’d come across.

        • Dan says:

          Even if most people have considered why raising the MW to $100 would be bad, and they have thought about the reasons for why, which I rarely come across people who think along those lines, it still isn’t a bad thing to reiterate the point. It’s at least a good way to shift the conversation away from “take from the rich and give to the poor” to “what are the downsides of doing this, and do they outweigh the positives”. Regardless, I see no downside in bringing this point up. It’s not like taking a second to address this point derails the conversation.

  5. Andrew says:

    As Daniel said, “why not make it $100 an hour?!” is a bad argument when used by itself because the average reader will intuitively understand that a $100/hour minimum wage is bad in a way that isn’t as obvious for a moderate minimum wage bump.

    On the other hand, I do think it is valid and understandable to the average reader to say, “This line of argument is obviously invalid since all of the points made could also be said about a $100/hour minimum wage. And we all realize that a $100/hour minimum wage is absurd.”

    I find this to be a general flaw in the common arguments of what Bob calls “the free-market camp.” The catch phrases and slogans they use make perfect sense to its members, but are recited in an abrasive manner and run counter to the intuition of the average reader. Because of this, the average reader is more likely to come away thinking “This guy is a crackpot,” than “That’s interesting, tell me more.”

    Basically, I wish people who comment on the internet would take a moment to consider their audience’s frame of reference and craft their arguments accordingly. A crazy idea, I know.

    • Cosmo Kramer says:

      The ‘average reader’ understands it (100$/hr) is wrong because they know it to be absurd. They see no connection between modest increases and extreme increases in the minimum wage.

      Consider a person exceeding the speed limit by 10 miles per hour and a person exceeding the limit by 100 miles per hour. They are both clearly more dangerous, just to different degrees.

      “Basically, I wish people who comment on the internet would take a moment to consider their audience’s frame of reference and craft their arguments accordingly. A crazy idea, I know.”

      That’s why there are explanations……..

      • Daniel Kuehn says:

        I’m not sure the person going 10 over is clearly more dangerous if everyone is going 10 over. A road with everyone but one person going 10 over is a road where there will be more lane shifting at an above-speed-limit-speed than if the guy went 10 over. So it seems (in many applied cases) less dangerous.

        This argument does not work with my wife, fwiw.

        • Cosmo Kramer says:

          I was only saying that it is more dangerous in general to drive faster. And when accidents occur, they are exponentially worse as speed increases. I was making the point with physics in mind mostly.

          You are correct, that it is more dangerous when there is one person deviating. So let’s assume that every one does it pretty uniformly. Even if all were going at the same rate of speed (10 over and 100 over), it is more dangerous as speed increases.

          • guest says:

            ” So let’s assume that every one does it pretty uniformly.”

            So, what you’re saying is that the capitalist should raise prices by the percentage increase in the minimum wage, in response.

            And that this would also apply to inflations of the money-substitute supply – which is why the Fed doesn’t want to be audited. The monetary inflation trick only works when you can trick others into thinking that the next unit of money-substitute they receive has the same marginal utility as if the supply had *not* increased.

  6. Josiah says:

    If you raised the gas tax $1 a gallon, people would still be paying less for gas than they were a few months ago. By contrast, a $10 gas tax would mean people would be paying 3x as much for gas as they ever have.

    That’s not the only difference, of course, but it seems like the most obvious one (and Krauthammer even alludes to it towards the beginning of his op-ed).

    • Bob Murphy says:

      OK Josiah so when I say, “Why not tax gasoline at $10/gallon?” your answer isn’t to say, “Because that would be awful, duh.” Instead, you need to say, “I need more information, Murphy. Had the market price a few months earlier been $12 per gallon, and then it collapsed down to $2? If so, then a $10/gallon tax would be OK with me.”

      • Josiah says:


        Unless I’ve just returned from an Interstellar space flight, I shouldn’t need to ask wether gas prices were $12 a gallon recently.

        • Bob Murphy says:

          OK Josiah there are fewer plane crashes (at least per passenger mile) today than 20 years ago. So if the gov’t institutes a policy causing the same number of crashes as 20 years ago, the public isn’t really hurt.

          • Josiah says:


            If the government decided to increase the number of airline fatalities just for fun, that would be pretty evil. On the other hand, it’s well known that auto fatalities per passenger mile are a lot higher than airline fatalities per passenger mile. Perhaps there are ways you could decrease auto fatalities, but they require shifting resources such that more people die in plane crashes. Even if the overall number of fatalities decreased, this shift might be politically untenable, because the public would freak out about any large upsurge in plane crashes. Suppose, though, that some new technology has come on the market that is greatly reducing the likelihood of plane crashes. In that case, you might be able to pull off the resource swap where you wouldn’t have been able to before.

            There may or may not be good arguments against a resource swap like this. But rhetorically asking “why not let all the planes crash?” isn’t among them.

          • aby says:

            imagine two scenarios. 
            #1) 2 years ago 1 in 10 people who flew with an airplane died but through technical innovation
            only 1 in 1000000 passengers dies today. Let´s assume that before the public took notice of that change the government instituted a stupid policy that caused 1 in 10 to die (as before). 
            #2) 2 years ago 1 in 1000000 passengers died because of a plane crash. Now the government steps in and institutes the same stupid police as in scenario 1 ( 1 in 10 passengers die) 
            In both scenarios the policy would be bad but i think #2 is worse, because many more people will fly believing that the chance of dying is 1 in 1000000 than if they believed it is 1 in 10.  People would also depend more on air travel in scenario 2, whereas in scenario 1 there would most likely be more alternatives such as trains ships and busses.
            I don’t think it´s a good response to your analogy but Krautheimer could make a similar argument: 
            People have already adjusted to high gasoline prices (bought a more fuel efficient car, a motorcycle,…).  
            If you raise gas prices (through taxes) beyond what they were expecting they will be unprepared. People who bought a car 3 years ago did so (probably) under the assumption that prices would stay constant or go up slightly, so they made their decision  based on a gas price similar to what Krautheimer´s policy would lead to. Had they expected a price of 12$ per gallon a donkey might have been a better investment than a fuel efficient car . Or they might have set up a home office instead. 
            Just like an expected minimum wage increase is imo less harlful than an unexpected one because firms will make different investments if they know there will be a min. wage increase in 2 year, I think raising gas prices to a level people were expecting anyway is less harmful than raising them beyond that price. (not just because the increse will be larger)

            Btw: you said “Krauthammer’s analysis sounds plausible on the surface, to a non-economist at least. But anyone who has studied tax analysis knows that it is utterly wrong. „
            I am a non-economist and I have not studied tax analysis; do you have any suggestions what I could read to understand it better?

  7. E. Harding says:

    Scott Alexander makes up a hypothetical (but imperfect) conservative argument for cutting CO2 emissions here:

  8. Daniel Kuehn says:

    So one more point –
    If we can get a bad argument for X to turn into a better argument for X because of a bad reductio, that’s great.

    But what if you get a bad argument for X to turn into a bad argument against X because of a bad reductio (i.e. – because someone assumes “there exists a minimum wage that is too high” implies “all minimum wages are too high”).

    What are peoples’ feelings on that? In a sense you’d be poaching the people that have a tendency to make bad arguments from the other side!

    • Andrew says:

      There’s a really good series of videos on just how to handle such people, featuring John Gruber.

    • guest says:

      A modest rise in the Minimum Wage is damaging in the same WAY as a large one.

      “Not as bad” is still bad.

      This is why it makes sense to ask *why* a $100 rise would be absurd.

  9. Darien says:

    It’s amusing that Robert Nozick was so converted, since he also lamented in Anarchy, State, and Utopia that (I’m paraphrasing here, of course) nobody is ever convinced by “where do you draw the line” arguments. By and large, I’m inclined to agree with him, sadly; I agree with logic behind the “why not $100” arguments, but I don’t think they’re viable in practice. As Daniel and others are saying — unless I’m reading them very wrong — people who support a $10 minimum wage simply don’t see a parallel there.

    I had this issue recently while arguing with a woman I work with about drunk driving laws; my position was that they unreasonably empower the police, in large part because there’s no non-arbitrary definition of “drunk.” She couldn’t see how this was a problem, since obviously someone who’s “completely trashed” shouldn’t be driving. I guess the rest is just a technical problem for somebody else to worry about; so too with the “optimal” minimum wage.

    • guest says:

      I’ve had some success with an argument like this:

      A completely wasted drunk driver almost plows into a family in a parked van.

      The drunk narrowly misses the family, but, in my scenario, none of the family members were ever made aware of the danger they were in.

      Is the drunk still guilty of a crime, if no one noticed the danger and no one got hurt?

      This argument is designed to help the other person distinguise between the act of drunk driving and the crime of driving a car into someone.

    • Harold says:

      Most countries have a non-arbitrary definition of drunk in this context -over 50 or over 80 mg alcohol per 100mL blood.

  10. TJ says:

    I wanted to lose a couple extra pounds lately, so I went to the doctor and he recommended I start running 10 miles a week. “Why 10 miles doctor? Why not 100 miles?” When he recommended I drink 8 glasses of water, I used the same argument: “Why not 80 glasses doctor?” Conversely, “why should I cut down by only 500 calories a day? If calories are so bad why not cut them out completely?”

    I’ve yet to reach my goal weight.

    • Gene Callahan says:

      Very good TJ. I would say almost everyone understands this in relation to the minimum wage or gas tax. I just don’t see how the argument “Ah, if you think a little of something is good, then you must think a whole lot of it would be great!” goes anywhere.

      • Bob Murphy says:

        Gene wrote:

        I just don’t see how the argument “Ah, if you think a little of something is good, then you must think a whole lot of it would be great!” goes anywhere.

        Even if the specific arguments for why “a little of something is good” have no reason to suddenly flip when you increase them?

        You must have hated philosophy classes in college, Gene. All those guys do is sit around saying, “Well that’s a dumb argument, because…” Who cares if the argument makes sense or not? The important thing is, does the conclusion feel right in your gut!

  11. Transformer says:

    If I take 2 ibuprofens it relieves my headache. If I take 100 it probably makes me very sick.

    • Cosmo Kramer says:

      That works off of the “too much of a good thing” scenario.

      When does the minimum wage rate turn into a bad thing? And why does it turn into a bad thing? If too much money in the workers’ pockets is bad, cannot legislation take care of that as well?

    • Tel says:

      And there’d probably be a reason for that right?

      A good doctor would be able to explain the reason, thus demonstrating he/she knows something about medicine and biology.

      • Bob Murphy says:

        Thank you, Tel. I feel like I’m taking crazy pills.

        (And if taking crazy pills is really bad, then even taking one crazy pill is suspect too.)

  12. Bob Murphy says:

    Everybody, let’s take a time out here. Before we proceed, answer me this:

    Does everyone agree that if somebody makes an invalid argument for a true conclusion, that it’s worthwhile for critics to point this out, and that the proponents of the conclusion should at least be able to say what the correct argument is on Attempt #2?

    • khodge says:

      Tough time all around on this, Bob? Seems you had some trouble getting us kids to focus when you first offered the brain teaser.

    • Tel says:

      IMHO bad arguments should always be put to rest, but very often there’s political debates where people feel that it’s worth winning by whatever means… and they don’t hold much hope of their fellow citizens capacity to understand a properly nuanced argument.

  13. Tel says:

    Now there was some pushback last year from the free-market camp, along the lines of, “Hey guys, we really need to stop doing the extreme ‘why not make it $100 an hour?!’ argument in the minimum wage debate.”

    I strongly disagree. If someone makes an argument for X, but that same argument would prove 10X is much better, then it must be a bad argument if in fact we can all agree 10X would be terrible. We haven’t of course proven that X is bad, but we’ve definitely established that the original argument for X is bad.

    I think you should always ask both questions:

    Why not make it 100 times larger?

    Why not make it just 5% larger?

    A well considered argument should be able to answer both questions.

  14. Transformer says:

    “I strongly disagree. If someone makes an argument for X, but that same argument would prove 10X is much better, then it must be a bad argument if in fact we can all agree 10X would be terrible.”

    It would not be a bad argument if we all had wrongly concluded that 10x would be terrible. Everyone may agree that a $100 minimum is a terrible idea, but everyone might be wrong.

  15. Transformer says:

    Most arguments in favor of the minimum wage (such as those based on monopsony) point to small increases being good but larger one bad. The rhetorical device Bob describes fails in this case since the bit about ” that same argument would prove 10X is much better” would be untrue.

    I am not aware of any, but in theory there may be some arguments of the “bigger the increase the better” kind. If there are, and people genuine believe in them, then the “if in fact we can all agree 10X would be terrible” is untrue.

    So I think arguing against the minimum wage using the kind of the rhetorical device that Bob describes is not very sound.

    • Andrew_FL says:

      The average person calling for a higher minimum wage has never heard the word “monopsony.”

      They just literally don’t believe the labor demand curve is downward sloping.

      • Transformer says:

        As Bob says the average min wage advocate probably thinks something like “There is a huge margin of profit and… the measure is simply a transfer payment from rich owners to poor workers”.

        These people would also agree with the monposony crowd that a small increase would be justified but a huge increase would be bad.

        • Andrew_FL says:

          I believe that polling has shown a dramatic shift in support for the minimum wage towards opposition if you ask the question with the stipulation “would you support it if it meant fewer jobs for low skilled workers.”

          BTW I think you meant they think “There are these huge profits” since the profit margins are not huge at all.

          But you’re crediting them with thinking at the margin in the first place, of course you’d conclude they’d think the size of the increase matters.

  16. Anonymous says:

    The questions are actually asked so people can think about an answer, so I wouldn’t call them “rhetorical” to be strict about the word.

    Also, asking a question to “why not a $100/hr min. wage?” when “why not a $100/hr min. wage?” is not explaining anything to said question is also not explaining anything.
    Andrew: Why 10 miles, doctor? Why not 100 miles?
    Doctor: Why a $15 minimum wage? Why not $150?
    Gene: It’s a little chilly in here so I’m gonna crank the thermostat up to 62.
    Bob: Well, if 62 is so good why not 100? And before you go “but 100 is too hot” why not a $100 minimum wage, smart guy?

    • Major.Freedom says:

      Bad analogy, because people do die from earning a higher wage.
      Wage are not like temperature.
      If you cannot respond without invoking some kind of analogy to the natural sciences, then you are just saying you are unable to give an answer.

      • Major.Freedom says:

        *people do not die from…

      • Gene Callahan says:

        Iposted this to FB a couple of days ago: “Dumb online debating moves: you create an analogy between x and y. Your opponent jumps on this: ‘So, you think x and y are exactly the same!’ Well, no, they are analogous, which means alike in some respect or other… Perhaps only in a single respect! But the move is a good way to score cheap points in the peanut gallery.”

        Pointing out that analogous things are NOT alike in some respect is a meaningless exercise: ALL analogies are between things that are dissimilar in some respect or other, otherwise they would be identities.

        Here the analogies are drawing out the similarity: “Some of x can be good while a lot of x is bad!”

        The fact that “a lot of x” can be bad for different reasons is not relevant to the analogy.

  17. JC says:

    I think we need to take everything in context. Krauthammer has neither the air time or space in his column to make a thoughtful arguement. If Krauthammer said ” Our infrastructure is in bad shape and we haven’t the funds to pay for the replacement of bridges that are past the lifespan. Now is the time to index the gas tax to inflation!” would your opinion change?

  18. Jerry says:

    Hi Bob,

    You use an implicit assumption of linearity in your 10x argument. Close to the equilibrium the system may behave linearly but far away, nonlinear effects may dominate. So a simple counter argument is to say that a small hike (in whatever parameter) leads to a beneficial response while a large one, due to nonlinear effects, may lead to a harmful response.

    I think people naturally think this way but economists sometimes confuse the issue with models that are too simple or that don’t apply in a given regime.

    It is known that drinking too much water can cause death (water poisoning) but it would be absurd to say that the benefits of drinking water are questionable because if you drink 10x the amount you might die.

Leave a Reply