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Silly policy proposals this Thursday

1. In the most self-interested and silliest pleading I have seen for a while, a lingerie retailer has argued that lingerie should be subsidised, or its purchase made tax deductable, to sustain men’s sex drives and to thereby reduce the divorce rate.

The obvious retort is that not all women (or men) look good in skimpy underwear – subsidising might increase the divorce rate.

2. Meanwhile Kim Beazley has proposed giving priority access to parking and bus transit lanes for green (hybrid and alternative fuel) cars – inappropriate policies from the perspective of the major external cost in our cities, namely, congestion. Green cars in themselves don’t cause less congestion than standard cars and, even though they might pollute less, this is a more minor externality in our congested cities.

If governments do wish to encourage less dependence on oil, then high petrol prices will steer noses in the right direction. Subsidies on alternative fuels will create incentives to switch to such fuels but congestion pricing needs to favor transport modes that congest little – public transport and bikes. The costs of running a bus fleet and a train system have large fixed components so marginal cost pricing at low levels provides efficiency gains anyway.

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