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Raise Gas Prices Tomorrow — A Thaler Twist
Friday, January 9, 2015 7:25
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This blog post will borrow some ideas from Shlomo Benartzi and Richard Thaler's Save More Tomorrow proposal and apply them to raising gas taxes. Thaler identified a problem that we are not saving enough for retirement. He proposed that a credible solution to this problem is for people to commit to save a given fraction of future raises in their earnings.
“Our goal was to design a program to help those employees who would like to save more, but lack the willpower to act on this desire,” write Thaler and Benartzi.
Using principles drawn from psychology and behavioral economics, the plan gives workers the option of committing themselves now to increase their savings rate later. Once employees join, they stay in the plan until they opt out.
The SMarT plan has four basic components: First, employees are approached about increasing their contribution rates approximately three months before their scheduled pay increase. Second, once they join, their contribution to the plan is increased beginning with the first paycheck after a raise. Third, their contribution rate continues to increase on each scheduled raise until the contribution rate reaches a preset maximum. Fourth, the employee can opt out of the plan at any time.”
Could this same idea be applied to gas price dynamics? When the price of gasoline was $4 a gallon, could the U.S Congress have passed an act that said, for every 50 cents future decline in gasoline we will raise the gas tax by 25 cents. Should this be symmetric when gas prices rise?
Such legislation would collect more gas revenue when prices fall and would send a clear signal to Hummer lovers that they should continue to seek out fuel efficient vehicles.
Source: http://greeneconomics.blogspot.com/2015/01/raise-gas-prices-tomorrow-thaler-twist.html
