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Comments on: Treading on our human rights! http://www.tvhe.co.nz/2008/04/24/treading-on-our-human-rights/ The Visible Hand in Economics Fri, 25 Apr 2008 05:49:08 +0000 hourly 1 https://wordpress.org/?v=6.9.4 By: rauparaha http://www.tvhe.co.nz/2008/04/24/treading-on-our-human-rights/#comment-1291 Fri, 25 Apr 2008 05:49:08 +0000 http://tvhe.wordpress.com/?p=346#comment-1291 Great to see you posting Metrosideros, but I’m not sure I agree with you. Not all price rises are a good thing: we need to consider why the price is rising. If it is rising because of rising costs to the petrol company then the optimal price (taking into account the environmental externality) is also rising. In this case, the price rise doesn’t necessarily get us any closer to the efficient level of driving.

If the price rise is due to collusion in the market then the efficient price isn’t changing and we are indeed getting closer to the efficient level. However, in this case the petrol companies rather than the government is getting the revenue from the higher prices. We may see that as a social cost and thus think that the price should be lower because of equity concerns, despite it being closer to efficiency.

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