Pigovian Tax

[deepak]

I recently heard about something called a Pigovian Tax in economics, but I’m not entirely sure what it means. Can someone explain it in simple terms? How does it work, and what’s its purpose in controlling negative externalities like pollution?

 

[Rick_Grimes]

A Pigovian tax is basically a tax on activities that cause harm to others, like pollution. The idea is to make the person or company causing the damage pay for the social cost of it.

 

[peterkavinsky]

A Pigovian tax is a tax imposed on activities that create negative externalities, like pollution. It’s designed to make producers or consumers pay for the social costs of their actions, encouraging them to reduce harmful behavior and promoting a more efficient, cleaner economy.

 

[Gsusangrey]

A tax imposed on a market activity that produces a negative externality, like pollution, is known as a Pigovian tax. Its goal is to raise the activity's cost to the full social cost in order to incentivize producers and consumers to curtail harmful activities.

 

[isabel]

A Pigovian tax is a fee levied on the activities that have adverse side effects such as pollution. It is supposed to cause businesses or individuals to pay their social costs of operations and lessen the ill effects.