Fred Foldvary wrote:
>
> From: "Thomas TerBush" <[EMAIL PROTECTED]>
>
> > The government here in Japan has a sly "solution" to this
> problem. Here the government maintains a stable gas price
> target by fluctuating the tax.
> > As the price of oil changes, the government adjusts the
> tax to keep prices around US$4.50 a gallon. Since there's
> no price change, no one complains (well, I complain, but
> I'm definitely in the minority here in every way).<
>
> If the supply of oil is fixed in the short run, then a tax
> on the sales price of oil should not affect the price to the
> consumer and just affects the profits of the seller. So
> perhaps the government has not really provided a solution at
> all, but just fools the public into thinking so. Since
> Japan imports all its oil, even in the longer run, if the
> tax is reduced, the demand would not change, so would the
> price not be affected? Where would the supply-side effect
> come from?
Just because the world supply is fixed, does not mean that one country
can't reduce after-tax prices by cutting taxes. Inelastically supplied
to the world, elastically supplied to individual countries.
--
Prof. Bryan Caplan [EMAIL PROTECTED]
http://www.gmu.edu/departments/economics/bcaplan
"[W]hen we attempt to prove by direct argument, what is really
self-evident, the reasoning will always be inconclusive; for it
will either take for granted the thing to be proved, or something
not more evident; and so, instead of giving strength to the
conclusion, will rather tempt those to doubt of it, who never
did so before."
-- Thomas Reid, _Essays on the Active Powers of the Human Mind_
