Bryan Caplan - Bryan Caplan Politely Declines to Join the Pigou Club. The entire argument is excellent (and worth reading). I would just like to comment on this:

My view is that people have a right to create all sorts of negative externalities, and other people basically just have to live with them. Unhappy campers have a right to complain about the externalities, refuse to associate with those who create them, or buy a large bloc of land and require visitors to abide by their rules. But they have no right to pass laws to do anything about most externalities. For example, even though I think education has important negative externalities, I don't want to do anything more than eliminate government subsidies for education.

This does not mean, of course, that all negative externalities should be legal. Murder creates externalities, and I'm firmly against its legalization. But the right place to draw the line, in my view, is at physical trespass.

Since Bryan brought up murder... some statistics from the U.S.:

• Murders - About 16,000 (Source)
• Deaths from Air Pollution - About 70,000 (Source)

The issues here go far beyond being mildly inconvenienced.

I do agree with Caplan's conclusion:

But until Pigovians forthrightly acknowledge that the right solution to most negative externalities is tolerance, not taxes, I'm not going to join their club.

I do forthrightly acknowledge this. I do wish, however, that more economists took the issue of air pollution seriously.

The European Central Bank did what the Fed decided against - a 25 basis point rate hike. The details:

1. The minimum bid rate on the main refinancing operations of the Eurosystem will be increased by 25 basis points to 4.25%, starting from the operation to be settled on 9 July 2008.



2. The interest rate on the marginal lending facility will be increased by 25 basis points to 5.25%, with effect from 9 July 2008.



3. The interest rate on the deposit facility will be increased by 25 basis points to 3.25%, with effect from 9 July 2008.

So what can we expect further rate hikes in the future? Not necessarily, if you listen to European Central Bank President Jean-Claude Trichet:

In a statement delivered at his monthly news conference, Trichet used none of the phrases employed in the past to signal a further rate hike was imminent.

Asked about the lack of language highlighting either "heightened alertness" or "strong vigilance" on inflation pressures, Trichet said the ECB's message was clear and that the governing council would strive to communicate with the markets in "a clear fashion that will allow us to be as predictable in the future as we have been in the past."