The members of the Pigou Club advocate a fairly straight forward approach to recouping those costs: a tax on gas that gradually increases over time until it reaches some approximation of the cost of side effects of driving. Gregory Mankiw, the Harvard economist, states what he calls the club’s manifesto in Friday’s Wall Street Journal (here is a free version of the column). He lays out a concise case for an increase in the fuel tax, and even throws in some interesting twists on the standard pro-gas tax position, such as the tax’s ameliorating effect on the U.S. budget and the pro-growth impact on the economy of a large scale consumption tax.

I fully support an increase in the gas tax, and believe it is a critical piece to any campaign to reduce driving in this country. U.S. policy with respect to gasoline has long distorted our perception of the cost of driving. Judging by the reactions to gas prices pushing past $3 per gallon, most Americans seem to believe that cheap gasoline is an inalienable right granted by the Founding Fathers in the Bill of Rights. Our European neighbors have long understood the true cost of driving, and this enlightenment is due in large part to the healthy gas tax imposed by European countries.

A punitive gas tax alone, however, is not enough to produce real change. The gas tax doesn’t even properly align the financial incentives for drivers in this country. In addition to the concepts covered by Mankiw, basic economics teaches us that price sensitivity varies among consumers, and that lower income families will be far more sensitive to changes in the cost of basic commodities, such as gas, than affluent families. In fact, the incentives are almost perverse: the more successful a gas tax is, the more incentive rich drivers have to use their cars. Congestion free highways for only $1 more per gallon? Where do I sign up? So not only will the affluent be able to retreat to their gated communities, but they will have their own riff-raff free highways to get there.

Even if we make adjustments for price sensitivity, policies based purely on financial incentives still fall short. Cigarette taxes, which are the most well-known sin tax, work well on the margins, with casual smokers and people with less disposable income choosing to forgo smoking due to the pain to their wallets. I believe that the real change in smoking came as a result of massive cultural change brought about by a barrage of health warnings, public policy changes and real-life horror stories. The change in our view of smoking is a classic tipping point phenomenon. Once enough elements of society turned against smoking, the cool factor associated with smoking disappeared and everyone rushed to the healthy side of the room. People who smoke are now treated as pariahs, huddled together on sidewalks like refugees from mainstream society.

The day when car abusers are viewed with disdain by the public will come only after a full assault on not just the economics of driving a car, but on the public perceptions of car driving. Public service messages and surgeon general warnings about the contributions of the car to declining health and degradation of the environment would be a nice start. But we also need to cure our schizophrenic transportation policies. A heavy gas tax combined with continued investments in new roads and loopholes in fuel efficiency requirements for SUVs is just the type of dysfunctional policy that causes people to shrug their shoulders and turn the ignition key. The gas tax combined with a serious investment in alternative transportation and an unwillingness to add all those extra lanes on the highway, however, makes the message crystal clear. Once the alternatives to driving are attractive enough to cause people to question their driving habits, the extra $1 per gallon advocated by the Pigou Club will be the appropriate nail in the coffin of our national car obsession.