• The Pigovian tax is designed to tax producers of goods or services that create adverse side effects on society.
  • Economists argue that the cost of these negative externalities, such as pollution, is borne by society, not the manufacturer.
  • The purpose of the Pigovian tax is to redistribute the cost of the negative externality back to the producer or user.
  • A carbon tax or a tax on plastic bags are examples of taxes in Pigovia.
  • Pigovian taxes should equal the cost of negative externalities, but they are difficult to determine, and overcharging can harm society.