The Pass-Through Illusion: Why Voters Demand Bad Climate Policy

What this episode covers

This episode explores why efficient market-based climate policies, such as carbon taxes, are frequently rejected by the public in favor of less efficient command-and-control standards. It delves into a new NBER working paper that attributes this rejection to voters' fundamental misunderstanding of how costs are passed through the economy, leading to a "pass-through illusion." Listeners will learn about this behavioral blind spot and how it causes the public to incorrectly believe rigid standards will impact their bills less than market-based instruments.

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