Cap and Trade Is Not a "Market Solution"
I explain here. I really don't understand all the mainstream economists going along with this stuff. Even if you totally believe the IPCC science, how could you trust governments around the world to implement the scheme "properly"?
Comments (53)
Excellent comments! Thanks for pointing this out. I've long been puzzled by Reason's Ron Bailey supporting this kind of thing. Governments are still setting the cap, not the marketplace.
Published: June 4, 2008 10:35 AM
Thank you for the informative discussion.
I am not surprised that many economists refer to cap and trade as a market solution. After all, if one considers the politically-oriented IPCC “research” and conclusions as science (i.e., objective and analytically rigorous), it is no significant change in intellectual mindset to label cap and trade a market solution.
Published: June 4, 2008 11:46 AM
The answer is that politicians CAN'T be trusted to implement what is indeed a scheme. It will be manipulated as politicians have their eyes on their future employment -- that is, they'll satisfy the entities that they'll end up lobbying for after they leave Congress.
Take action on this subject at DownsizeDC.org!
Published: June 4, 2008 12:46 PM
Sorry Bob, but your argument makes no sense. After I dug dug dug to find where you finally explain why cap and trade "is not a market solution", here's what I got as your explanation:
*blood boiling*
If we take the science at face value (which you seem to, for purpose of discussion), then YES the atmosphere's ability to handle CO2 in a non-damaging way most certainly IS scarce. If you accept that there's a natural limit to what the atmosphere can take (w/o serious harm to our lifestyles), impediments to my ability to use fossil-fuel products based on that limit are genuine instances of economic scarcity.
Then, digging deeper, it appears that no, maybe you're merely arguing that the fact that the governments are setting the level is what makes it a non-market solution. REAL market solutions (again, trying to discern your point against all my impatience), you claim, are when private property owners determine how to allocate their resources in the face of demand for them. So yep, if it's not private property owners managing their means of production, it's not a market solution.
The problem with this reasoning is that
THERE ARE NO PRIVATE PROPERTY RIGHTS IN THE ATMOSPHERE!!!
Gee, kinda puts a crimp in private owners' ability to set more objectively-justified limits, eh?
So, basically, you're criticizing a proposal for not being grounded in property rights, when the scarce resource in question does not have any identifiable private owner, and that very same proposal is an actual instance of assigning property rights in that resource!
You can't make this stuff up, folks.
Bob: Do you believe that, assuming the science is right, there should be property rights (including identifiable owners) in atmosphere with respect to CO2 emission? If so, isn't any practical method of assigning these rights (given that pretty much everyone has "occupied and used" it at some point), going to involve government, EVEN if your plan is ultimately eliminate these governments?
So:
1) You don't like solutions that use non-property-rights methods.
2) You realize that a scarce resource in question never had private property rights allocated to it.
3) You don't like attempts to make these property rights if government is involved in them at any stage, even if that means leaving the atmosphere in a tragedy of the commons for the hundreds of years until governments are abolished.
4) You want me to believe you have a coherent point.
Sorry, no dice.
Published: June 4, 2008 3:22 PM
Scientists have known for years that bovine flatulance contributes more to GHG's than CO2 emitted by industry. I suggest congress concentrate on solving that problem first. Maybe cows could trade farting rights. Large bulls could purchase extra rights from small calves. Or congress could treat the atmosphere as it has radio frequencies and auction rights to cows to pass gas.
Published: June 4, 2008 4:39 PM
Person, perhaps you can explain how setting a pollution "cap" equates to assigning property rights in the atmosphere? True property rights would actually be assigning control to certain individuals/organizations over specified resources--caps aren't doing that.
Also, if goverments CAN somehow assign property rights in the atmosphere, there's certainly no reason private individuals and organizations can't do it, either. Governments can use their power to force the adoption of certain policies, but without true economic incentives involved, only political incentives, there's no way to ensure that such government policies will be effective. The economic incentives of the market place ensure that any such adoption is actually worthwhile and cost effective, while political solutions are always at the mercy of political influence and corruption.
Published: June 4, 2008 4:52 PM
Michael_A._Clem : "Person, perhaps you can explain how setting a pollution "cap" equates to assigning property rights in the atmosphere? True property rights would actually be assigning control to certain individuals/organizations over specified resources--caps aren't doing that."
Yes, they are. The caps assign the resource -- use of the atmosphere for CO2 dumping -- to the highest bidders at an auction, which they can then trade as they re-evaluate the use they get out of that right to dump. Other than the initial allocation, how is that different from any other property right, say, somone's right to receive .002% of the amount a corporation allocates dividends and .002% of the vote in who runs it (i.e. shares of stock)?
"Also, if goverments CAN somehow assign property rights in the atmosphere, there's certainly no reason private individuals and organizations can't do it, either. ... The economic incentives of the market place ensure that any such adoption is actually worthwhile and cost effective, while political solutions are always at the mercy of political influence and corruption."
Well, golly, that's a great point. If just the MARKET PARTICIPANTS can get together and all decide what the true cap should be based on the honest science, and then sue anyone violating that market-organized property-rights-system, that would be a MUCH better result. What a brilliant point!
It's also something that Bob said absolutely nothing about. Instead, he just complained about how, hey, the government set the limit, instead of ... the owners of the atmosphere ... which is, er, no one yet, and no one for the forseeable future, and no, I'm not going to give any hint whatsoever about how property rights would be assigned in the atmosphere when it clearly hasn't at this point, cause that would actually be making a coherent point, which is hard work...
Published: June 4, 2008 6:19 PM
The unfortunate reality is that all of these CO2 reduction schemes will impose significant economic costs with almost no environmental benefit.
First of all, CO2 represents less than 4% of the atmosphere and mankind's annual contribution is about 3.4% of that small amount. If you imagine the atmosphere as a 100 story building, man's CO2 contribution is basically the linoleum on the first floor. It is not significant and well within natural variability.
Most people assume that increasing atmospheric CO2 levels automatically results in higher temperatures. This is not correct.
CO2 is logarithmic. Ironically, it actually has a decreasing effect on temperature as its levels increase. For example, about 280 additional units of CO2 are required to produce the same warming effect as the first 20 units.
There are certain absorbtive bands, or windows, of CO2 in the atmosphere. Once these become saturated, and they're probably between 1/2 and 3/4 of the way there, any additional CO2 will have no warming effect.
Because of its logarithmic nature, a doubling of CO2 from 280 parts per million to 560 would only produce about 1 degree Celsius of warming. We're currently at about 380.
Are we looking at a looming disaster from carbon dioxide emissions? There is absolutely zero indication of that. Although human emission of carbon dioxide has likely had some measurable effect on global temperatures the effect from continued emission is rapidly diminishing as radiative windows in which carbon dioxide is active approach saturation. Before long carbon dioxide emission will have exactly no discernable effect on global temperature.
Can we have significant effect on global temperature trend by limiting future carbon dioxide emission? No way. The most you will do is lower global temperatures by a fraction of one degree over the course of the century, at the cost of trillions of dollars. That is the reality.
I know this forum is primarily concerned with the economics of these carbon reduction schemes, but I just wanted to emphasize their utter futility from an environmental standpoint. Accepting the terms of these schemes lends them a legitimacy that they in no way merit. This idiocy must be stopped.
Published: June 4, 2008 6:40 PM
Person,
Must there be property rights for "the atmosphere" or "CO2-emissions" themselves, in order to have property rights and compensation for damages? As I understand it, the possibility that CO2 emissions have an effect on temperature isn't the problem. The supposed problem is that these higher temperatures are considered to be "damaging".
Now if we assume this is actually the case (ignoring the point that "Usufruct" made), and one thinks about what this damage would entail, it would be damage to both person and physical property. Now we do already have property rights for those. And if the (future) damage can be proven and quantified, surely the current persons who feel they or their property is or will be damaged, can sue the persons emitting CO2? Or perhaps, more efficiently, sue the producers of fossil fuels and demand reparations, or an injunction against emissions that are "too high". They will then pass these costs on to the consumer. What "too high" is, or what the price of reparations should be, can then be determined in a court, where the claimants can present the evidence and expert witnesses to convince a judge or jury. Ironically, many people would (indirectly) basically be sueing themselves for damages of their own emissions, but anyway.
So I don't see how we need more property rights, if the ones we have will suffice. The only problem may be damage so far in the future that we will not be the ones damaged, but a future generation. Then again, the question if that generation will exist or not, how large it will be, and if their lives are considered worthwhile, is entirely up to the previous generation of CO2-emitters. And assuming a reasonable market, the fact or possibility that their property may be subject to more natural disasters, will already have an impact on the prices of real property (in the form of higher insurance premiums or discounts in the market price), or the higher cost of food, etcetera, before those generations are born. They can therefore not be considered "victims", since the state of the planet would already have been altered before they were even born. Unless we also consider it a crime to have children in any situation where their material condition will be worse than the previous generation. It would then be a crime for Bill Gates to have children, if he loses or gives away his vast wealth, because they would be "worse off" than him.
Apart from all that, personally, if find it a rather strange notion that we are somehow currently at a "climate optimum" at which we magically have the least problems and the least possible natural disasters, and that any degree Celsius up or down will disturb that "harmony". That seems a little too coïncidental to my taste.
Published: June 4, 2008 7:44 PM
Person
How do we decide what level of CO2 is optimal? Who gets to set the thermostat?
"Given a choice of being too hot or too cold, I'd sooner be too hot - very few people died from being too hot. Both Napoleon and Hitler lost armies by being too cold!"
Published: June 4, 2008 8:13 PM
Owl
You assume that rising CO2 produces costs. You ignore the benefits. If global temperatures increase, we get higher crop yields - ask any farmer, or go look in the Farmer's Almanac.
Many of the negative effects attributed to CO2 and global warming have nothing to do with global warming at all - they are related to changes in rainfall patterns, which in turn are related to clouds - which we really don't know at all. (Even Joni Mitchell realized this back in the sixties!)
Published: June 4, 2008 8:24 PM
Person,
Then, digging deeper, it appears that no, maybe you're merely arguing that the fact that the governments are setting the level is what makes it a non-market solution.
No, his argument stems from the calculation problem, not from the 'mere' fact that it is government solution. From where does an organization decide how many carbon permits to issue, in order to reach the desired effect?
Yes, they are. The caps assign the resource -- use of the atmosphere for CO2 dumping -- to the highest bidders at an auction
The point being that the caps would be issued in an arbitrary manner, due to the calculation problem. Nobody will be able to say for sure that a number of caps is optimal, the same way nobody could say that the number of tomatoes in stores right now is optimal - only a market through spontaneous trades can determine that.
Published: June 4, 2008 8:45 PM
Actually, cap and trade will probably make the problem worse. Innovation in energy efficiency often comes from small companies on a small budget. It would seem to me that "cap and trade" is a powerful way for inefficient and large conglomerates to lock out competition.
Published: June 5, 2008 12:48 AM
Person,
"Yes, they are. The caps assign the resource -- use of the atmosphere for CO2 dumping -- to the highest bidders at an auction, which they can then trade as they re-evaluate the use they get out of that right to dump.”
No; they're not. True property rights do not imply rights as restrictive as the use of the atmosphere for CO2 dumping. The resource would be the atmosphere itself, to be used by the owner in any way the owner saw fit, and to be sold at a price the owner saw fit. Any damage to this property would result in compensation at a level agreed upon by the property owner and damaging party, or by a court.
“Other than the initial allocation, how is that different from any other property right, say, somone's right to receive .002% of the amount a corporation allocates dividends and .002% of the vote in who runs it (i.e. shares of stock)?"
The initial allocation is kind of the point. Resources are scarce. In actual fact, the permits are the same as fiat currency, in the sense that they are not backed by the ownership of any physical resource. As pointed out by Francisco, there is no scarcity underpinning their issuance. The number of permits to be allocated has been decided upon at the stroke of a pen. If needed, and as touched upon by Michael A. Clem, permit issuers can simply expand the permit supply at the stroke of a pen.
Cheers
Adam
Published: June 5, 2008 4:24 AM
While we are on point, there is an issue here that irritates me. If there is a flaw in my logic, I would be obliged if it was pointed out, as I am currently having this debate often.
The institutions/governments who allocate or auction these permits are distributing to the private sector the right to damage public goods. They are thus acting on behalf of the ultimate owners of those public goods, i.e., individuals.
If the permits are allocated, the individual receives no actual compensation for this damage – apart from the fact that goods may cost slightly less than what would otherwise be the case. Does this fact in itself justify the free allocation?
Alternatively, if the permits are auctioned, we witness a windfall gain by the government that can be used in any way it sees fit. This is basically the same as what happens when the government opens public land to development, an act that I also have an issue with. Both instances represent theft in the sense that assets I have a share in are expropriated and used in a manner that I have no control over.
---------------------------------------------------
My questions for Robert are these: Do you think there is a problem with the act of polluting? If so, is the best theoretical solution to the pollution problem the privatisation of public goods? If so, how is this proccess best structured?
Published: June 5, 2008 4:27 AM
then did plants it is a a young will never every for kids trees done it. the dead a pair just their
Published: June 5, 2008 6:19 AM
I think the fear many feel over this issue results from an error its odd to see libertarians indulging in: giving politicians too much credit. You're acting as if they have principles or something.
Quite simply the average voter cares far more about the cost of getting their kids to school and putting food on the table than they do about global warming. The political costs of alienating them are far higher than the political benefits of getting in the good graces of weird smelling floraphiles.
This is why I can't see any legislation on this issue being anything more than a sop. A harmful sop but of nowhere near the harm green activists would like. The program will be rolled out in the grand manner to the sound of many trumpets, politicians will compliment themselves on the depth of their empathy and breadth of thier sagacity, and that will be the end of it. All the subsequent complaints of the environmentalists that the scheme is inadequate will be brushed aside as the ravings of ideologues who can never be satiated.
Published: June 5, 2008 7:43 AM
I think the whole problem with this is that we're trying to apply it to global warming, dealing with the atmosphere as a whole instead of the air above your land. If the courts, at the beginning of the industrial revolution, had deemed the air above your land, going up 50 feet or so, to be property, I think that emissions would have been effectively controlled long ago. Today, we view the atmosphere as a whole as belonging to everyone, but clearly a coal plant is specifically, and quantitatively, harmful to those living directly next door. The only reason we have to deal with global warming now, whether you believe in it or not, is that we never dealt with local pollution correctly. We have no concept of property rights for the atmosphere as a whole because we never considered property rights on local airspaces. It's like trying to do calculus without arithmetic first. While local air property rights can't completely solve the problem, you still can't get your CO2 into the stratosphere without first going through the ground level air (except for my floating blimp-carried factory).
Published: June 5, 2008 9:49 AM
Yeah right Mike. If such 'air ownership' laws were in practice before the Industrial Revolution then we'd all still be living the same way as the Amish do.
Published: June 5, 2008 10:01 AM
fundamentalist says:
"Scientists have known for years that bovine flatulance contributes more to GHG's than CO2 emitted by industry."
just goes to prove that letters after one's name mean nothing. ruminant farm animals make absolutely no net carbon dioxide contribution over their lifetimes.
the sheep eats grass and liberates both methane and carbon dioxide. but what would happen were there no sheep? the grass would die and compost or burn in a brush-fire. either way the co2 gets re-release in the atmosphere. in the first way, at least we get lamb chops on the way.
new zealand i think is considering a sheep impost - taxing one lot of sheep to pay for another. the four-legged ones must be pissing themselves laughing.
Published: June 5, 2008 10:58 AM
I just want to say, you guys all seem to have some pretty neato arguments here. It's just that Bob didn't actually, you know, make any of them. He wants to denounce market solutions, without specifying what would be the property rights for the market that he does want. If you want to advance your own arguments, that's wonderful, but they do nothing to defend the case Bob actually made.
A_De_M: That's a very bizarre conception of property rights. For one thing, it disallows the concept of share ownership.
Furthermore, if you say the only property-rights-based solution is for there to be an "owner of the atmosphere", well, which one person or organization do you think should be given this tremendous windfall and veto over everyone's lives despite everyone else's piecewise homesteading?
Mike: I don't see how that framework deals with the harm profile of CO2, which is something like:
if TOTAL GLOBAL human CO2 emissions C is less than X, nothing.
else, randomly scattered catastrophies with frequency alpha*(C-X)
Published: June 5, 2008 11:04 AM
Person,
If Bob Barr wins and legalizes drugs, I'm hoping you chill out for the next four years.
OK, this wasn't an academic paper for the QJAE. I am trying to make sure the average person gets why the biggest expansion of the government since the New Deal (and yes it is just that) isn't really a "market solution."
What they are doing in DC right now is the furthest thing from an honest attempt to replicate what a Coasian outcome would be with low transactions costs.
Look, I get what you're saying. It's true, my 700-word op ed is not the last word on the issue. I'm not claiming that it is.
People are referring to what is happening right now as a debate on a "market solution" to climate change. McCain is saying he is for a market solution, not command and control.
That is nuts. You're trying to argue that theoretically, if we restrict the market participants to what is feasibly in this real world (i.e. rule out massive Coasian arrangements), while we allow politicians to enact programs that they would never do in the real world because of politics, then my op ed is wrong.
I'm happy with that. No problem. It's good enough for me that my op ed is right (a) in the real world right now, and (b) in an ideal world where we imagine what is possible.
OK I'm not posting again on this because I really can't get bogged down into a fight. I'll occasionally check back to see what your response is.
I know I'll be like Hannity: Person I'm gonna give you the last word...
Published: June 5, 2008 1:11 PM
Bob_Murphy: Unfortunately, much as you'd like that to be your last word, it can't be. If you don't answer me here, you're going to have answer me somewhere (and for the first time) in the next 400 writings you do (be they essays, op-eds, research papers, consultancy reports, blog posts, etc.) on this topic, because you raise more problems than you resolve.
My objection, let's keep in mind, was not merely that you didn't mention the theoretical possibility of an honest political attempt to set the catastrophe presenting levels. That was the "tip of the iceberg". I also criticized you for advocating a "true" market solution in a realm where HELLO, ANYONE HOME?, there AREN'T ANY PROPERTY RIGHTS nor any identifiable private attempts to negotiate them. I criticized you for trivializing carbon caps as "not a real economic constraint" even while accepting the science which indicates that, yes, exceeding *some* cap (even if higher than this one) will seriously screw other people over. Yes, Bob_Murphy, the fact that using too much carbon will potentially shut off vital earth systems *kinda* counts as a real constraint (again, accepting the science for purposes of argument).
(Aside: I really don't expect you to try to read my arguments before responding. That's giving you too much credit. However, since i did you the courtesy of digging through the non-content in your op-ed to finally get to your point, it was the least you could do.)
Getting down to the bottom of tip of the iceberg, I also criticized you characterizing caps as *inherently* non-market, when in reality, of course, they are a kind of allocation of property right (like a landfill owner selling dumping rights), and you only meant (though no human, including those familiar with you, would have have inferred) caps *stupidly* set by politicians, as differentiated from, uh ... politicians copying the market's assessment (however the hell it got that) of how much the atmosphere can really take (however the hell property rights eventually got assigned).
So yes, go ahead and ignore me. But to have an actual argument against these climate policies, you're some time or another, going to have to specify how you expect "the market" to assign rights in the atmosphere, which you've written about ... nowhere, or else one of these times you would have pointed to your or someone else's brilliant assessment of the libertarian position on atmospheric property rights.
But, I do intend to follow people like you around to other internet forums, when you try charades like this. Just ask Stephan_Kinsella. If you don't have anying to contribute, please don't advertise that you do.
Published: June 5, 2008 1:49 PM
Walt D.,
I agree with you that if human beings influence the climate by CO2-emissions, there would probably also be beneficial effects. I just assumed that people don't sue other people for unintentional benefits they received from them. In fact, depending on the theoretical political or justice system, they might even get sued themselves for payment of this free ride.
But if we theorise about a justice system that only recognises rights to ones body and physical property, and only allows to sue for damages, not payment of unintended benefits, this should not really be an issue. The persons who believe they (will) suffer damage, and see this as a problem can sue the fossil fuel producers for an equivalent amount of money, and any benefits they might receive would be subtracted.
Of course this would get more complicated if the claimants actually wanted an injunction against the damage, and not just compensation for it. Because then a small minority, or even one person, could stop all emissions above levels that could cause them any damage at all. I know many libertarians don't like the idea that anyone could damage their property and just compensate them for it. And from a personal point of view I feel great sympathy for that position.
But on the other hand, stopping an activity because it has any negative impact on your neighbours property, could also mean disaster for our current society. I'm not too sure if that would create a liveable world, since all human activity will have some impact on fellow human beings and their property. For example, if farmers have to stop using fertilizers because they cause negative effects on their neighbours' ground water or nature reserves.
Published: June 5, 2008 10:40 PM
"Yeah right Mike. If such 'air ownership' laws were in practice before the Industrial Revolution then we'd all still be living the same way as the Amish do."
Not at all. Surely some level of pollution is acceptable to most people, but at a price. A lightly polluting factory next door that is within my acceptable levels but still having an effect might offer to buy rights to some of my airspace. I might rent it with a long term contract, or even sell the land later with an easement. In areas where the community would not tolerate pollution, prices would be very high. When a middle class black neighborhood gets screwed by city council putting a power plant in, they would have recourse. A market price would develop for pollution, which would factor in to the cost of production. Factories would be driven by profit to reduce emissions (using technology that, from what I know, is not completely beyond 19th century minds). Pollution would be checked by a REAL MARKET VALUE.
So yeah, this doesn't deal with global warming on a grand scale, but if individuals had been able to enforce their right not to have their house engulfed in smog, do you really think we'd be talking about global warming today?
Published: June 6, 2008 7:20 AM
Person, I love how you've dismissed every other argument on this thread as being "neato", while continuing to lambaste Bob for not answering your every bullet point. While others have addressed your every bullet, Bob continues to be the target of your ire.
In any case, as was pointed out by Owl in an early comment, atmospheric property rights may be wholly unnecessary, if not impossible to determine or enforce. Property rights on things such as land are easily defined and enforced because land is pretty much stationary. The atmosphere is not. One need not worry about the sudden relocation by shift of wind of the land on which his house or business is built...unless, of course, it was built on unstable ground to begin with, but that's a different discussion. Since it's always in motion, how is one to assign property rights to volumes of air?
Of course, if we're talking about "air space", that's entirely different, as it asserts ownership of a constant, limited area above an owned piece of land. But this is not what cap and trade does or attempts to do. Instead, it attempts to grant ownership of a cubic volume of air and claim that the holder of X number of permits can pollute X cubic feet of air. While one can easily measure land area and therefore establish a quantity thereof, doing so with air is nearly impossible, or can be only approximated at best. If a quantity cannot be assigned, then it can only be guessed at, and its scarcity set by fiat.
Even if one could measure the full quantity of air in the atmosphere, how is one to ensure that the air one owns stays put? If you purchase a permit to pollute a cubic foot of air, that cubic foot will be dispersed, or at least relocated by wind currents as soon as it's polluted. How, then, is government (or anyone else) to keep track of who owns that cubic foot of air? Only be enforcing measurable property rights of land and the air space above, insofar as it impacts the property and its owners, can government allow a market solution to function properly.
Published: June 6, 2008 10:24 AM
Mike: that solution is not viable because it would be plagued with holdout problems. What if the rest of my community likes X pollution, and I want zero (or effectively undetectable) pollution? Well hey, we can't force me to take the X level, right? So everyone has to adhere to the Amish standard TLWP_Sam warned about, because they can't exceed my limit.
But then, you might use some formula that allows the broader community to force their higher level upon these holdouts. However, once you concede that tiny, tiny step, you've conceded, in principle, the right of the world community to determine, against holdouts, what world concentration of CO2 it finds acceptable, and within that, the optimally efficient solution, which is to auction off rights to emit a portion of that limit.
Ron: Person, I love how you've dismissed every other argument on this thread as being "neato", while continuing to lambaste Bob for not answering your every bullet point. While others have addressed your every bullet, Bob continues to be the target of your ire.
Yes, others have made (lame) arguments in response to my points, but they are completely different from the position Bob_Murphy is taking, and therefore do nothing to substantiate his essay. And thus do not satisfy my criticisms in the context of the position he took.
In any case, as was pointed out by Owl in an early comment, atmospheric property rights may be wholly unnecessary, if not impossible to determine or enforce. ... Since it's always in motion, how is one to assign property rights to volumes of air?
Um, let me think think think ... uh OH OH OH !!!!! I KNOW!!!!!!!! How about, by setting the TOTAL global emission limit, and then auctioning off portions of that! You know ... what this entire discussion has been all along!
Of course, if we're talking about "air space", that's entirely different, as it asserts ownership of a constant, limited area above an owned piece of land. But this is not what cap and trade does or attempts to do. Instead, it attempts to grant ownership of a cubic volume of air and claim that the holder of X number of permits can pollute X cubic feet of air.
Actually, no, cap-and-trade wouldn't do this; the plan you've outlined is your attempt to force-fit it into a different, deficient framework. C-and-T would involve an owner of the entire atmosphere, insofar as major CO2 emissions are concerned, and then permit anyone holding a permit to insert the CO2 effectively anywhere. This is very much a clearly defined standard for who may do what and where.
The rest of your point becomes similarly irrelevant, as the only remaining problems are finding those that emit beyond what their permit allows (or in practice, they may simply check the permits at the fuel provision stage, rather than waiting for it to be burned).
Published: June 6, 2008 10:54 AM
Person: C-and-T would involve an owner of the entire atmosphere, insofar as major CO2 emissions are concerned, and then permit anyone holding a permit to insert the CO2 effectively anywhere.
So who's the owner? For C&T to be valid by your standards, some entity would have to be the worldwide accepted owner of the atmosphere, yet this isn't the case. The US government has simply proclaimed itself to be the owner by fiat.
Published: June 6, 2008 12:27 PM
The US government has simply proclaimed itself to be the owner by fiat.
Good point. Some people make the mistake of assuming that the "unowned" is by default owned by government or society in general, and that the government is acting on behalf of society in general. The unowned is just that, not owned by any human being or organization, and cannot be owned until someone figures out how to effectively 'homestead' it. Merely asserting claims of ownership is insufficient. The ingenuity necessary to homestead new frontiers is unlikely to come from politicians and bureaucrats, but from the individual creativity of entrepreneurs who can find value and profit in homesteading it.
Cap and Trade regulations confer restrictions, not rights, and thus provide little of true benefit to C&T participants. At best, C&T is simply a legalized form of law-evasion. There is a big difference between governments merely protecting rights and governments creating rights.
Published: June 6, 2008 3:56 PM
Person,
First of all, it seems rather an important ethical question if you choose the option of absolute property rights, allowing "hold-outs" to prevent any damage to their person or property, or choose a more "utilitarian" option of allowing damage, as long as it is compensated. That is a serious question, and not something to just gloss over because it doesn't seem to fit in that personal issue you seem to have with Mr. Murphy and his piece.
Secondly, assuming the utilitarian option for a moment, and maybe more in line with Mr. Murphy's point: how will the desired total of acceptable pollution be calculated? Does the government have any objective standard for this? Does it question all people in the US or even the World, to ask them what level of damage, or what increase in the "chance of damage" they find acceptable, and then calculates an average personal CO2 emission permit? One of my "lame" points was that maybe you don't need cap-and-trade in order to make that calculation, and therefore no new "rights" in the form of such pollution permits, with the associated increase in bureaucracy. A relatively simple class action suit of all persons interested in compensation for expected damage would be sufficient, with lawyers hired and fired on the basis of what the claimants feel is cost effective. Hopefully this allows a fair and objective calculation of the damage and benefits those claimants and defendants are due.
Instead you seem to think it is more "efficient" to give the legislative and executive branches of government another set of rules and civil servants to play with. And more arbitrary decisions to make about the extent of peoples rights to their own life and physical property to fight over in the next election. Not by allowing every person to sue individually (or in a voluntary class action) over actual (expected) damage, and not even by giving every citizen an equal right to decide how much pollution or associated damage they would accept. But by letting (in theory) 50%-plus-one of the voters decide for 100% of the people what that level should be.
So these are the extreme choices: Either your right to life and property is absolute, and this makes any involuntary damage unacceptable. In which case cap-and-trade would also be unacceptable. Or damage to person or property (or both) is allowed, but must be compensated for. In which case you don't need cap-and-trade, because your right to pollute would only be limited by your ability to pay compensation, and therefore related to your productivity and contribution to the desires of other productive consumers. If an individual consumer disagrees with your level of pollution, all he or she needs to do to reduce your personal "cap" is by no longer buying from you.
I can understand if someone find this morally dubious (as do I), but anything in between those extremes of absolute property and property-rights-relative-to-productivity (whether decided by democratic majority, "expert" judgement, or even by somehow polling and averaging every human being's subjective idea of acceptable polution or damage), seems at least equally arbitrary. So why have the extra bureaucracy and regulations, if what we already have will do an equally "good" job?
Published: June 6, 2008 8:14 PM
The already is a market solution. Let politicians do their part by buying one of these units and wearing it all day!:-)
http://www.rebreather.com/CCR2000Models.html
Published: June 7, 2008 1:12 AM
Alright, folks, let's see if I can respond to the general points being raised here.
As libertarians, shouldn't we *want* private property rights in the atmosphere? Right now, it is unowned, which should be anathema to a libertarian. No owner, no clarity about who may do what, then you get a tragedy of the commons with overdumping.
Am I really being so controversial at this point? It seems so. Even Bob_Murphy refuses to say how atmospheric ownership should be distributed, which I guess isn't surprising because he still (somehow!) can't see how limitations on carbon emissions are genuine instances of economic scarcity. Why is this so hard to grasp? If the total human population -- not necessarily any one person, but the total -- emits beyond a level, that seriously takes away from the consumption of others. So either the carbon emitters consume a resource and the victims don't, or the would be victims consume, and the would-be emitters don't. If you can't see how that counts as scarcity, your ability to engage in abstract thought is deficient, and there's not much more I can say to convince you.
Then, once you accept that there should be atmospheric private property rights, you have to grapple with all kinds of issues (which, sadly, are beyond the ability of most here, as evidenced by their posts). For one thing, EVERYONE has emitted CO2 to the atmosphere, and therefore, has done a kind of homesteading in it. Outright denying people emission rights, runs the risk of violating legitimately homesteaded easements.
You also run into the thorny issue (which there's been no shortage of complaints about here) of how much harm is created when it's a government defining and enforcing the boundaries. While a valid complaint, I honestly don't see how it's different from government's enforcement of other rights. Most libertarians, for example, have no problem with government enforcing (at least some of the existing) land titles, excluding murderers from interaction with the rest of us, putting out fires, etc., at least until private alternatives are estabslished. The libertarian position is more like, "Hey, that would be a lot more efficient if done by privately-run organizations," rather than "Putting out fires is immoral." We should likewise view enforcement of the atmospheric property rights: yes, government will botch it horribly, but it's preferable to the tragedy of commons resulting from ZERO property rights.
But I don't see anyone here following this chain of reasoning. All I see (here and on a mailing list) is poorly thought out schemes: oh, we should give anyone a veto over any harmful emission; or we should never allow any.
I'm very interested in learning where I'm wrong, but if even Bob_Murphy can't grasp basic issues like why carbon emission capacity is scarce, I'm not sure anyone here is even prepared to make the point.
Published: June 9, 2008 2:58 PM
As libertarians, shouldn't we *want* private property rights in the atmosphere?
Most libertarians, for example, have no problem with government enforcing...land titles, excluding murderers from interaction with the rest of us, putting out fires, etc., at least until private alternatives are established.
Most libertarians view rights as pre-existing government, not as things created by government. Most libertarians, for example, have a problem with governments creating and enforcing "rights" in jobs, health care, education, welfare, etc, because such positive obligations are not considered to be legitimate rights by them. Did governments say that murder was wrong, or did people already think that murder was wrong and then expected government to enforce that?
If the atmosphere is truly an indivisible commons that private arrangements cannot resolve, then arbitrary designations and limits enforced by government can hardly be considered legitimate.
Furthermore, even if the atmosphere is an indivisible commons, there are other, more roundabout ways to go about protecting it. For example, if someone has health problems because a local factory is polluting the air in and around their home, surely a beneficial arrangement can be made or otherwise dealt with through the courts. Similarly, if global warming causes specific and known violations of rights to people, we can prosecute the people who are doing the rights violations--however, that assumes that GW is in fact, man-made--natural causes cannot be considered rights-violators. If, in fact, the major cause of global warming is natural, not man-made, we have a more important question: what, if ANYTHING, can humans do to mitigate harms caused by natural GW? Carbon taxes or Cap & Trade would be totally ineffective in such a case.
Published: June 9, 2008 3:37 PM
I'd also like to correct my initial post in this thread. Ron Bailey supports carbon taxes, not cap & trade. My mistake for not remembering correctly.
Published: June 9, 2008 3:39 PM
Person,
I would not call myself a libertarian (yet), but yes, in most cases I would support private property rights. However, I also like simplicity. It seems redundant to have more "rights" and regulations than absolutely necessary or truly justifiable. So generally I will support any person's theory of property or justice that will provide the individual with the maximum possible freedom, but I will also transfer that support if someone comes up with an equivalent theory that uses less assumptions and rules.
Why do we need to "own" the atmosphere in common, if our rights to our own persons and physical property will do? You could have both, but you will still need the right to your own body and physical possessions anyway. So why create more bureaucracy if those property rights and the existing system can be used? Why give government another instrument to limit your freedom? At least now the claimants sueing you will have to prove they are actually harming you physically, and make a reasonable assesment of the damages in a trial, to a judge and\or jury. Having government make an "estimation" of "appropriate damage", will leave no room for such a process.
Using existing rights will not lead to a "tragedy of the commons", because for there to be any "tragedy" there has to be damage to humans or their property. And hopefully, humans would own themselves and all land and (natural) resources on it. Therefore, if there will be "damage" caused by CO2-emissions, it will show up in the prices of those possessions, for which the owners\victims can sue. And since almost everyone, like you pointed out, is a CO2-emitter, this process would work out to make people pay for damage they cause, and receive payment for damage caused by others to them. If they are already emitting more than average, or living in a location that is not negatively affected by climate change, any legal adviser would point out to them that sueing others for damages would be useless. In the end, only people who emit significantly less than average (and therefore are "nett victims" instead of "breaking even" or being "nett damagers") and live in an area where they can experience possible damage from climate change, would have a reason to sue anyone. That seems at least as efficient as making every single person on earth an "emission-rights" trader, setting some arbitrary level of "acceptable damage".
If you don't want a system that bans all damage, even the most trivial (which I guess would be a "libertarian" position of "absolute" property rights), and you also don't want a system that allows any damage as long as the person doing the damage compensates for it, then setting any level of emission rights in between becomes an arbitrary (political) decision. That has very little to do with individual freedom, equal rights, or property. That is basically the State deciding for you that yes, you can destroy your neighbours property (or even life), but only as much as the State allows. To me that seems inconsistent: property rights are relative instead of absolute, but exactly how "relative" they are is decided for you by someone else. How can anyone else possibly make an objective decision for you about what the "right level" of emission rights, and therefore the level of damage will be, if that is a subjective level that differs from person to person?
And I am no expert, but in general most primitive or simple legal systems require you to "control" the physical thing that you're trying to own. So streaming water, or moving air would not really qualify. Only when you bring it under your personal control, like if you build a reservoir to hold the water, or live inside an airtight greenhouse perhaps, would that be poss(ess)ible. In other cases, like unsequestered air or water that freely flows anywhere, nobody owns it. Or do you also homestead the ocean by urinating into it?
Published: June 9, 2008 8:02 PM
I think most libertarians (or at least this one) would consider C&T along the same vein as occupational licensing. In most states, for instance, one must obtain a license to be a plumber, electrician, barber, massage therapist, and a plethora of other professions. Requiring a license amounts to government declaring itself, in effect, the "owner" of all the plumbing or electrical work in the state, setting some arbitrary limit on the number of licenses available, then making it illegal to earn a living in one of these professions without obtaining said license.
Plumbing, electricity, and massages all existed before government got involved. People were perfectly well able to make a living in these professions before licensing, and the market very effectively weeded out those who were incompetent. Likewise, if an electrician caused harm to a customer or damage to their property, the injured party had recourse through the courts, and the incompetent electrician would soon find himself out of business.
Professional licensing is a mechanism for government to impose artificial scarcity where none previously existed, in an effort to curb competition to benefit established firms. Government can no more determine the maximum allowable level of carbon emissions than it can determine the optimum number of plumbers for a given market. All it can do is guess, or more likely, set the number at whatever level best serves its own interests or those of campaign contributors. The same will hold true for carbon emissions permits.
So, to sum up...first, C&T permits amount to government creating artificial scarcity by fiat where none previously existed, and are therefore illegitimate. Second, C&T permits are unnecessary, as other legitimately established property rights already exist that can and should protect the interests of those who may be harmed by polluters. Finally, the coercive scarcity created by C&T permits will naturally be set at some arbitrary level, as it is impossible to know what the optimum or maximum level of non-harmful pollution is. Even if that figure could somehow be objectively and accurately established, government would most likely manipulate it to its own ends, whereas private enterprise would face natural economic incentives to reduce pollution in order to avoid reaching that level.
One final point is that few libertarians believe that government solutions lead and private solutions follow. In fact, the reverse is nearly always true.
Published: June 9, 2008 10:28 PM
Ron: the difference is that even if every single person on earth started to cut hair for money, the thermohaline circulation wouldn't shut down, most of florida/england/thenetherlands wouldn't submerge, etc.
Way to miss the point there, bro.
Owl and Michael_A._Clem: so can I take it you both have no problem in principle with a cap, as long as it emerges from a world-wide, class-action jury trial rather than a government attempt to untangle the massive web of torts?
It would be nice if you would be clear about rationalizations like these sooner rather than later.
Anyway, what makes you so sure one would involve more government and/or waste than the other? Why not just let the government set the caps and then let people sue where they think the estimates are in error?
(Of course, neither of you have worked out how existing private property rights handle the harm profile of CO2, where you can't, even in principle, say who harmed whom.)
Published: June 10, 2008 8:25 AM
So I answer your question and you just ignore it? Ah well...
Of course, you haven't specified what kinds of harm GW will cause, or why C&T will supposedly prevent those harms, or even if GW is man-made, and thus preventable by humans.
Published: June 10, 2008 10:39 AM
No, Michael_A.Clem, I responded to it just fine: at best, you get the same result, with more cost, but even that's unlikely as you can't explain how that framework handles the harm profile of CO2.
Of course, you haven't specified what kinds of harm GW will cause, or why C&T will supposedly prevent those harms, or even if GW is man-made, and thus preventable by humans.
Actually, liar, I either explained these, or they were obvious to anyone with a background understanding of the debate. Let's dumb it down for you:
-GW would, accepting for purposes of the argument that the science is basically right, flood a bunch of areas, worsen weather, and shut down vital earth systems. Duh.
-Since the harms don't kick in until a threshold is reached, a cap prevents that threshold from being reached. Duh.
-This discussion has assumed the science is about right about the harms, and if you are just arguing against the science, your point is irrelevant here. Duh.
Wanna give it another go, and be serious this time?
Published: June 10, 2008 12:57 PM
As several posters have mentioned, there is no need at all to create property rights for the atmosphere. Courts successfully handled water pollution issues for many years when no rights to private ownership of waterways were held. All the plaintiff had to do was prove damages to his property by someone upstream. The atmosphere could be handled in the same way if the state would get out of the way.
But radical environmentalists don’t want that solution because it would make them look like fools. They would have to prove to an unbiased judge that 1) GW has caused the damage and 2) that CO2 emissions by industry are the major contributor to global warming. Then the science would be dragged out into the open for all to see, instead of being vetted by true believers.
As Robert wrote, C&T is not a market solution by definition. Market solutions originate within the market place. If it originates with the state, it is not a market solution. Tagging C&T a market solution is just government spin to make it look less like socialism.
The real problem with C&T is that it jumps the gun and cuts off all debate on the appropriate response to GW. As Bjorn Lundberg and his Copenhagen Consensus have outlined, GW represents a far smaller danger to mankind than do a dozen other problems, even if the hysteria of the IPCC is correct. The most rational thing to do about GW may be to do nothing. C&T cuts off that debate completely.
Published: June 10, 2008 1:48 PM
To show how stupid the discussion of GW has become in the media, a story about the above average temperatures in the NE US included the obligatory hysterical GW spokesman who claimed that emissions of GHG’s have made the temperatures unnaturally high. But he didn’t clarify that GHG’s have contributed just one degree to average temperatures. So temperatures that reached 101 degrees on that day would have been just 100 degrees without GW. Would that really have made a difference to anyone?
Published: June 10, 2008 2:03 PM
You can't have a market solution without a market. You can't have a market without property rights.
The market isn't currently establishing property rights in the atmosphere.
Tradeable permits are a kind of property right in the atmosphere.
What am I missing?
(Btw, if you're just going to complain about how inefficient government is at managing property rights, why not go do something more productive like complain about how cops arrest murderers.)
Published: June 10, 2008 2:27 PM
Person: "The market isn't currently establishing property rights in the atmosphere."
There is no need for property right in the atmosphere, as many people have explained. If GW warms the atomsphere, but doesn't cause any damage to other property in which property rights exist, then there is no problem at all. But if GW does damage other property, then the courts can handle the cases within existing laws and property structures.
Person: "Tradeable permits are a kind of property right in the atmosphere."
An artificial and unecessary kind of property invented by the state to solve a problem that doesn't exist and designed to increase the size, scope and power of the state.
Published: June 10, 2008 3:14 PM
But if GW does damage other property, then the courts can handle the cases within existing laws and property structures.
No it can't, because (like all the libertarian legal theorists who chime in on this point say) you cannot point to any person and say this guy harmed that one. The victims are indifferent to *who* did it; they only care about whether the *aggregate* exceeded some total. Meaning that, again, the courts would just come to the same conclusion, more expensively, while relying on the same principles for setting the limit that you claim won't result in a justifiable limit (or whatever you guys want to switch your position to), and creating the same tradeable permit market (that you say isn't a real market) because they'd want to allow for flexibility in meeting the global threshold, and violating the same "emission rights" you claim people have when arguing against a government-set limit.
Please, you need to figure out what exactly you object to first.
An artificial and unecessary kind of property invented by the state to solve a problem that doesn't exist and designed to increase the size, scope and power of the state.
Really??? Property rights in the atmosphere are well defined already? You casually ignore the precondition of the discussion which is what to do if the science is right? Enclosure of ill-defined property rights increases the size, scope, and power of the state?
(In reality, I'd say, *not* defining clear rights to use the atmosphere is what gives governments perpetual veto over anything they don't like, but whatver.)
Published: June 10, 2008 4:30 PM
Person: "No it can't, because ... you cannot point to any person and say this guy harmed that one."
Nonsense. The plaintiff can choose whom he sues. He'll only want to sue people with money, meaning large corporations. And those who produce the most CO2 will be the easiest targets. He doesn't have to sue everyone in the entire world who produces CO2. The real problem would not be choosing whom to sue, but proving 1) that GW caused the damage and 2) that CO2 emissions are a significant cause.
Even if we accept that GW is a problem and that CO2 is the only cause, that's a long ways from proving damage. All you have to go on is forecasts from faulty models. C&T assumes damage before any has been shown.
Person: "Property rights in the atmosphere are well defined already? You casually ignore the precondition of the discussion which is what to do if the science is right? Enclosure of ill-defined property rights increases the size, scope, and power of the state?"
You didn't read what I wrote. Property rights are not defined for the atmosphere, but I wrote that such rights are totally unecessary. If pollution harms someone, that person can sue. For example, recently one of the eastern states sued large power produces west of it because of acid rain. I assumed that the hysteria about GW is right and that the current law is sufficient to handle any problems arising from it.
What you don't like about my argument is the fact that someone would have to prove damages by GW in order to succeed in a law suit. You want to assume damages on a vast scale and punish people with a huge tax before any damages have been proven. Even if GW hysteria is correct, the damage from it will likely be very small, as Bjorn Lundberg points out. Our limited resources will be better spent elsewhere.
Published: June 10, 2008 5:02 PM
Person,
Creating more rights than needed will only add to the existing bureaucracy, not lessen it. You will still have courts and class-action suits, but the emission permits would require additional civil servants, inspectors, etcetera, doing (at best) exactly the same thing a class-action suit would do, for a higher cost. Because those bureaucrats at some future "Department of Emissions" would be appointed for life, and knowing the way goverment works, in superfluous numbers with an arbitrary budget. A lawyer in a class-action is paid for by the plaintiff, who will spend his own money a lot more efficiently than the State spending the taxpayer's money. And after doing his job, or if he is no longer required, he is made redundant. And as Fundamentalist pointed out, you don't have to sue the whole world, nor even know who emitted how much of what. You just sue, for example, the fossil fuel producers, and only if you already believe you will suffer more damage than you cause by your own emissions.
At best a "Department of Emissions" would reach the exact same conclusion about people's preference in the amount of damage they would accept, but probably they would not. In reality the level would be set by political processes, involving lobby groups, and (in theory) a majority of 51% of voters deciding for the whole people what arbitrary level of damage they must accept. Like Fundamentalist said, it would not be a matter of proving in court that you will probably actually suffer damage (or a chance of damage) from reaching some threshold in CO2-levels, but a matter of populist retoric. If the environmentalists are wrong, but still win the popular vote, you would suffer artificial scarcity in your CO2-emissions. And if the environmentalists are right, but the CO2-emitters win the popular vote, you would suffer personal or economic damage because the level has been set too high (or not at all).
And you seem to ignore my main point: How would any level of emission rights be "just"? The extreme choice is between absolute rights, or relative rights. If the right to your body and\or property is absolute, no level of emission would be acceptable if even one person decides to enforce that right. If the right to your body and\or property is relative, then anyone can emit as much as they can afford to compensate their victims for. And if the level must be somewhere in between, then how do you determine what it should be? Must every human being be somehow polled to ask what level of damage they find acceptable, versus how much CO2 they would like to emit themselves? Deciding it by popular vote, where only the opinion of a theoretical 51% counts, seems in conflict with the idea of equal individual rights.
I don't know too much about the United States legal system, or how much your Constitution allows you to sue your government for making an arbitrary law by majority voting. But in my country (The Netherlands, which has been relatively able to deal with living below rising sea levels, long before this supposed problem) you would probably not have much chance of overturning a formal law that fixes the CO2-emissions at an arbitrary point. The (in)correctness of that law would be left to "democracy" to determine, because we have a rather weak national constitution, which isn't very libertarian and doesn't allow judicial review anyway. And if the level has been set by the EU, you can probably forget even about that "democratic remedy". The existing treaties don't seem to provide much protection against democratic or government arbitrariness, and the "future EU-constitution" is so long and complex, I doubt it would do you much good in fighting irrational levels of emission quota in court. Although of course up to now, the EU emission quota have been granted "liberally", for lack of a better word.
Published: June 10, 2008 7:25 PM
I could reply to person, but fundamentalist is doing well with arguments same as mine.
Published: June 11, 2008 2:39 AM
o I answer your question and you just ignore it? Ah well...
Of course, you haven't specified what kinds of harm GW will cause, or why C&T will supposedly prevent those harms, or even if GW is man-made, and thus preventable by humans.
Published: June 11, 2008 3:27 AM
Bob, I thank you for posting your piece from IER, which has stimulated a relatively even-tempered and productive discussion.
But allow me to express a little disappointment. Even as I agree fully with the gist of your post (the largely self-evident and unsurprising point that politicians prefer, as an alternative the more honest, open and politically less-palatable approach of direct Pigouvian taxes of the type supported by a wide range of mainstream economists, to address the concerns of scientists, economists, business leaders and others about man's contribution to ongoing climate change by dressing up such taxes as a "market approach" involving a cap and trade program), I think that:
(1) you unfairly conclude that, since it will be government that will be implicitly pricing carbon emissions, such pricing "won’t reflect genuine economic scarcity" at all, when Austrian approaches do not deny that lack of property rights will result in economic actors ignoring external costs, but simply indicate the government pricing of resources can only imperfectly reflect economic factors;
(2) you've gone to a bit of unjustified rhetorical excess with your statements that:
- "[t]his is no more a “market price” than if the government decided to sell people permits giving them permission to sneeze": rather, it's more like the government trying to price grazing rights, resources extraction rights or other user fees on "public lands"- yes, such prices are not market prices (and are perhaps more likely to be underpriced rather than overpriced), but that does not mean that they do not represent or at all reflect valuable resources.
- "Cap and trade is not a market-based solution" - while not a true market solution, a cap and trade approach is clearly one that makes use of markets.
- Cap and trade ... can therefore be justly viewed as a tax, stealthy or otherwise, on energy - the lifeblood of our economy" - this not only overbroad, as it would only tax certain types of energy, and overdramatic, it completely ignores the point that certain activities (a wide array not limited to combustion of fossil fuels, including release of other GHGs) are perceived as adversely affecting (now and in the continuing future) many within the country as a result of externalities involving an open-access and unowned and unmanaged commons, which is precisely what expressly motivates (actually or allegedly) so many - including many in your profession - to support Pigouvian approaches;
(3) surprisingly, you failed to take the opportunity to add to the discussion by informing your readers of Austrian concerns, including the following:
- the calculation problem;
- whether, as you note it posting here, there is any reasonable basis to "trust governments around the world to implement the scheme 'properly'" (by exploring problems with rent-seeking and bureaucratic incentives);
- whether it is desirable for the government to presume that it should act as the owner of the atmosphere in creating emissions rights (as opposed to citizens generally or long-standing/homesteading users of fossil fuels), and the related ethical issue of creating rights to emit that cut off those who may be harmed from any direct remedy (such as a share of the proceeds of the sale of rights); and
- the underlying institutional problem of lack of clear or enforceable property rights (for which past interferences by government have some responsibility); and
- whether growing concerns (and private responses) regarding the shared global issue (affecting nations with different circumstances and legal systems than ours) of increasing GHG emissions might be addressed less expensively and more rapidly by voluntary actions and national and international litigation rather than by coordinated action by various governments and implemented by individual nations.
None of these points is easily addressed, but they would help to provide a Austrian framework that may be useful to your readers.
(4) Finally, it is disappointing that you completely failed to take on any of your mainstream colleagues (such as those in the "Pigou Club" http://en.wikipedia.org/wiki/Pigou_Club) who support either carbon taxes or cpa and trade approaches.
I understand that you've got a paper in the works addressing Nordhaus, but he's hardly the only one writing specifically on climate change; I hope you will also be looking at Marty Weitzman at Harvard, Richard Tol and a few others noted here:
http://mises.org/Community/blogs/tokyotom/archive/2007/12/16/the-social-cost-of-ignoring-carbon.aspx
http://mises.org/Community/blogs/tokyotom/archive/2007/10/17/reason-congratulations-to-al-gore.aspx
Sincerely,
TT
Published: June 11, 2008 7:08 AM
-GW would, accepting for purposes of the argument that the science is basically right, flood a bunch of areas, worsen weather, and shut down vital earth systems. Duh.
-Since the harms don't kick in until a threshold is reached, a cap prevents that threshold from being reached. Duh.
-This discussion has assumed the science is about right about the harms, and if you are just arguing against the science, your point is irrelevant here. Duh.
Missing the points, again. Proving that GW is occurring is not the same as proving that it's man-made, or even exactly what harms will occur, despite your assertion. If GW is NOT significantly man-made, no cap will prevent it from occurring. This is still no reason to worry unless major harm occurs, but dealing with that would have to take a very different form from carbon taxes or C&T.
Even if GW is significantly caused by humans, the question of what harms will occur, and what level the cap should be to prevent them, or even IF a cap will prevent them, is still very uncertain.
While I can certainly understand the "better safe than sorry" argument, a better assessment of the actual risks and harms involved should be necessary before humans cut off their nose to spite their face.
Published: June 11, 2008 1:19 PM
[I've tried several times to post a comment that hasn't come through, and even my posting of a link to where I've copied my comments on my blog has been held up.
Here are my comments again, with all links stripped - the full post with links can be seen by clicking on my name above:]
"Bob, I thank you for posting your piece from IER, which has stimulated a relatively even-tempered and productive discussion.
But allow me to express a little disappointment. Even as I agree fully with the gist of your post (the largely self-evident and unsurprising point that politicians prefer, as an alternative the more honest, open and politically less-palatable approach of direct Pigouvian taxes of the type supported by a wide range of mainstream economists, to address the concerns of scientists, economists, business leaders and others about man's contribution to ongoing climate change by dressing up such taxes as a "market approach" involving a cap and trade program), I think that:
(1) you unfairly conclude that, since it will be government that will be implicitly pricing carbon emissions, such pricing "won’t reflect genuine economic scarcity" at all, when Austrian approaches do not deny that lack of property rights will result in economic actors ignoring external costs, but simply indicate the government pricing of resources can only imperfectly reflect economic factors;
(2) you've gone to a bit of unjustified rhetorical excess with your statements that:
- "[t]his is no more a “market price” than if the government decided to sell people permits giving them permission to sneeze": rather, it's more like the government trying to price grazing rights, resources extraction rights or other user fees on "public lands"- yes, such prices are not market prices (and are perhaps more likely to be underpriced rather than overpriced), but that does not mean that they do not represent or at all reflect valuable resources.
- "Cap and trade is not a market-based solution" - while not a true market solution, a cap and trade approach is clearly one that makes use of markets.
- "Cap and trade ... can therefore be justly viewed as a tax, stealthy or otherwise, on energy - the lifeblood of our economy" - this not only overbroad, as it would only tax certain types of energy, and overdramatic, it completely ignores the point that certain activities (a wide array not limited to combustion of fossil fuels, including release of other GHGs) are perceived as adversely affecting (now and in the continuing future) many within the country as a result of externalities involving an open-access and unowned and unmanaged commons, which is precisely what expressly motivates (actually or allegedly) so many - including many in your profession - to support Pigouvian approaches;
(3) surprisingly, you failed to take the opportunity to add to the discussion by informing your readers of Austrian concerns, including the following:
- the calculation problem;
- whether, as you note it posting here, there is any reasonable basis to "trust governments around the world to implement the scheme 'properly'" (by exploring problems with rent-seeking and bureaucratic incentives);
- whether it is desirable for the government to presume that it should act as the owner of the atmosphere in creating emissions rights (as opposed to citizens generally or long-standing/homesteading users of fossil fuels), and the related ethical issue of creating rights to emit that cut off those who may be harmed from any direct remedy (such as a share of the proceeds of the sale of rights); and
- the underlying institutional problem of lack of clear or enforceable property rights (for which past interferences by government have some responsibility); and
- whether growing concerns (and private responses) regarding the shared global issue (affecting nations with different circumstances and legal systems than ours) of increasing GHG emissions might be addressed less expensively and more rapidly by voluntary actions and national and international litigation rather than by coordinated action by various governments and implemented by individual nations.
None of these points is easily addressed, but they would help to provide a Austrian framework that may be useful to your readers.
(4) Finally, it is disappointing that you completely failed to take on any of your mainstream colleagues (such as those in the "Pigou Club") who support either carbon taxes or cap and trade approaches.
I understand that you've got a paper in the works addressing Nordhaus, but he's hardly the only one writing specifically on climate change; I hope you will also be looking at Marty Weitzman at Harvard, Richard Tol and a few others noted here."
TT
Published: June 12, 2008 2:59 AM
Just following up on an old thread here: TokyoTom, I have to pass right now on answering your (good) objections. As with Silas, I can't take the time to give you a really good answer, just to post on a blog.
For what it's worth, I do plan on doing a formal response to Weitzman's work on fat tailed uncertainty vis-a-vis climate change. And re: Silas' objections, I might be able to justify using "work hours" to write up something for the QJAE or JLS on a free market response to AGW.
Published: June 30, 2008 2:23 PM
Allow me to note that, in response to my item (1) above:
(1) you unfairly conclude that, since it will be government that will be implicitly pricing carbon emissions, such pricing "won’t reflect genuine economic scarcity" at all, when Austrian approaches do not deny that lack of property rights will result in economic actors ignoring external costs, but simply indicate the government pricing of resources can only imperfectly reflect economic factors;
Bob Murphy has, in comments on his blog, acknowledged his overstatement:
However, in context, my statements could easily be construed as saying that even in principle, the idea of carbon emissions having anything to do with scarcity was crazy. And that is too strong, so my op ed was misleading on this point.
https://www.blogger.com/comment.g?blogID=5776375569387669394&postID=6161240542026291740
Published: November 4, 2008 2:11 AM