"Even if you make an argument about a "global public good" it seems to me you still would need to worry about "demand-revealing" mechanisms, etc. In other words, if you grant many of the strongest arguments to the climate change alarmists, they would still have to worry about (a) identifying what the correct policy response would be, and (b) figuring out how to implement such a policy in a cost effective manner."This sounded on-target in many ways, but had an odd flavor of assuming his own conclusions insofar as he did not apply the same concerns to his own position. First, of course interventionists have a demand revelation problem. The idea is to make carbon users bear the full cost of carbon, but the question is "what is that cost?". Where do we set a carbon tax? It's a big problem and there's no easy way to solve it.
But the thing is, the only reason why anyone is proposing a carbon tax in the first place is precisely because we are saying that there is a "demand revelation" problem in the market. There is an externality - people are using carbon without bearing all the costs of that use, and people are bearing costs of the use of carbon without compensation. There is no market for "comfortable climate" where people can trade-off costs and benefits, so those costs and benefits are externalized from the market transaction for carbon. The market has no way to reveal demand, in other words. So we say "well, it's not like we're not aware of the consequences as a society, so let's put a Pigovian tax on carbon that at least improves (albeit probably doesn't solve) the problem".
Demand revelation problems don't just go away, as I said. You still have to price carbon. But if you "grant many of the strongest arguments", as Boettke claims he does, presumably you're granting the argument that the market has a serious demand revelation problem in this case. That's the heart of the public goods/externalities argument, after all, so it would be hard to "grant many of the strongest arguments" without granting that argument. And if the market does have a demand revelation problem, then there's no reason to highlight the demand revelation problems of a government solution. Democratic government is not a perfect solution, but it has one major advantage when it comes to dealing with problems of externalized costs and benefits where there are no property rights, namely that people without property rights do have voting rights. Not a perfect solution, obviously - but if we assume the existence of externalities, it seems to me it's probably the better solution.
This all gets back to my old point that too often we talk past each other because we confuse "calculation problems" with "incentive problems". I have no disagreement at all with Boettke on the "calculation problem" facet of this issue. My disagreement comes in with the "incentive problem".
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"There is no market for "comfortable climate" where people can trade-off costs and benefits, so those costs and benefits are externalized from the market transaction for carbon.'
ReplyDeleteSure there is. The issue for some is whether that market emerges in time save us all from DISASTER! Run for the hills Martha! In other words, if and when these nightmare scenarios reveal themselves, will the market respond to them? Surely it will. But then it will be TOO LATE! DOOM! DOOM!
"Democratic government is not a perfect solution, but it has one major advantage when it comes to dealing with problems of externalized costs and benefits where there are no property rights, namely that people without property rights do have voting rights."
But does voting really matter when it comes to the passage of something like this? I'd say it is at best hard to make that argument.
Xenophon - if you want to respond to someone that takes that sort of view of these things, go visit Daily Kos or something like that.
ReplyDeleteRE: "But does voting really matter when it comes to the passage of something like this? I'd say it is at best hard to make that argument."
Directly, perhaps not. I should say the democratic representation does even if the ballot box alone does not. Remember, the ballot bax is just a proceedural tool to help guarantee the more important institutional factor: democratic representation. "Voting rights" alone was probably not the best thing for me to cite, but it offered a nice juxtaposition with "property rights".
Daniel,
ReplyDeleteI didn't attribute that opinion to you. I do think that there is a market in a "comfortable environment" though. Air conditioning in homes and cars is an example of that (as are shotgun houses).
"Remember, the ballot bax is just a proceedural tool to help guarantee the more important institutional factor: democratic representation."
Well, if it were something that brought about some results it would mean that no cap n' trade, etc. ever came into being. Most Americans don't want to have their energy consumption taxed. Cap n' trade, etc. are all anti-democratic proposals.
:) that's why I said "if"
ReplyDeleteI'm not sure how the market for AC is a market for a certain temperature. What it is is a market for a technology, the demand for which is informed by our temperature preferences. But there is no market where the costs and benefits of global climate can be traded off precisely because something that is collectively experienced - ie, the climate - defies designation as property.
RE: "Most Americans don't want to have their energy consumption taxed"
And most Americans don't want to do nothing and let the temperature increase too. "Most Americans" are funny like that. It's part of the problem with situations where property rights are weak or non-existent and costs and benefits are far off into the future - "most people" have the luxury of holding conflicting views.
We're not really that concerned with a certain temperature ... what we're concerned with are the supposed ill-effects of a particular temperature. And there are plenty of reasons to think that those ill-effects will be directly addressed by the market.
ReplyDelete"And most Americans don't want to do nothing and let the temperature increase too."
Well, I have no problem with this ... Anyway, you can't really be talking about democracy or voting rights then. What you're really talking about is the expert opinion you place a lot of weight in.
@ Xenephon
ReplyDelete"And there are plenty of reasons to think that those ill-effects will be directly addressed by the market."
The market is excellent at allocating goods in instances of physical scarcity. Dramatically less so when physical scarcity is not the binding constraint. The issue here is the potentially massive externality - an inter-temporal one at that - of climate change (and by association C02 emissions), which is (are) not captured by conventional market processes. The exact point of trying to establishing a carbon price is to address this shortcoming.