Recently, the New York Times has published pieces by economists arguing that the costs of limiting climate change may be much lower than people have feared.
The Cornell economist Robert Frank has made a series of arguments in favor of vigorous action in responding to climate change. Some of them are more persuasive than are others.
First, the same people who argue that climate change isn’t certain also go to the dentist once a year. Why? Because fillings are cheaper than root canals. The same reasoning goes for the uncertain effects of an uncertain degree of climate change.
Second, the same people who want to protect capitalism from excessive regulation ignore that the market works really well. Raise the costs of pollution to producers and consumers and they will find lower-cost alternatives. Carbon taxes and cap-and-trade policies can cut pollution without pushing up over-all prices.
Third, we restrict the right of individuals to exercise their “individual liberty” when it would harm others. Same thing goes for discharging greenhouse gases.
Some of his arguments seem to come from cloud-cuckoo-land.
First, capitalism is “creative destruction.” If carbon-based industries get destroyed by prices that reflect their real costs to the environment, then investors will plow money into alternatives. What Frank fails to understand is what Catherine the Great tried to explain to Denis Diderot: “You write your reforms on paper; I must write them in human flesh.” Coal miners don’t easily convert to barristas. Look at what happened to British coal miners after the Thatcher government decided to close many inefficient coal mines. Boozing away their dole in the local.
Similarly, there are only a relatively small number of convicted felons or people discharged from mental asylums who want to obtain a permit to carry a concealed weapon, but lots of people drive cars. It is easy to restrict the rights of the former, but it will be hard to restrict the rights of the latter.
Second, what you lose on the swings you make up on the merry-go-round. That is, high taxes on pollutants would generate huge revenues that would allow other taxes to fall. What Frank fails to notice is that American taxation is highly progressive. The top one percent on tax-payers provide over a third of all income tax revenue, while the bottom fifty percent pay less than five percent. Raising gas taxes, for example, would penalize the vast majority of Americans while off-setting tax cuts would benefit the “one percent.” Good luck getting that through Congress.
However, the proponents of the carbon tax increase + other taxes decrease frankly acknowledge that the two have to run together to keep the tax effect neutral. If the carbon tax is increased without an offsetting reduction in other taxes, then it really is a significant additional cost for the economy.
Third, American leadership would give us the moral high-ground, while the threat of tariffs could be used to lever the Chinese and the Indians into following our lead. I suppose we could ask Vladimir Putin what he thinks of America’s moral high ground—and of economic sanctions.
In short, there are some interesting ideas on offer. However, the political bugs haven’t yet been worked out of the system.
Robert Frank, “Shattering Myths to Help the Climate,” New York Times, 3 August 2014.
Eduardo Porter, “The Benefits of Easing Climate Change,” NYT, September 2014.