Alleged and real economists

Scott Wickstein weighs in the economics of Kyoto, and on who is and isn’t an economist, demonstrating once again that he isn’t one. Scott’s argument is that signing Kyoto would kill the gas export deal to China, costing the economy the $25 billion in sale proceeds. Assuming the claim that the deal would be killed is right (it’s drawing a long bow to put it mildly), let’s look at the economics. The economic value of the deal is not the $25 billion sale price but the difference between this price and the value of the gas in its next-best use. It could, for example, be used in gas-fired power stations, displacing coal and therefore reducing our net emissions of carbon. Given that gas is a commodity, it’s rare for the price to vary more than 10 per cent or so from one potential buyer to the next. So the net benefit of the deal might be $2.5 billion over the life of the contract – it certainly isn’t $25 billion. Of course, given the high political profile of this deal, there’s every prospect that we haven’t in fact got the best possible price, and that we are worse, not better off.
Scott also objects to my ‘gratuitous swipe’ at the self-styled ‘Anti-Idiotarian Rottweiler’, whose entire blog, starting with the title, consists of gratuitous abuse. This is another instance of a point I’m increasingly noticing – the right can dish it out, but they can’t take it.