I had a set-to with Jonathan Adler of Volokh about DDT recently, so I was pleased to note this piece on free-market environmentalism and climate change, which makes a number of points I’d been thinking about following debates over at the Australian Libertarian blog. Rather than recapitulate Adler’s post, I’ll make a number of points of my own regarding the response of (most, though not all) libertarians to climate change, which I think are in the same spirit:
* First, I’m a bit surprised to find libertarians mostly on the wrong side of this debate. Global climate change is one of the few instances where lots of environmentalists (not all, by any means) are supporting a property-rights based solution (tradeable emissions permits), despite starting from a position (in the leadup to Kyoto) of almost uniform opposition to anything that didn’t rely primarily on direct and detailed regulation. it seems as if the ideological opponents are upset because the government-created nature of the property rights in question will be self-evident, rather than obscured by a century or two of history.
* I’m struck by the reliance of most libertarian critics, such as Indur Goklany, who debates Adler here, on consequentialist benefit-cost arguments in favor of climate inaction. As Adler says, it seems odd to find libertarians saying that it’s OK, for example, to completely wipe out the property of Pacific Island nations, on the basis that there will be a net social benefit for the world as a whole from doing so.
* If emission permit trading is rejected on ideological grounds (I can’t exactly figure out what these are, but I’m not well equipped to arbitrate on ideological disputes among libertarians) it doesn’t seem as if any the other solutions commonly proposed by the FME camp are applicable. Take for example the Coasian favorite of tort action. For a global congestion problem, this would require everyone in the world to sue everyone else, presumably in some newly created world court (Goklany disputes this, saying, in effect “let he who is without sin cast the first stone”, a principle that renders any sort of response to pollution impossible)
* This has led lots of libertarians, and others on the right, to write as if the mainstream scientific view on global warming renders libertarianism untenable, or, more succinctly[1] “global warming equals socialism”. If only it were so easy! Even it the scientific evidence weren’t overwhelming, it’s surely a big problem for a political viewpoint if its viability depends upon assumptions about cloud feedbacks. As I’ve said, I don’t think any such concession is necessary. A successful response to global warming is vitally important, but it doesn’t imply (or, I should note, preclude) radical changes to the existing social order.
fn1. This is from a conservative, not a libertarian, but the same sentiment is evident among many libertarians.
John Quiggin 
Paulidan:
Try this (preview didn’t work the first time):
Paulidan:
i.e. weather forecasts for years ahead
of climate
No, it just means predictions of climate will never forecast weather, just climate. Do you understand the difference between weather and climate? People like Paulidan complain that climate models don’t predict the weather. All they’re doing is setting up a strawman.
re: #50 TerjeP
See Skeptical Science, Models are Unreliable, #5.
Unlike many economic models, climate models are constrained by well-established laws of physics. If you automatically distrust complex computer-based physics models, you should avoid modern cars and airplanes since they are all designed with such models.
In any case, nobody needs computer models to understand that it’s going to get warmer. Basic physics is quite adequate. At least read 18-page IPCC AR4 SPM, which is not very technical, and if you want to learn more, go to START HERE at RealClimate.
Real skepticism, in the classical sense, requires that a person become educated enough in a problem domain to have a meaningful opinion. It’s not that hard to get educated in the basics, if one reads science-based sources. While an overwhelming consensus among real scientists is no guarantee, it’s usually the best current approximation to reality.
On this one topic in particular, many libertarians seem to reject/doubt the science, which hints that the underlying reason has nothing to do whatsoever with science.
Cars are road tested. In any case I think models of the human body are a more useful metaphor. With the human body we can road test our models across thousands of case studies. With climate modelling we have no such readily available feedback system.
p.s. The honey bee is also constrained by the laws of physics however it is only recently that we figured out how the heck they fly.
Sorry to labour the point but the key ingredent in science is in my view it’s use of feedback. A hypothesis (model) is proposed. The model is tested against known knowledge. However more importantly it is tested against the real world. If the predictions made by the model stand the test of time then and only then the model might be said to be a reliable representation of reality.
I accept that in the case of climate change given the time frames involved there may be a case for taking action even without a proven model. However I don’t need to give up my skepticism to accept action. And as outlined already I have already advocated support for a broadening of the fuel tax on the basis of CO2e emmissions.
TerjeP:
a) Have you read the references I mentioned?
b) What you describe is exactly what they’ve been doing for decades. You seem to assume that they don’t do that, i.e., that they are really stupid fools who are poor scientists?
Do you get that impression from discussing such issues with them? Who have you talked to who does climate simulations?
c) Some models either give correct results or not [such as logic simulators in chip design, or protein folding models], and if not, they are useless.
d) But other models, whether by computers or just math, give approximations. The standard example is Newton versus Einstein. The former is plenty good enough on Earth until you’re doing GPS satellites or particle accelerators.
Simulations (as of autos, cars, and climate) are like that: they yield approximate results bounded by uncertainty ranges. As new data arrives, as models improve, as computers improve, the models get better, and uncertainty ranges narrow.
Car designers routinely now do way more crashes via computer than in real life, which wasn’t true 20 years ago. The models are now *good enough* for many design decisions.
Climate models are already good enough for many decisions. They’ll get better …
BUT, all this is a red herring anyway. The basic ideas of AGW are just simple physics, much of which has been known for 50-100 years, and then confirmed and refined by increasing data collection. One doesn’t need computer models to know there’s a problem.
But, the real question, since this thread is about libertarians and global warming, is why *this* topic excites such disbelief amongst libertarians, because it goes beyond normal scientific skepticism.
Where do your views come from? What journals, books, articles, websites, authors do you cosndier credible?
Do you attend lectures by climate scientists and ask questions? [That’s not possible everywhere, but many metropolitan areas and others at least have a good research university where there are occasional public lectures on the topic. Some offer outreach lectures.]
Sorry to labour the point but the key ingredent in science is in my view it’s use of feedback. A hypothesis (model) is proposed. The model is tested against known knowledge. However more importantly it is tested against the real world. If the predictions made by the model stand the test of time then and only then the model might be said to be a reliable representation of reality.
An important point to note is that the AGW theory was proposed, not on the 17th June 2008, but rather a full century earlier.
Quiggin:
1. Europe’s emission trading system has fallen apart. It is commendable that environmentalists are seeking property rights solutions. However, doesn’t the general argument that tariffs are better than subsidies for welfare apply here as well:
2. RSPAS academics from ANU reckon the Pacific Islanders are better off coming to Australia rather than staying there, even if AGW didn’t exist (because they are better off getting welfare from us here than over there. So your point is moot…I think you’ll have to take up the rest of the argument with them. I am not a person who says that AGW is bunk. I do question your idea that the islands will be wiped out or that they won’t be able to build a levee in 100 years time except for making a highly regressive 1% global GDP sacrifice right now.
3. It is strange you are proposing a property rights solution while at the same time questioning how we identify costs and benefits. That is the advantage of a tax that is compensated with welfare upping and tax cuts to income and consumption taxes. Tradeable permits can never work as well without prohibitive enforcement and information costs. Like I said, Europe’s broke down because everyone cheated. A global trading system will be less workable than the Doha round of trade negotiations. Note below I have made a simpler proposal paid out of general revenue through costs savings of eliminating industry policy that encourages carbon emissions (which is cheaper than “cheap” carbon taxes). Like I said, please make your own estimates if you think mine are unreliable.
4. Environmentalism doesn’t necessarily equal socialism. But war doesn’t necessarily equate to a loss of civil liberties and a lot of wasted resources. But typically, both will lead to those poor outcomes.
As to the comments, I wonder if you guys need me to buy you each a dictionary.
“wilful Says:
June 15th, 2008 at 3:49 pm
Of course Libertarians who read this blog will rightly state that there is no official orthodoxy on the matter of climate change from the Great Libertarian Oversight Council. But yeah, it seems beyond odd to me that there is a common view among libertarians to deny the impacts of climate change and to fail propose sensible, workable mitigation measures.”
This is obviously well intentioned but you are incorrect. There is nothing wrong with scepticism – warming exists but to say you know you are exactly certain about the degree that humans are warming the globe is premature. Wait for the CLOUD experiments at CERN in 2010. The only problem with workable mitigation schemes is that none has passed a rigorous CBA. Stern’s modelling of the discount rate is utterly flawed. The 100 year elasticity of income? Let me give you a hint. It will be extraordinarily elastic.
“Lord Sir Alexander “Dolly” Downer Says:
June 15th, 2008 at 6:04 pm
I think “libertarianâ€? is just a pompous (self-)label for right of centre. Many go strangely quiet on things like drug-taking, abortion etc.”
Incorrect, Sir. Simply read the comments on the ALS blog, catallaxy or LDP policy. Don’t you dare call me a conservative again!
“carbonsink Says:
June 15th, 2008 at 6:11 pm
Where’s Terje?!
As a generalisation many on the right support higher consumption taxes in return for lower income taxes, but at the same time oppose so-called ‘green taxes’.
Well hello? What is a carbon tax if not a consumption tax by another name?”
I think you are being wilfully ignorant.
Here is a proposal for a carbon tax libertarians support:
Click to access pm80.pdf
I have an even simpler proposal: just plant trees. Given the survival rate of seedlings, commercial planting costs but assuming you don’t need to pay for land, and the average carbon consumed by a tree over it’s lifetime, we would need to spend 500 million and if you need to pay for the land, up to 1.5 billion per year to mitigate. Please revise my figures if you think they are incorrect but I believe I have prices correct. Tree planting has synergies with tackling salinity and erosion and so there would be private and community interests in doing the planting. Also note we have enough arable (even though the trees don’t need it) land for this to work, even for a very long time.
That would cost up to 1.5 bln per year, but a carbon tax pricing carbon @ $20 per tonne would cost at least $8 bln per year. Tree planting could be funded simply out of savings by eliminating industry policy and subsidies which contribute to carbon emissions. You could even abolish excise tax and still be carbon neutral.
As long as you can pay for the tree planting by budget savings you can have tax cuts or be revenue neutral. My figures can be out a magnitude of 5.333 times before we are indifferent to “cheap” carbon pricing.
Interestingly enough, the UN has recently tried to ban hematite (iron) seeding, a potentially cheap solution to AGW and the degradation of marine ecosystems. This also had aquacultural applications. Importantly, the UN has seemed to go against the precautionary principle in doing so, and the amount of seeding that occurs would be dwarfed by natural systems.
“Ken Miles Says:
June 16th, 2008 at 11:19 am
Empirically validated by current cooling?
Dude, you’re mistaking noise (or more specifically, internal variation) for cooling.”
does not reconcile with
“Ken Miles Says:
June 16th, 2008 at 11:38 am
The “noise� was just discovered in May by the German researchers.
Citation please.”
Ken, you’re good at what you do but you are showing a clear bias here: AGW doesn’t need citations but scepticism does.
“wilful Says:
June 16th, 2008 at 11:19 am
Well I say that is absolute bollocks. We have a far cleaner environment than only thirty years ago, and that is entirely due to government regulation, education and other action. If we’d relied on the wondrous private sector, there would be tens of thousands more ‘externalities’ dying every year.”
I don’t know why you’d say that. The cleanest rivers are the privately owned ones in the UK. The dirtiest is the Ganges and the worst polluted area in the world was the corner between the USSR, Poland and Czechoslovakia.
Property rights matter. A lack of property rights contributes to deforestation in South America and effectively causes emissions to be a problem where they otherwise may be mitigated by the forests.
“wilful Says:
June 16th, 2008 at 5:07 pm
Yep, read it, it doesn’t help. Private industry has been dragged kicking and screaming to clean up their act over the last 40 years (since around about the invention of EPAs). They have opposed at every turn the actions that governments have taken to fix problems they created.”
Wilful,
Are you aware to the extent that the Government has encouraged environmentally damaging policies, vis a vis corporate welfare. Take aluminium smelting for example. It receives (coal fired) electricity subsidies. Not a way to drag industry kicking and screaming to corporate social responsibility, is it?
If people read the Goklany paper JQ links to above, they will find that Goklany proposes numerous solutions that bear no resemblance to “inaction”. It’s not inaction to ask for more coherence in climate change policy before jumping into carbon taxes or carbon trading. On the one hand, we have a Department of Climate Change and on the other we have a Department of Industry that shovels billions of dollars in subsidies to fossil fuels.
If this is the sort of coherence that comes from a Rudd Government dedicated to mitigating climate change, one can only shudder at the incoherence being dreamt up by people like Ross Garnaut. Not only will it be impossible to get rid of bad policy due to special interests capturing the regulators, it will lead to a whole lot of extra bureaucracy when there are small government solutions to climate change – like removing barriers to the development of alternative energies (e.g. nuclear).
“The cleanest rivers are the privately owned ones in the UK. The dirtiest is the Ganges…”
I didn’t know that privately owned rivers of the size of the Ganges fit into the non-built-up area of the UK.
I didn’t know that even one Ganges river (including its contributories – can’t cut them off without creating something other than the Ganges)fits into the UK.
As a sceptic, I would say either all published representations of the geographical realities are wrong, or Mark Hills theory needs refinement, or Mark Hills wants to change the real world to fit his theory. In the case of the latter, how much would that cost?
“Ken, you’re good at what you do but you are showing a clear bias here: AGW doesn’t need citations but scepticism does.”
Bias, eh? A well-established scientific consensus is challenged by what may be sheer invention – eg “A team of Patagonian researchers conclusively established in September 2006 that the Earth is in fact flat, and supported on the back of a giant toad called Edmund”. I suppose I’d need to cite Copernicus and Keppler’s original papers (in Latin) to remain in the argument on your rules. Or maybe not.
Ken, you’re good at what you do but you are showing a clear bias here: AGW doesn’t need citations but scepticism does.
Sorry Mark, but the bias is all in your head. I asked for a citation because I was not aware of any German research published in May which supported the claims that Paulidan was making. As it turns out, I was (probably – Paulidan seems to have taken off so isn’t correcting the record) right – there is no such research. Paulidan simply badly misinterpreted a study which provides absolutely zero support for his claims.
I would appreciate it if you could find a post of mine which suggests anything close to: “AGW doesn’t need citations but scepticism does”.
Mark, if you’re after citations on AGW, can I suggest the IPCC reports, which have (literally) thousands on all aspects of the problem. If you follow the citation lists of these papers, you’ll have tens of thousands. The problem is to read even a tiny fraction of them, which is why the IPCC reports (only a few thousand pages) are so useful.
By contrast, I think I can safely claim to have read all the main sceptic papers tha have been published in reputable scientific journals (and quite a few in non-reputable journals). That’s a job that can be completed in a weekend, though in retrospect it would be a wasted weekend.
What is your argument? If it is large in size you cannot allocate private property rights to it?
This is about the worst rationalisation for the common pool problem I have seen. It is almost aplogetic towards the pollution the Ganges sees.
There is no realtionship between this argument and air pollution. Size is not the same as indivisibility.
I don’t know why you’d say that. The cleanest rivers are the privately owned ones in the UK. The dirtiest is the Ganges and the worst polluted area in the world was the corner between the USSR, Poland and Czechoslovakia.
At the risk of showing my bias again, is there a good study which quantitatively examines this while correcting for attributes like proximity to people and industry?
Hal9000 – you are being facetious. You are also basically accusing people who question the consensus as being liars. No one ever claimed something as proposterous as you say. I misjudged Ken’s motivation (I do ask for citations out of interest sometimes too).
John, I never asked for citations this time around. I wish people would stop attacking strawmen. I’ve given people a few links so they can educate themselves.
If global warming is a problem, we don’t need to do anything too drastic. Libertarians argue that action is justified, a compensatory cut in other taxes and upping welfare is justified too.
However, the alleged view told by some commentators was a nightmare of their own creation. John Q wants to know what the libertarian policy would be and it is in the CIS paper written by John H.
“At the risk of showing my bias again, is there a good study which quantitatively examines this while correcting for attributes like proximity to people and industry?”
No. Property rights still matter.
Property rights enforce polluter pays without any extra regulation. That is what a emissions trading scheme tries to do. (But I favour a tax with comepensatory cuts to income and consumption taxes). Like I pointed out as well, the scope for Governments forcing polluters to change their ways is limited by Government industry policy encouraging bad behaviour.
While the rivers in the UK may be tucked away from industry, the forests of the Amazon are free to be looted because no one has recognised title over them.
“Hal9000 – you are being facetious.” Yeah guv, I dunnit. You got me bang to rights.
“You are also basically accusing people who question the consensus as being liars.” No I wasn’t. However on climate, as with evolution and smoking, many of them are. When you lie down with dogs, as an unlamented late former Queensland premier used to say, you get up with fleas.
“Europe’s emission trading system has fallen apart.”
No it hasn’t.
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/06/1650&format=HTML&aged=0&language=EN&guiLanguage=en
Emissions for 2005 where around 5% BELOW the cap.
http://en.wikipedia.org/wiki/European_Union_Emission_Trading_Scheme#cite_note-27
“Europe’s emission trading system has fallen apart.”
No it hasn’t.
Emissions for 2005 were 5% below the cap.
http://en.wikipedia.org/wiki/European_Union_Emission_Trading_Scheme#Overall_emission_reductions
New lower caps for 2008-2012 have been adopted.
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/06/1650&format=HTML&aged=0&language=EN&guiLanguage=en
Repeating nonsense from, far-right propaganda does nothing for your credibility.
Test
“There is no realtionship between this argument and air pollution.
If so, what is the point of writing: “The cleanest rivers are the privately owned ones in the UK. The dirtiest is the Ganges…â€? under the heading ‘global warming’?
“Size is not the same as indivisibility.”
True. However, it was not I who choose ‘river’ as the unit of analysis instead of water.
“This is about the worst rationalisation for the common pool problem I have seen. It is almost aplogetic towards the pollution the Ganges sees.”
Nothing I wrote has anything to do with “this” in the above sentence.
“What is your argument?”
This is exactly the question I asked myself when I read “The cleanest rivers are the privately owned ones in the UK. The dirtiest is the Ganges…â€?
“If it is large in size you cannot allocate private property rights to it?
This question is too vague for me to deal with.
Hal – I don’t think CERN are liars. Do you?
http://public.web.cern.ch/public/en/Research/CLOUD-en.html
While I doubt they will disprove Arrhenius, the degree of forcing is what should be examined.
The point was Ernestine, that along with the toll of industry policy, wilful was wrong to assert that more regulation is what cleaned up the environment.
It is not the size of the Ganges which makes it polluted. There are no clear property rights. Ditto for deforestation globally.
Applying property rights to the air is tricky. Not because of the size of the atmosphere, but because of divisibility. Emissions trading attempts to overcome this but an income tax/welfare compensated consumption tax is better due to compliance and rent seeking problems.
Ian Gould has some interesting points about cap & trade versus carbon tax over at deltoid, here: http://scienceblogs.com/deltoid/2008/05/open_thread_7.php#comment-911885
I am tempted to think that his conclusion that carbon taxes favour high polluters over low polluters relative to cap&trade may explain the sudden enthusiasm of the CIS for a carbon tax.
Mark: the level of atmospheric forcing of CO2 is well understood; the alleged link between cosmic rays and cloud cover has so far not been found by any other researchers other than the Danes who invented it, though since they are serious scientists, it is worth testing of course.
Something tells me that if we were (for some reason) to put greenhouse mitigation on hold until 2010 as you appear to want, and then that research didn’t support the conclusion you would like it to have, you would then ask us to wait for some new set of experiments, or the next sunspot cycle, or something, in 2015. And so on.
“Something tells me that if we were (for some reason) to put greenhouse mitigation on hold until 2010 as you appear to want, and then that research didn’t support the conclusion you would like it to have, you would then ask us to wait for some new set of experiments, or the next sunspot cycle, or something, in 2015. And so on.”
Don’t put words into my mouth. I don’t need to question the science to question mitigation (nor would I). I question blinkered economic analysis such as the Stern report which discounts the mitigation project lower than inflation.
If your discount rate is lower than the inflation rate, just what are you discounting? Ask your accountant if you don’t know.
Don’t worry, mitigation will never happen with cap and trade anyway. If the EU can’t get it to work, how would it work globally?
“I question blinkered economic analysis such as the Stern report which discounts the mitigation project lower than inflation.”
Discount rates are always stated in real after-inflation terms.
If you aren’t aware of that you probably aren’t the best person to be critiquing the work of one of the world’s leading economists.
Oh and despite what you may have heard the EU is “getting it to work”.
It should also be pointed out that there is huge confusion regarding the discount rate used by Stern.
Stern quotes a “pure time preference” of 0.1%, people including many who should know better equated this with the discount rate.
If fact, as I eventually established after exchanging e0mails with the person who actually ran the econometrics model used in the Stern Review, the model in question derives the discount rate from a range of factors including income levels and rates of return from factor markets and as a result in long-term modelling runs the discount rate varies over time.
The published results used in the Stern Review represent the average of around 1,000 modelling runs with initial inputs varying randomly within set ranges and exogenous shocks ot the system added at random intervals.
As such and because of the iterative nature of the system for calculating the discount rate over time within each run, there is not a single discount rate applied continuously in the Stern Review.
The average discount rate applied (from memory) was between 3 and 4% per annum.
Well actually, I do know how Stern came to those figures, and it is completely unclear as to how his figure of 1.4% (but it appears he actually used 2-3% in his calculations) captures inflation or is a real discount rate. How does the elasticity of income over 100 years caputre inflation? So what, elt’s say if he measured the elasticity of real income? The result does not mean the nominal figure is closer to 4.4-6.4%, where you would use inflation adjusted benefits streams instead.
Discount rates are not always stated in real terms. Similarly, the risk of a project is not always measured by a risk premia.
This doesn’t even get to the conceptual issue of not using the market cost of capital.
The EU system has been cheated on by all 25 participating nations. They issued too many permits. It is an implicit backing of a tariff as opposed to a quota system.
I am not a Professor of Economics but I do know what I am talking about. BTW Stern said Thatcher’s rationalism would lead to a recession. He was wrong. I wouldn’t have predicted what he did.
I agree that indivisibility of the atmosphere is a problem for ‘property rights’ – but this applies to the eco-system, too (the watershed area of the Ganges is about 1 million square km).
Yes, ‘cap and trade’ (emissions trading) attempts to ‘overcome this’ (ie respect the notion of private property as much as possible and hope there is something positive coming from the profit motive). This is what I had in mind, Mark, when I said your theory may require refinements.
“Emissions trading attempts to overcome this but an income tax/welfare compensated consumption tax is better due to compliance and rent seeking problems.”
Well, the little discussion seems to have been useful after all because the foregoing sentence has narrowed down the issue considerably.
If I may allow myself a few small points,
1. Compliance costs may differ a lot between countries due to uneven development of public sector services (natural science and administrative skills and tradition).
2. If rent seeking is a problem (and I am not saying it is not) then a wealth tax may be appropriate to limit the divergence of the wealth distribution, which seems to me to be a prerequisite for promoting property rights (there is little point in promoting ‘property rights’ if a possible outcome is that the Ganges (watershed area) is owned by 1 person and everybody else starves.)
I never said Stern used 0.1%. It was part of his calculation in building a discount rate.
3-4% for a discount rate is very lean. What are global forecasts for inflation?
Let’s say that is the real discount rate. It wouldn’t cover the cost of capital.
This would obviously overestimate the benefits of a mitigation scheme when firms don’t need to pay the cost of capital to change their technology or capital base.
Ernestine,
NSW is almost that size. Property rights are no problem here, where they are applied. People don’t throw their junk over neighbours fences.
Rent seeking occurs independent of wealth. There are few if any people starving where property rights exist. Nor are their resources being plundered in an unsustainable way.
Again Mark, the models operate in constant dollars. Inflation is calculated because it affects economic behaviour but the 3-4% is the discount rate in constant inflation adjusted dollars.
So if we assume an average inflation rate also of 3-4% we’re talking about a nominal discount rate of 6-8%.
Current prime business rates in Australia are around 7-8% based on a very unscientific study I just undertook of Esanda and Macquarie bank deposit rates.
Inflation is currently around 3%, so the real cost of capital in Australia currently is around 4-5%.
“I am not a Professor of Economics but I do know what I am talking about. BTW Stern said Thatcher’s rationalism would lead to a recession. He was wrong. I wouldn’t have predicted what he did.”
Well obviously we shoudl only take economic advice from people who’ve never been wrong ever about anything.
BTW, what’s the source for the Thatcher/Stern claim? My first inclination is to suspect the rather loopy Viscount Monckton (climate skeptic and one-tiem science adviser to Thatcher).
“The EU system has been cheated on by all 25 participating nations.”
Not according to the EU.
Click to access is20061127.pdf
The second phase of the EU scheme (which isn;t really an EU scheme since several non-EU states have joined the second phase)has been announced.
Emissions will be cut by a further 7% over the next five years.
http://europa.eu/rapid/pressReleasesAction.do?reference=IP/06/1650&format=HTML&aged=0&language=EN&guiLanguage=en
Mark,
Well, apparently the conversation has not been successful in narrowing down the issues.
True, NSW is almost “that sizeâ€? (of the Ganges watershed), about 80%. But it hasn’t got the equivalent of 80% of the Ganges-eco-system. How many ‘private rivers’ are there in NSW? Ask Prof Quiggin about the water allocation problems in the Murray-Darling area and the ‘property rights’ squabbles between the States and property interests.
True, residents in NSW have ‘some’ property rights but these don’t solve the air and noise pollution problems created by over-flying aircraft in Sydney and elsewhere. The noise pollution penetrates even ‘private real estate’ in a measurable way (vibration of floor boards). In some parts of NSW the private properties are so large (area) that I should think it would be a major effort for people to go to the boundary fence for no other reason than to throw their junk over the fence.
“Rent seeking occurs independent of wealth”. Please explain (if a person doesn’t own anything, it seems to me seeking rent on {0} is a hopeless endeavour). Rent seeking is a means to accumulate wealth. (Why do you worry about rent seeking?)
I’d say there are few, if any, people starving in those societies which have a socio-economic system that does not confuse the philosophy underlying economic theoretical models of a ‘market economy’ with ‘capitalism’.
I find the idea of evaluating alternative policy measures to reduce CO2 emissions by means of a net present value calculation quite puzzling.
Firstly, the ‘project’ is the whole world. I am not sure that even the most self-confident corporate CEO would be prepared to look at the problem that way.
Second, the use of a discount rate, estimated on financial market rates of returns makes, the analysis dependent on an institutional arrangement (financial markets) that is under great stress, more or less regularly.
Third, the NPV decision rule is: Choose that project which has the highest non-negative NPV. Who would own the positive NPV?
The whole approach is back-to-front. In theoretical models of economies that take their philosophical origin in Adam Smith, financial markets are to serve the productive and consumptive activities of humans. Chosing an environmental policy on the basis of the greatest NPV, using financial market rates, makes humanity the servant of financial markets, which ultimately deal with abstract objects, called real numbers.
Things may have changed but I actually think it is worse than that. In Brazil the government claims title in most of the Amazon forest. At the forest fringes it provides private land title to those that clear the land. So in essence it is prepared to give clear recognised private title over the forest, but only if the forest is removed first. In other words the government pays people to remove forest cover. This is not dissimilar to the land clearing bounty that used to be paid by Australian governments. It is economicly stupid policy and also econologically destructive.
http://www.mongabay.com/brazil.html
The full artile is worth a skim. It also suggests that the tax system favours pasture lands over other forms of land use. Clearly forestry would offer a better ecological dividend than pasture and it seems silly to tilt the tax system in favour of the former.
p.s. I should have said “latter” not “former”.
Stern was one of the 364 economists that wrote to the Times criticising Thatcher’s economic policy.
Was he in favour of the near 90% tax rate on investment income that Thatcher abolished?
The letter was criticising was Thatcher’s plan to *raise* 4 taxes by 2% of GDP during a recession. There was nothing in in about pro-market reform in general.
Mark Hill, who invented property rights for sulphur emissions in the USA? Who is trying to create workable property rights for carbon emissions? Not big business, that’s for sure.
I find it quite absurd that you are suggesting that the reason our current environment (in the first world) is so much cleaner and safer these days is because of those nice businesses. It’s a matter of the historical record that very many regulations were heavily opposed at the time.
It is in the nature of unfettered capitalism to be against change, risk averse and hate innovation. They’re often their own worst enemy. Governments have pressed industries to clean up their acts, which has allowed creativity to be unleashed, creating new opportunities.
Part of the solution is certainly allocating property rights, however this cannot be the only answer, there are too many public goods that need protecting.
Examples of where government have failed to adequately regulate (such as in the Ganges) hardly disprove my point. Governments can be corrupted by business, I’m sure you’re aware. It is a failure of governance that means the Ganges is so polluted. These privately owned rivers, tell me how many extractive industries they have on their banks, how many people live in their catchments?
What a lot of folks don’t realize is that by simply opening the energy market in the right way, we could vastly reduce power costs and greenhouse pollution at the same time. I’m associated with Recycled Energy Development, which produces power through a highly efficient process called combined heat & power — low emissions, low cost. Only problem is that regulations protect monopoly utilities’ profits. Efficient options — market-based options — have a tough time emerging. Loosen the restrictions, and you’ll see a lot less global warming pollution.
miggs, I think it’s pretty indisputable that governments have controlled, subsidized and heavily supported the fossil fuel industry for a long time. But I’m less willing to accept that were they to simply pull out and take no part in the energy industry that things would automatically move back towards a less fossil-fuel-intensive balance of energy supply quickly enough to achieve the sort of emissions reductions needed. If government played a big role in creating the problem, it has something of a responsibility to help fix it too. Given that the external costs of fossil fuel usage are now far better known, and there are some realistic options to take its place, governments should now be able to enact more sensible policy than they have in the past.
a simpler way of putting it miggs – you say “regulations protect monopoly utilities’ profits” and that may be true, but equally, regulations break up monopolies. (Good) Governments are more inclined to breaking up monopolies than capitalists are.
When you say capitalists do you mean those people that believe and advocate for capitalism or do you mean people who own a lot of capital? The term is routinely applied to both groups but they are not the same.
re: #95 Miggs
Yes, CHP is important, and if OZ is like the US, indeed, utility regulations often get in the way of doing the right thing. miggs’ company RED is run by Tom Casten and his son Sean, both of whom are knowledgable and good writers.
Here’s a recent article, and if you click on Sean’s name, you’ll get more good articles.
I’d recommend any of their material to people interested in this topic: energy systems are nowhere near as efficient as they could be, even using just easily-applicable current technology.
Terje, I mean practicing capitalists, those with a lot of capital, that are wont to consipire for their own advantage, and do not for one moment believe in healthy competition. So the latter I would guess. Naively, many capitalists in the former sense appear to think that unfettered capitalism is pro-competition. Which it never has been.
Don’t get me wrong, well regulated capitalism (what Australia does, mostly well) is about the best system we’ve got for allocating scarce resources, I’m not fundamentally against it, just wary of acolytes who seem to misunderstand or misrepresent the need for steady government to make it work.