Libertarians and global warming

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.

155 thoughts on “Libertarians and global warming

  1. wilful,
    To me the problem with what you are saying is that the rent-seeking behaviour of the “capitalists” is enabled by government interference.
    You seem to be identifying the cause as being “capitalists” running about trying to reduce competition by foul means – to me the predominant means is through encouraging government action to dampen that competition (industry policy, subsidies, tariffs etc.) If I am right, then, the increased government action will only result in increased rent-seeking – leading to less competition. Ironic, perhaps, but common.
    The solution to all this then is not more interference, but less. You get close to this conclusion in your #96 – but then back away from it by saying that “…it has a responsibility to fix it, too.” I would agree with that sentence – but I would say that the responsibility can only be discharged by removing the activity that is driving the rent-seeking, not increasing it.

  2. Yet again, Andrew shows the typical libertarian binary logic.

    Government is always bad, capitalism is always good.

    Rent-seeking is not a product of government, in deed government typically makes it more difficult.

    Tariffs, industry policy et cetera is infinitely preferable to the industrial trusts of the early 20th century.

    But admitting that possibility might mean giving up on the idea that Utopia will arrive just as soon as we can stop government viciously oppressing the poor innocent capitalists.

  3. All this talk of capitalists and capitalism is a bit confusing, as there are lot of different flavors, and it works differently in different places.

    I haven’t visited Oz for a few years, but I used to hear a lot of complaints that the Venture Capital segment (which tends to generate ferociously competitive companies, even as lemming effects sometimes create dot.bombs) was weak in Oz, and it was difficult to get funding and do university spinoffs.

    How well has that been fixed?

    Locally, VC investments in San Francisco and San Jose totaled about $6B last year, i.e., in metropolitan area about 7M people, roughly about the same as Sydney+Melbourne. [Of course, SF+SJ = world center of high-tech venture capital, an extreme case, whose epicenter, Sand Hill Rd, is about 5 miles away. ]

    Does any one have any idea of the size of real venture capital investment in Australia lately? Is government doing a good job of fostering it correctly? Are universities? The last talk I gave on this last November in Singapore was summarized here. It has some comments about what governments can and cannot do.

  4. This discussion is very weird. I came on to tackle some misconceptions about libertarians and point out there is valid criticism of Stern. Some of you aren’t arguing about this, you are accusing libertarians of being things we are not.

    Libertarians have come and said there might be action needed on global warming – but probably not. We’ve also said that compensated taxes are better than trading and that is better than industry policy.

    So there might be a more realistic rate of 3-4% for inflation and 8-6% nominal cost of capital. This is what Nordhaus used (and rejected the policy). Stern didn’t. He calculated a lower rate (1.4%) and admits that it is essentially biased…paraphrasing, he believes the “ethics of climate change influence discount rates”. This is simply bias. It does not change the discount rate. He is implying that there is a preference for mitigation even if it isn’t worth the costs. (Stern used 2-3% for his calculations).

    Assuming the cost of capital is equal to the prime lending rate is also very “optimistic”. Also optimistic is inflation of only 2-3%. Nordhaus recommends a rate of 5% above inflation while the UK Treasury recommend a real rate of 3.5%.

    As for calculating the “base” discounting rate – I believe I was confused. You were referring to Stern – I was speaking generally (with respect to the presentation of rates). Even if Stern uses constant dollars, using “elasticity of income” over 100 years is meaningless. It will be very close to zero. Using a benefit stream to derive a discount rate is odd. He is not finding an internal rate of return. The elasticity of income is dependent on capital costs and adjustments, not the variability of income with artifically low capital costs.

    The Stern/Thatcher schtick is mostly meaningless…but a foil to those who say “don’t question SIR Nick Stern, “eminent” economist…blah blah blah”. Like you and me, he makes mistakes. Nordhaus, Arrow (Nobel winner) Dasgupta and Varian have all written with regards to their disagreement.

    No the comment about predicting recession was not concocted by Thatcher’s Minister’s or spin doctors. 364 economists, including Stern attacked Thatcherite economic policy in an open letter. More or less, they predicted severe economic trauma. They were wrong.

    The EU says it is a success? I am sure Kevin Rudd says his policies are all prescriptions for a new golden age. The caps have been ignored and the reforms won’t implemented until 2013. The caps were abused so heavily the price of carbon per tonne was traded at )0.10 eruodollars per tonne by September 2007.

    “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.”

    What does this prove Ernestine? Getting Governments and special interests to give up their allocations is difficult? So was tariff reform. Whitlam had the guts to do it.

    “I find the idea of evaluating alternative policy measures to reduce CO2 emissions by means of a net present value calculation quite puzzling. ”

    Well that is what Stern did. It is what Nordhaus did….etc. You’re attacking the whole methodology and it’s extensions. Note this is very basic compared to other methods or reasons. By questioning discounting, bringing up fat tails (essentially the fat tail of a benefit stream) or insurance as issues would be duplicitous.

    “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.”

    Now…there is absolutely nothing wrong with that. Opportunity costs are what the discount rate should be.

    “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.”

    I don’t understand what the hell you are talking about here mate. Opportunity costs are all important in economic analysis. Stern didn’t use them. That is why his analysis, however careful, is flawed.

    “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.”

    You are right…flightpaths are problematic, especially when people buy into areas they know have traffic, then demand the traffic is removed. One way of dealing with this might be to end the regulation of landing rights and terminals. Community groups could buy these out and negotiate directly with the airlines.

    Where property rights are allocated, people don’t dump their garbage. They suffer economic loss themselves if they dare. Common resources get abused.

    ““Rent seeking occurs independent of wealthâ€?. 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?)”

    Yes, that was correct. I don’t think you understand what rent seeking is. It does not mean “to accumulate wealth”. It means to obtain benefits through favourable economic policies at the expense of others. It is horribly inefficient and leads to poor outcomes. It makes everyone worse off.

    “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.”

    Europe is trying and failing. Government created property rights may be a good thing. I am not complaining about them. Some property rights emerge from social conventions. You seem to be implying big business did something wrong. I suggest you would prefer to live in a society where big business can’t do what the Government does. Please tell me how Europe’s trading system did anything but encourage more pollution by big business when emissions fell to 0.10 euro per tonne last year?

    “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. ”

    You seem a bit confused wilful. I own private property, but I am not a business. It isn’t me that creates those rights – conventions or Government mandate do. Property rights enforce good behaviour, good management and stop the common pool problem. It is precisely because there are no or little property rights in the Amazon that the individual, small, medium and big business can all freely slash away at it. There is not enough incentive to use the common resource in a sustainable way.

    “These privately owned rivers, tell me how many extractive industries they have on their banks, how many people live in their catchments?”

    That should tell you something about how private property rights work to protect the environemnt – potential polluters find out their capital costs are lower when they buy more marginal land with potential for spillovers. The question isn’t why they aren’t there, it is what stops them from being there.

    “Naively, many capitalists in the former sense appear to think that unfettered capitalism is pro-competition. Which it never has been.”

    With rule of law and property rights, how is unfettered capitalism anything but ultra competitive? What do you mean by “capitalism”? Libertarians prefer “free enterprise” – there is no double meanings here. Freely cometing enterprise, no favours, no preferential treatment by Government. Similarly we have to tell right wingers we are not libertines, but for personal choice and responsibility.

    “Government is always bad, capitalism is always good.”

    Andrew did not say this. He did not imply this either. You simply wish he did.

    “Tariffs, industry policy et cetera is infinitely preferable to the industrial trusts of the early 20th century.”

    No. Our current 17.5% tax on clothing (which is downright medieval), an effective rate of protection on TCF in the mid 1980s of 145% and ERP on cars at present over 25% is greatly inpreferrable to the accumulation of capital networks which did not abuse market power in any significant way – and you were free to compete with.

    Anti-trust literature shows that industrial pricing is tied to market openness, not the number of competitors.

  5. John, thanks for this piece. As a libertarian who believes that climate change IS a problem, I share some of your puzzlement and have done considerable commenting on this issue. Allow me to offer a few thoughts on various factors at work in the general libertarian resistance to taking government action on climate change:

    – As Chris Horner noted in your linked piece, many libertarians see “global warming [as] the bottomless well of excuses for the relentless growth of Big Government.” Even those who agree that is AGW is a serious problem are worried, for good reason, that government approaches to climate change will be a train wreck – in other words, that the government “cure” will be worse than the problem.

    – Libertarians have in general drifted quite far from environmentalists. Even though they still share a mistrust of big government, environmentalists generally believe that MORE government is the answer, while ignoring all of the problems associated with inefficient bureaucratic management (witness the crashing of many managed fisheries in the US), the manipulation of such managment to benefit bureaucratic interests, special interests and insiders (wildfire fighting budgets, fossil fuel and hard rock mining, etc.) and the resultant and inescapable politicization of all disputes due to the absence of private markets. Libertarians see that socialized property rights regimes can be just as “tragedy of the commons” ruinous as cases where community or private solutions have not yet developed, and have concluded that, without privatization, government involvement inevitably expands. Thus, libertarians often see environmentalists as simply another group fighting to expand government, and are hostile as a result.

    – Libertarians are as subject to reflexive, partisan position-taking as any one else. Because they are reflexively opposed to government action, they find it easier to operate from a position of skepticism in trying to bat down AGW scientific and economic arguments (and to slam the motives of those arguing that AGW must be addressed by government) than to open-mindedly review the evidence. This is a shame but human), because it blunts the libertarian message in explaining what libertarians understand very well – that environmental problems arise when property rights over resources are not clearly defined or enforceable, and also when governments manage resources.



  6. There are a two points I wish to clarify regarding Mark’s post # 104

    1. Aircraft noise. Mark acknowledges that aircraft noise is a problem but he believes that this is the result of residents buying properties under flight paths. This was exactly the argument propagated in Sydney by special interest groups at the time when the Third Runway was built. While there may be examples where Mark’s argument matches reality, it is empirically not true in the case of Sydney (Gross and Sim, “Aircraft Noise in Sydney: Community Reaction in Areas between 25 and 30 km North of the Airport�, Proceedings of the 5th International Congress on Sound and Vibration, December 1997).

    2. NPV: I understand Professor Nordhouse used to be challenged by various interest groups. Now he is talking business. His approach (applying the NPV formula to global environmental policy choices) is brilliant because it clarifies matters. For example, it allows questions to be asked such as ‘who owns the positive NPV? This is the question I asked. I did not get an answer. However, the answer is important because the ‘project’ (choice of a global environmental policy) is ‘large’ – it involves ‘the world economy’. In this special case, logical consistency of the numbers which enter the formula requires that the resulting NPV is zero.

  7. “…capital networks which did not abuse market power in any significant way – and you were free to compete with.”

    I’m sure the oil companies that were burnt out or taken over at gun-point by Standard Oil will be happy to hear that this didn’t involve any significant abuse of market power.

    “I can hire one half of the working class to kill the other half.” Jay Gould

  8. Ian (#102),
    Maybe you should go and find a strawman to bash – coz your arguments seem to be unrelated to my comment.
    If you actually think about what I said (you know – apply logic) the rent seeking behaviour by the “capitalists” is a bad thing; ergo, capitalists can do bad things; ergo capitalists can be bad. It seems that this sort of deductive logic is beyond you from your comment.
    Now, can we move on and forget the strawmen / stereotypes etc. or not?
    If so, I would say that all of us are capable of doing bad things. The trick for governments should be to try to minimise the scope for them not only by punishing us when we do them but by not encouraging them in the first place.
    Rent seeking behaviour is encouraged by and builds on itself. Witness the Australian broadcasting regulations – they were first brought in to try to narrow the information flow to us, apparently to try to stop overloading our tiny little minds (sarcasm, in case you were wondering). They have become a huge source of rent seeking behaviour by the major players, who use them to keep out competition, thus improving their profits. Banking regulations brought in to protect the consumer instead acts to restrict competition.
    In case after case after case the regulations, whatever were the reason for putting them in, end up with a contrary result. The solution, surely, is not more regulations to try to overcome the issues caused by the first set of regulations (to be followed later by still more regulations) but to get rid of the tangled thicket.

  9. Thankyou Tom for that enlightening, concise comment.

    Not quite Ernestine. If there was deregulation of airport terminals, then genuine negotiation could occur.

    Tell me why people who buy under existing flight paths deserve special recognition? I’m sure you wrote a quality paper, but you have to explain yourself more than that.

    Who owns the NPV under Stern’s modelling? Who owns a dollar of Government revenue? If the NPV is zero than the project should be rejected. You can’t question the whole methodology, point out that you think it makes all projects break even and then choose the ones you like.

    “I’m sure the oil companies that were burnt out or taken over at gun-point by Standard Oil will be happy to hear that this didn’t involve any significant abuse of market power.”

    Okay Ian, please point out any firms that were taken over by Standard Oil by gunpoint. Then tell me why Rockerfeller wasn’t charged with various serious criminal offences.

    More to the point, Standard was simply more efficient. Jared Diamond points out that in 1870, kerosene was 26 c/gal, SO produced at 3 c/gal, in 1895, costs were 0.45 c/gal, and the market price was 8 c/gal. Previous research showed that the efficiency of Standard allowed the market price to fall so far. This would not have been possible without Standard’s efficiency and reinvestment.

  10. Mark, I’m finding it a bit hard to follow comments on several different points simultaneously. Can you try to make shorter comments on a single point?

  11. Tom – “environmentalists generally believe that MORE government is the answer”.

    Which ones exactly? I’d argue they consistently believe that *better* government is the answer, but I’ve never an environmentalist jump up and down and say that the reason the environment is being mistreated is because government is too small. Indeed many have strongly argued for the reduction of “corporate welfare” and various subdisies direct and otherwise that benefit various highly-polluting industries.

  12. BTW, do you classify Al Gore as an environmentalist who believes in big government?

    His words: “I don’t believe there’s a government solution to every problem. I don’t believe any government program can replace the responsibility of parents, the hard work of families or the innovation of industry. A return to big government would be as wrong for our economy as a return to big tax cuts for the wealthy…I will not add to the number of people doing work for the federal government, not by even one position, and there will be more who leave those ranks than the ones who are replaced.”

  13. wizofaus,
    Just a quick question. Have you ever heard Sen. Bob Brown, for example, make a point of trying to remove regulations? Just one would be a start. It would compensate for the many he has advocated.

  14. This is my last comment in reply to Mark Hill.

    1. Aircraft Noise. Mark, except for the special case of Harrier Jump Jets (vertical take-off and landing), the flight paths of landing passenger and freight aircraft depends on physical factors (configuration and location of runways and wind direction and strength) and not on the deregulation of airport terminals. Aircraft noise (unwanted sound) exposure over existing residential areas depend on flight path.

    2. NPV. Mark I don’t know the problem to which your reply is allegedly a solution. Therefore I take it your statement on NPV is unrelated to anything I wrote.

  15. libertarians, and others on the right

    That was a cheap shot Professor Quiggin! You know how cranky we get when we’re told we are right wingers. Almost as cranky as when we’re told we’re on the left by the conservatives.

    I can’t speak for any other Libertarians but I can say that I suspect talk of consensus in science. Science isn’t democracy. I also suspect climate modeling in general. From the very little I’ve looked into modeling seems like a poor place to be putting climate research funds. In my darker times I suspect climate modelers we’re all Y2K debuggers or possibly involved in ponzi schemes in Albania prior to finding the climate crusade. I tend to not air such wild accusations though for fear of being locked up in a padded room.

    Padded rooms aside, you can’t blame the Libertarians for distrusting those who automatically turn to the government in times of crisis. Libertarians are small government people and when someone claims that there is a big problem with the world and only government action will fix it then we smell a rat. Especially when said government action will throw billions of tax dollars in the general direction of said rat.

    If you want the Libertarians on your side then you are better off trying to think of a pure market solution to your problem. Opting to force people to do your bidding as your first course of action is not something that is going to enamor you to the freedomophiles.

  16. Ben, can you give some examples of conservatives saying libertarians are on the left?

    Of course, there is a tiny group of self-described leftwing libertarians, but I haven’t seen, say Cato or Heartland or the Libertarian Party described as leftwing in any context. Got some links?

  17. Wizard,

    We have to give credit to Gore for being an active and influential Vice President in a very fiscally responsible Government which made some necessary and at the time unpopular reforms. What he says about big Government not being desireable is credible.

    To ensure this is heeded, it must be frequently pointed out that a compensated tax is preferable to trading, which is preferable to industry policy.


    Arguing the physics and limitations of 747s with an expert is obviously stupid. It’s not what I’m doing however. I am arguing if there was deregulation of terminal rights, then community groups could bid for flightpaths and negotiate directly with the airlines – effectively, airlines would be polluting payers over the areas they affected detrimentally. This is fairer and more efficient than leaving the rules up to arbitrary Government regulation that changes on whim and is often suspect when campaign funds are involved. These decisions belong in the market, not in backrooms.

    Third runway groups could also force aiport builders to make some more positive planning as well.

  18. Generally speaking the conservatives are capable of making the distinction Professor Quiggin. They are a little more discerning than ≠ Left = Right.

    Looking at Libertarian beliefs about gay rights, drug laws etc, can you really believe we are righties?

  19. Ben, I just took your quote “Almost as cranky as when we’re told we’re on the left by the conservatives” at face value.

    Politics is about coalitions and, as far as I can see, most self-described libertarians are part of the rightwing coalition. Whatever they may think about gay rights, they are happy enough to work in alliance with gay-baiting politicians like Howard and Bush, rather than support even centrists like the Clintons.

  20. PrQ,
    That is mainly true in my case at least – because I see larger threats to individual liberties coming from government intrusion in the economic front than from intrusions and threats on the social front. In large part I see this because we have a much more open and tolerant society today than (IMHO) at any time in the past. The main arguments are also heading in a socially liberal direction.
    Taxation and regulation, however, I see as heading in the opposite direction to all of our long term detriment.

  21. AR – I don’t know of any regulations that Bob Brown has talked of removing, but I can think of plenty that I’m sure he would support, e.g. regulations that compel shopping centre developers to provide free parking.
    And at any rate, my only claim was that environmentalists don’t generally call for “big government” per se. But I agree that relatively few call for less regulations. Indeed, I don’t see much point for calling for “less regulations” just for the sake of it. All regulations should be regularly examined to measure their impacts, and revised or retracted as necessary.

  22. See, AR, I’m quite the opposite – Australia is pretty much already ranked as about the most economically liberal democracy in the world (about equal with Ireland).
    It’s on the social front Australia lags behind many other countries.

  23. Er, “plenty that I’m sure he would support removing“, that should be. Though I can certainly imagine he might prefer to introduce regulation that compels shopping centres to charge for all parking (not an idea I’d dismiss out of hand, but the complications and consequences involved probably make it hard to justify).

  24. So because Libertarians are willing to co-operate with someone to increase liberty we are the same as them? Does that make Nixon a Communist?

  25. wizofaus,
    If you actually had to try to comply with the sorts of regulations that I have to work within every day of my working life you would probably be a bit less sanguine about them.
    On the question of re-examination, I would suggest a reversal of the burden of proof. If it cannot be proved they have achieved anything they should automatically lapse.

  26. Well regulations surely always achieve *something* – and in all likelihood someone benefits from them. And realistically, it’s pretty much impossible to perform a full CBA on any single regulation, let alone a whole bunch of them interacting. But that doesn’t mean that governments shouldn’t be held continually responsible for ensuring that regulations are generally achieving their aims, and not causing undue side effects.

  27. Nixon was pretty damn destructive and may as well have been a communist. I have never read anything about the man that made me feel even slightly warm towards him or his legacy.

    I suppose AR at comment 120 pretty much sums up my outlook. However I am ever ready to cross the room as and when the issue demands.

    Instead of pondering why the libertarians align with the conservatives the left wingers should consider what it would take to lure the libertarians over to their side. And the libertarians should advertise what it would take.

  28. Terje,
    I would have thought that advertisement to be an easy one to make – introduce free trade, reduce regulation and taxation and lose the affection for industry policy.

  29. And stop trying to legislate morals! Leave us our ciggies, alcopops, pokies and pot. Let us worry about the consequences.

  30. Ben Says:

    So because Libertarians are willing to co-operate with someone to increase liberty we are the same as them? Does that make Nixon a Communist?

    This bulls**t would be a little bit more persuasive if you could actually point to an instance of Libertarians cooperating with someone who “increase[d] liberty”. Note that cutting taxes without cutting spending doesn’t count as an increase in liberty when you’re running a deficit.

  31. Ben, current taxes and restrictions that exist on sale of cigarettes and alcohol are hardly trying to “legislate morals”. They can be justified on any number of grounds. And at any rate, given taxes have to be collected, I’d much rather see them collected on highly-discretionary products such as alcohol and cigarettes than on incomes, or on products whose affordability significantly affects living standards.
    On marijuana – completely agree: there seems to be no rational argument for treating marijuana any differently to nicotine. I would extend that as far as ecstasy and other more powerful narcotic drugs – we’ll never stop people using them, so let’s make sure they’re manufactured and distributed safely, and taxes can be collected on them to help pay for programs that provide education advising “safe use”. That’s still a “social democratic” position, rather than a libertarian one, but it’s surely a far more justifiable one.

  32. No argument about deficits SJ. Show me a politician who has increased civil liberties and reduced the size of Government besides Hawke.

    Yes they are legislating morals. A pack of cigarettes costs 0.50 USD in SE Asia. Smokers never get back what they pay in taxes out of the health system, despite the rhetoric.

  33. “Smokers never get back what they pay in taxes out of the health system”

    Maybe, maybe not. But the fact that some people choose to smoke does cause significant externalities. And like I said, they’re a highly discretionary product – the social costs of high cigarette taxes are pretty much zero (vs, e.g., the social costs of high taxes on clothes).

    You can’t seriously be claiming that the difference between .50USD for a pack of cigarettes in SE Asia and $10 here is largely due to taxes and regulations.

  34. Cigarettes are not discretionary products to most of those who are addicted, Most people who are addicted got that way when they were teenagers, which tobacco companies have known for a long time.

    This was discussed in more detail here.

    There are smart libertarians and stupid ones. The really stupid ones haven’t read the Tobacco Archives to see how the cigarette companies abuse them. [A wish to have minimal government interference is a reasonable thing, but anyone who thinks tobacco companies care about that general issue (as opposed to their own profits) has serious reasoning problems.]

    Libertarians who fight for “smokers’ rights” are fighting for the tobacco companies to get kids addicted, since that’s what their business plans utterly depend on.

    They often even help out for free, from righteous indignation at the awful government treatment of poor tobacco companies… unlike lawyers, PR agencies and thinktanks who like to get paid. Tobacco companies seek Libertarians, as they provide good cover.

    According to Philip Morris, US consumers spend about $70B/year, yielding pre-tax profits of $8.8B.

    Athough the numbers aren’t quite the same, IBISworld says that at the wholesale level, the domestic Australian demand is about $322M, and purchases [i.e., most of tobacco that came from somewhere else] were 71% of that, and profit 5%.

    Unlike the US, that has a bunch of states who grow a lot of tobacco, Oz doesn’t even have much of a tobacco industry left. So, maybe I should say : fight on to let Aussie kids get addicted, it probably means more money for the US and other places, although mostly to BAT and PM.

  35. Sure, they may not “seem” discretionary to somebody addicted to them, but there are no long-term ill-effects to not using them, that I’m aware of. Unlike say, clothes, or food.

  36. Ben Says:

    And stop trying to legislate morals!

    wizofaus Says:

    Ben, current taxes and restrictions that exist on sale of cigarettes and alcohol are hardly trying to “legislate morals�.

    There’s no need to shy away from this argument, wiz. The question of whether or not tax on cigarettes and alcohol is an instance of “legislat[ing] morals” is one that exists only inside Ben’s head.

    For example, the various state crimes acts impose punishments for murder. One of the ten commandments corresponds: “Thou shalt not kill”.

    Now, is the crimes act an instance of legislating morality? Not really. Mosaic law (the ten commandments) was one of the first attempts at a legal system. We’ve carried through the “shalt not kill” and “shalt not steal”, but we’ve dropped things like “shalt not commit adultery”.


    a) laws can and do enforce things that can be interpreted as morality.

    b) at one time, “legal” equalled “moral”

    c) we’ve changed our laws over time, and so the ideas of “legal” and “moral” no longer equate for some people.

    d) we’ve legislated for all sorts of stuff that has nothing to do with morality, that nevertheless tries to discourage certain behaviour, like dumping rubbish or smoking.

    e) to call such legislation “legislat[ing] morals” is complete and utter crap.

  37. I guess I should have put in a concluding point (f):

    f) claims for and against “legislating morals” are pretty silly, really.

  38. Exactly, which is why it’s not worth wasting any more time trying to refute them.

  39. “Maybe, maybe not.”

    No it is a fact. Smokers pay well over excess of their private and social costs in taxes.

    “You can’t seriously be claiming that the difference between .50USD for a pack of cigarettes in SE Asia and $10 here is largely due to taxes and regulations.”

    When a bale leaves the farm gate, the market price is $850, when excise is applied, the bale is costed at over $28 000.

    I did not even mention regulation. Just taxes.

    We cannot be flippant with the costing of externalities. If carbon mitigation is necessary, the corrective action cannot be allowed to be excessive and considered on such vague grounds.

  40. Mark, according to,
    the excise on a 25-pack of cigarettes is $5.16, but the cost of such a packet at most retailers is pretty close to $10 (though some discount stores have prices as low as $8.50 for bulk purchases). So removing the excise entirely would only reduce the cost to $5, not 50c.

    At any rate, I can’t see any real benefit to society from lowering cigarette taxes and then raising other taxes to make up the lost revenue.
    OTOH, if governments come to rely too heavily on the revenue from cigarettes, it must act as something of an incentive for them not to work too hard in working to promote healthier smoking habits.

    But calling it “legislating morals” really is silly – behaviours that are considered truly immoral are generally banned outright. On that basis, I might grant that bans on marijuana smoking are a form of “legislating morals”. But it’s still a pointless criticism – there are far far better arguments for legalising the manufacturing, retailing and use of currently illegal drugs.

  41. wizofaus,
    Just a quick correction – retailers do not mark up by a dollar amount, but by a percentage. I am not sure what it is for cigarettes, but a normal retail mark up is about 30% – it may be higher for cigarettes. Using 30%, though, a drop of $5 in the excise will actually mean the price drops to about $3 per pack. Add in the resultant GST reduction (10%), state taxes etc and you are getting closer to $2 than $5.

  42. Wizard – I am merely quoting a price and cost differential stated by Channel Nine’s Sunday programme.

    “ADAM SHAND: The stakes in this game are high. To the grower, a 100kg bail of tobacco is worth a maximum of $850. With government excise added, the value skyrockets to $29,000. A farmer like Tony Bonacci, on 10 hectares, puts $10 million into government coffers each year. In 2004, he made a loss on his crop. He says he doesn’t do chop chop, but he has certainly thought about it.”

    Read the article. A cheap shot thrown at libertarians is that we shill for big tobacco. Not likely. Like religion, business should have a strict separation between itself and the State. A more astutue observation is that vilification of smokers contributes to organised crime and a more violent society.

  43. # Ben Says: June 20th, 2008 at 12:24 pm

    Looking at Libertarian beliefs about gay rights, drug laws etc, can you really believe we are righties?

    Libertarians are left-wing on cultural issues and right-wing on financial issues. Generally, given their economistic bias, they tend to favour the right-wing side of politics, which is where the supporters of the high-status tend to line up.

    Libertarians tend to line up politically with the high-status, since most libertarians come to their viewpoint via economics. This is a discipline that strongly endorses the pursuit of high-status through material advancement.

    Its true that libertarians favour liberal institutional modes, which sometimes benefit the low-status (such as gays, druggies and so on). But libertarians tend to follow the smart money, wherever possible. That is why an authentic libertarian like Hewson wound up leading the Liberal Party, despite having cultural views more in sync with Labor party.

    There is endless confusion over political concepts, Left v Right, Conservative v “Progressive”, Liberal v “Illiberal”.

    The key axis of political debate is over the distribution of social gains/pains. The Left wing supports the low-status, – aspiring ascendants – whether they be workers, women, gays, coloreds, animals etc. The Right wing supports the high-status – content with their entrenchment – typically pillars of society such as capitalists, militarists, ecclesiasts.

    (OT The Culture War introduced an anomaly into this classification, since high-status Cultural Elites tend to support the diverse or perverse low-status. Hence the phenomenon of right-wing cultural populist support of high-status majority v left-wing cultural elitist support of low-status minorities.)

    Another key axis of ideological debate is about the regulation of social agents. Classical liberals (and libertarians) prefer to leave decision making to distributed individual autonomies. Whereas, what I term, “corporalists” believed that concentrated institutional authority often knows best, whether these powers that be are located in the state, church, tradeunion hall or boardroom.

    Another axis of ideological debate is about the modulation of social change. I suggest that conservatives are those who prefer to moderate change to the traditional identity of fundamental agencies. Whereas non-conservatives (Hayek terms them “constructivists”) are happy to allow or enforce accelerated change to the identity of fundamental agencies.

    Quite obviously the Left wing are conservative on the modulation of ecological change and hence “corporalist” on the regulation of social agents. They want to give concentrated institutional authority the power to conserve the traditional identity of vulnerable low-status identities and entities (animals, plants, islanders and so on).

    Whereas as the libertarian Right wing are “constructivist” on the modulation of ecological change and therefore liberal on the regulation of social agents. They are happy to let high-status (industrial capitalists, high performance motor vehicle drivers) individual autonomies run amok with the earth’s ecological identities.

    So libertarians are right-wingers who are prepared to let high-status individuals do their thing though the heavens may fall.

  44. jquiggin Says: June 20th, 2008 at 12:45 pm

    Politics is about coalitions and, as far as I can see, most self-described libertarians are part of the rightwing coalition. Whatever they may think about gay rights, they are happy enough to work in alliance with gay-baiting politicians like Howard and Bush, rather than support even centrists like the Clintons.

    Howard may have been a right wing gay-baiting politician (link please?). But some might describe him as a sociological conservative policy maker.

    Just as Brown may be a left-wing business baiting politician. But most concede he is also an ecological conservative policy maker. (For political reasons exactly analogous to Howard.)

    Delusionism is rife on both sides of politics. There are plenty of right wing delusionists who insist that massive industrial constructivism has no adverse effect on the ecological system. Just as there are many left-wing delusionists who insist that massive institutional constructivism has no adverse effect on the sociological system.

    In both cases, constructivist revolution has had massive unintended consequences with naturally evolved complex systems. Hence the conservative reaction.

    OTOH Maybe there is no sociological “delusionism” on the libertarian Left. Just as their is no ecological delusionism on the libertarian Right.

    Because we all know that the massive institutional constructivism of the past generation did no damage whatsover to sociological systems, such as the flight of males from marriage and child care. Nor did anyones biological systems suffer from epidemics of STDs, like the AIDS plague, or infertility epidemics.

    So only a right-wing gay- or feminist-baiter like Howard could have any problems more of those changes. Yes, thats a far more reassuring morality play.

  45. SJ Pedantry about my use of the word “morals” aside, I was advising on how to better lure Libertarians to Libertarian-Progressive alliances so I’m not sure what the hell you were saying has to do with what I was saying.

  46. Mark – that’s a pretty weak argument, especially if you likewise don’t believe that other drugs should be illegal. I don’t doubt that at some point excessively high taxes on tobacco can generate some unwanted side-effects, but compared to the alternative of tax other things more, running at a deficit, or cutting back government services, I can’t find myself getting worked up about it. It would be a waste of time anyway – any government that proposed reducing the excise on tobacco these days would be pounced on as irresponsible by the media and the public, fairly or otherwise.

  47. I am just showing you that a) smokers are taxed by far more than they cost society, b) the tax on tobacco is usurious and regressive [3400% tax, which is paid mostly by the young and lower socio economic profile citizens] and c) has unintedned consequences (murders, the making of a more violent society) nearing the counterproductivity of drug prohibition.

    The argument of course, was that tobacco excise and related rules were misguided, moralistic, inefficient and a bad set of laws. That has been sufficiently demonstrated.

    “but compared to the alternative of tax other things more, running at a deficit, or cutting back government services, I can’t find myself getting worked up about it”

    Yes, because the Government is spending our money so wisely on middle class welfare and $ 90 bln of welfare churn per year? Reducing the excise would decrease the incentive for sumgglers and possibly lead to cost savings for the ATO and law enforcement.

  48. I don’t think anyone doubts there’s significant room for reducing welfare churn, but there’s not a lot of evidence that we’re going to get a government politically brave enough to do it any time soon.
    I would still argue that on balance, reducing the excise on tobacco is way way down the priority list of ways we could improve how governments tax, spend and regulate.

  49. “I would still argue that on balance, reducing the excise on tobacco is way way down the priority list of ways we could improve how governments tax, spend and regulate.”

    I agree, but I don’t think this is what we were arguing.

  50. You seem to think the high tax on tobacco is a bad thing, I’m simply suggesting that it’s most likely better than the alternatives.

    I’d also suggest that we have much better chance of convincing future governments to legalize other recreational drugs when we can point to how much revenue they could expect to raise from taxing them similarly.

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