Comments Jim Manzi has made

Guten Dag

I'm an Austrian (in the economic sense).  I really liked your post

It's almost an inhuman standard to avoid relying on unreliable predictions.  As an example, the (excellent) Casten post you link to goes thorugh a lot of funny stories about the inability of economists to predict accurately, then in point 4 reviews his theory that he understands exactly how to achieve several mutally-conflicting goals if only his preferred technological solution were put in place.

You end your (also excellent, in my view) post with:

"It is a possibility that overzealous attempts by liberal types to fix the problem could make matters worse, which I suspect is Taylor's main concern, which I share. We need to make sure that does not happen but we also need to take immediate steps to reduce greenhouse-gas emissions."

I assume that you have made an implicit prediction about the net economic (in the broad sense of the term) impacts of this.  Can you make it explicit?On Economists cannot predict the future posted 1 year, 11 months ago 69 Responses

Thanks for the Great Discussion

Ryan:

Thanks for the, as always, thoughtful comments.  I feel like we've taken this about as far as we can in this format, so rather than doing another post, I thought I'd give my quick reaction to a few of your points, and then make one general comment.

First, the quick reactions.

I do think that a carbon tax is very unlikely to be passed in the foreseeable future in the US.  That said, I think that a cap-and-trade system is quite possible.  All of the serious legislative proposals and presidential platforms that support mandatory limits take the cap-and-trade route.  I think this is for the obvious political reason that it hides the cost.  As you know, I oppose both approaches.  

By the way, Republicans have given Democrats, in effect, a free pass on this issue by being so clueless.  Similarly, the US has given the same kind of free pass to Europe which has been able to make speeches, pass "binding" caps, and pretty much proceed on the same emissions path as if they had done nothing.  You might be surprised at the willingness of Democrats to really bite the bullet on this in a crunch when they know they will be held accountable by voters.  The 95-0 Senate reaction to Kyoto-like treaties is some indication of this.  I think that something approaching "total electoral defeat" may well be in the offing for conservatives in 2008, so we may get to see this tested experimentally.

You disputed my view that passing a carbon tax would have regrets because eliminating it would be very difficult.  Your logic was that we have done things like this in the past:

"From the Bank of England-managed, gold-based financial system of the early 20th century to Bretton Woods II, the world has operated under a number of formal and informal financial agreements that functioned well for decades before dissipating as they became too costly, unworkable, or unnecessary. The record of international agreements in the last hundred years is mixed, but evidence indicates that functioning treaties can and are dispatched or modified when they outlive their usefulness. Within the United States, the past three decades also contain numerous examples of significant reductions in the tax burden; under President Bush alone the United States has cut taxes and abrogated international treaties multiple times."

The problem is that you haven't provided an example of a major class of taxation that has been entirely eliminated. (Obviously, when evaluating examples beyond your list, this begs the question of what is a "class" of tax.). I do agree that we can't say with certainty that we couldn't, in theory, pull back out of a carbon tax.  I'll just restate my view that I think it would be very hard, and that I think history supports my view on this.

You next said that the tax burden that this would impose wouldn't be as big a deal as I indicated, saying:

"A number of independent budget analysts, however, have pegged the annual cost of the Bush tax cuts of 2001 and 2003 at between $250 and $400 billion per year. Clearly, the economy was not crippled in the years before those cuts, so even if no offsetting tax is adopted to balance out a carbon levy, the economy should not suffer all that much, if at all, from a carbon tax."

But this seems to me like the baldest kind of free lunch argument.  By this logic, I can have any program I want, spend $100 billion per year of taxes on it and not worry about the cost.

All that said, I don't think the root of our disagreement is about technical tax policy matters - it's about the basic scale of the problem that we are trying to address.

The broader point that I wanted to end with is the following.  If we believe the UN IPCC, then we expect the economic impact of global warming to be ~3% of GDP over 100 years from now.  If I knew that the climate predictions that underlay that assessment were correct, I would support no significant action, because I think that it's ludicrous on its face to imagine that we can manage the climate and economy 100 years from now with that kind of precision.  I would support no tax, no emissions restrictions....nothing.  I am comfortable defending that position analytically, morally and politically.

It's the risk of catastrophic impacts that leads me to support action.  I see the role of government research around AGW as supporting improved prediction, mitigation and adaptation to reduce the probability and severity of such a low-odds disaster scenario.

Right now, many of those who support emissions restrictions are muddying, not clarifying, the distinction between the expected case for the impact of AGW and the unlikely (though possible) disaster cases.  This creates a tactical political advantage, for now.  Analogously, many of those who oppose emissions restrictions successfully muddied in the public mind what was known and unknown about the underlying science, which created a political advantage for a while.

If you sell emissions restrictions on the platform of "or else New York will be underwater", eventually you will have opponents with a much bigger bullhorn than I have who will take you to the mat on this, and you'll lose.  I believe that in the long run good policy becomes good politics.  Hopefully, you will be smarter about this reality than conservatives have been on the issue, because ultimately we all live on one earth and having "sides" on this issue doesn't make a lot of sense to me.

Once again, thanks for a very productive discussion.  I feel that I've learned a lot from it.
On A response to Jim Manzi posted 1 year, 11 months ago 9 Responses

My 2 cents

As has been indicated, this thread is obviously somewhat related to the discussion of my article here at Grist.

Rather than wade in on this, let me try to make a few quick points:

1.  Here's why you see people from "the other side" here: you won the debate about the existence of the problem.  There are no reasonable "sides" on this question anymore.

2.  Economists can be pretty obnoxious in their jargon-laden talk that often serves to hide assumptions, rather than do what jargon is supposed to do, namely focus on critical issues.  (Interestingly, as per the previous very funny comment, this is never true - in anything I've read by them, which is a lot - of either Friedman or Hayek.)

3.  Economics is not science.

4.  It is very seductive, having been proven right about the fact of the threat to believe that all opposition to your views on what to do about this is ill-founded.

5.  Careful consideration of the costs vs. benefits of trying to address this problem is a worthwhile process.

6.  Apocalyptic rhetoric about AGW is not justified by science, and in the end, is likely to be counter-productive.

7.  If somebody can't explain their position on the costs and benefits of various proposals in clear English sentences that don't include terms like "partial equilibrium", they don't know what they're talking about.
   

The Knowledge Problem

GreenEngineer:

You say that:

"By happy coincidence, the severity of externalized cost for most energy sources is roughly proportional to the carbon footprint of that energy source."

In my post here on Grist, I referenced another post that cites a research paper by European academics that reviewed all known peer-reviewed studies on the external costs of various fossil fuels and alternative energy sources.  I'll reproduce the link to their paper here:

http://www.handels.gu.se/econ/seminar/Article1.pdf

You'll find that the estimates for the external costs per kilowatt-hour of, for example, coal range from about .01 cents to $10. Even the middle 50% of studies have cost estimates that range by a factor of about 20. Depending on the analysis, AGW-related externalities might be anything from a dominant to a trivial component of external costs.  Every form of energy production from fossil fuels (coal, oil and gas) to alternative fuels (nuclear, solar, biomass, etc.) has a huge range of estimated external costs. The cost estimate range for every energy source overlaps with the cost estimate range for every other energy source. How can we rationally choose which ones should be taxed at what level vs. the others for the purposes of pricing the externalities?  How will we know whether we have decreased or increased total external costs once we have shifted X units of production, say, from LNG to biomass?On Jim Manzi replies to Ryan Avent posted 1 year, 11 months ago 29 Responses