Jim Manzi... then Jerry Taylor... will Milton Friedman and Friedrich Hayek be joining us shortly? Interesting day at gristmill, to be sure...  

A lot of back and forth and no real points made on the major question.  

Scientists should absolutely get involved in debates about what to do about global warming.  They are on the leading edge of understanding what is happening; and there is quite a diversity of opinion about what may happen.  Scientists like James Hansen who publicly argue for certain policies are critical to moving toward global warming mitigation.  Further, since their understanding of what may happen is the best we have, in some ways they are in a better position to judge what to do about it than economists, who are generally trained in mathematics, not the sciences involved with climate change.  Which leads to

Engineers, particularly civil engineers, are in a much better position than economists to discuss what the costs and mitigation strategies of global warming may be, because they understand much better than economists the dynamics of how flooding and drought, etc. can affect infrastructure

Since there is a large diversity of opinion among scientists, I'll stick my neck out and say that IPCC estimates of what impact global warming will have are only one of many, and on the conservative side -- the recent models did not seriously consider melting ice, for instance.  Many other scientists are very worried about positive feedback effects, and see that the "progress" of global warming is much faster than any models.

Meadows et al. did not claim that we would soon run out of everything.  They clearly show that by the mid of the 21st century -- depending on one of their many models, but that point seems the most common among them -- many resources would peak.  They argue that they've been saying that the whole time, and that their models have been working quite well, but we didn't immediately run out of everything so everyone jumped up and down and said "see! see! they're wrong!".  As far as Ehrlich losing his bet, yes, that was a dumb bet, but that doesn't mean he's not wrong in the long-run -- and plenty of cornucopian claims have been proven wrong as well.  So I have a question for you: are you aware of any economic models that assume that there are limits to natural resources? which leads to

Is it the conventional wisdom at this point that 3% growth rates will continue through to 2100?  Does anyone even try to justify that?  This is more of a information question, because it means that some serious work needs to be done to at least show that there is a high probability that we will have some serious resource problems in the future.

So basically, it looks to me as though you are still maintaining that global warming will not cause a very large impact.  Is this, as far as you know, also conventional wisdom in the economics community?  Or within a particular school?  Or has it not really been considered?  

Thanks for your input.

If you throw the "behavioral economics" guys out, you have to throw a lot of other "students of nature" out with them.

(Being a chemist though, I can take the snug position that there is only one, possibly, purer science out there.)

I hope to find the time to reply at greater length. I wish to note that Mr Taylor neither renounces nor defends the very strong claim that prompted my essay, specifically:

scientists are in no position to intelligently guide public policy on climate change. Scientists can lay out scenarios, but it is up to economists to weigh the costs and benefits and many of them say the costs of cutting emissions are higher than the benefits.

Let my address the nastiest of the herrings, though.

I think like polar bears, Easter Island provides a very powerful image, and so you will find those who start from defending a position rather than from thinking about our circumstance eager to deflect attention from the main issues at hand. So let me quote directly from the author of the referenced study about Easter Island (Rapa Nui):

"I got those results back and I was sceptical," says Hunt. "I thought, something's wrong with these." When repeated samples yielded the same date, he and Lipo re-examined the existing evidence. After throwing out any studies that lacked replicate samples or had other methodological problems, the 11 studies that remained all pointed to the same date - roughly 1200 AD.

Such a late arrival date means that the new inhabitants of Easter Island must have begun hacking down trees almost immediately, building the gigantic monuments and stone heads that make the island so distinctive, says Hunt.

And the new civilisation's ecological footprint must have been heavy from the start. "There isn't a period of ecological stability. There was almost immediate impact," says Hunt. "It isn't a two-part story any more. There's really just one chapter."

This may amount to an interesting controversy among archaeologists, but it hardly changes the moral of the story.

For now, I close with this. While I wish I could share in Taylor's optimism I take little solace in predictions of the number of dollars I can expect to spend in the future further-dimished world.

mt

"Students of nature"(including human nature) writ large is one thing.  They are scientists, I suppose.

It is the "students of 'human' nature only" (e.g., economists and demographers) that I am trying to distinguish by suggesting these investigators are not scientists.

Steve

Unreformed moderate that I am, I sometimes criticize economists and sometimes defend them.  I think evolutionary neurobiology, proto-economics, and behavioral economics are all tremendously interesting for their recent advances and their overlaps.  If I were going to build my own image of a non-scientific economist, it would be someone down in his basement with his models ... who ignores those same things.

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:

 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.

 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.)

 Economics is not science.

 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.

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

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

 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.

If we confine out topic to the subject of paying for air pollution controls on industries does matter.  The Clean Air Act always was a little dyslexic about it when talking about "reasonably available control technology."  The "reasonable" part meant cost, operation, and maintenance.  Anyway, I don't care of some kind of "societal cost" but rather what the industries have to do:

Grandfather units, clean them up using best available retrofit technology (BART)

Permits for today would use reasonably available control technology that might exclude coal gasification and sequestering (RACT)

Permits for the future might be required to use lowest achievable emission rate, regardless of cost (LAER)

I hope such a stratified vision for how CO2 reductions would be implemented is useful.  

The U.S. Congress needs to stop dinking with energy standards and revise the Clean Air Act to include CO2, CH4, and N20, and to require the EPA to implement those standards within two years.

Now.
-sammie

Onward through the fog

Your comments are most helpful.  Thanks.

What I am trying to simply point out is the way economists and demographers, for example, do not appear to acknowledge "human" beings as creatures existing within the natural order of living things. Second, and as important, these investigators appear to view "human" beings as existing somehow, inexplicably and apparently preternaturally, outside the bounds of the practical requirements of the biophysical world to which non-human beings are known to be subject.

Thanks to both of you for a remarkable and, for me, uncommon discussion.

Sincerely,

Steve

Jim Manzi should join me for a coffee while I'm in the Bay Area for AGU.

I don't agree with everything he says, but I agree completely with six of his seven points.

I am not sure whether AGW is into apocalyptic territory, but I do think we have a carrying capacity problem of which AGW is an aspect. Accordingly, minimizing the risk of a (likely horribly destructive) population crash is the central issue of sane governance for the foreseeable future.

We do have to weigh costs and benefits, but not only do I doubt that economists are uniquely qualified to manage this discussion, I suspect they are uniquely disqualified! This strange circumstance results from the fact that the present problems violate the assumptions on which their intellectual edifice is built.

mt

As I have mentioned elsewhere, we need effective policy to deal with the problems. And "effective" means exactly that - policies that elicit behaviours to effectively mitigate/adapt to climate change. And traditional economics has a tremendous amount to offer regarding which incentives, property rights, etc. best work in the real world - i.e. the global market place.

But I do have problems with "economics-as-usual", when it steps beyond behavioural prescriptions and pretends that it is somehow effectively modelling the world.

I.e. The basic thrust of Jerry's original article, which is subtitled "World to Scientists: Zip It!", which then goes on to declare economists pre-eminence in determining the economic costs and benefits. And comments like this from Robert Solow "If it is very easy to substitute other factors for natural resources, then there is, in principle, no problem. The world can, in effect, get along without natural resources.", or Julian Simon "Similarly, the quantity of copper that will ever be available to us is not finite... given the problem of the economic definition of "copper," the possibility of creating copper or its economic equivalent from other materials, and thus the lack of boundaries to the sources from which copper might be drawn."

This is, of course, then extended to the entire classical economic theory which, a priori, does not account for physical throughputs, just capital, labour and technology. Innovation and substitutability are somehow able to abstract resources, ecosystem services and waste sinks right out of consideration (or, in the case of Mr. Simon, suggest that alchemy is now possible - we will "create" copper somehow!).

It is when economics is stepping away from behavioural prescriptions, and into such models about "how the real world works", that it simply is a failed description. (The very idea that we could "substitute" human capital for, say, the ozone layer, beggars belief.)

Economics does, typically after the fact or late in the game, try to retrofit its model so has to impose costs on externalities. But the model itself still does not attempt to explicitly incorporate resource use, etc., into the model.

Nonetheless, the evidence that it "should" be doing so is piling up - fishery collapses, ozone depletion, GHG build-up, etc. These ecological dilemmas seem to be a systemic output from the "economics-as-usual" model. After acid rain, mercury, etc., does anyone actually think that GHG's are going to be the "last" externality that we'll need to account for? Maybe we should check the descriptive elements of the model a bit, or see whether we are missing some parameters? Hmmm?

And who might have some insights for the economists on how our material transformations, etc., interact with the world around us? Scientists, perchance? If not scientists, who?

Back to Jim Manzi's points 5&7, about clear articulations of cost&benefits... well, yeah, I agree. Let's start, for instance with Jerry's rosy A1F1 scenario above.

If I am reading from the same literature I think he is, there is also a B1 scenario which would limit emissions so that the temperature increase in 2085 would be only 2.1C, instead of the 4.0C that A1F1 produces... The difference in "net GDP per capita for developed countries"? $69,500 for A1F1 as Jerry claims, and $65,737 for B1. This despite the fact that "gross" GDP grew by a factor of ~ 7.4x from 1990-2100 under A1F1, but "only" 5.0x for B1... but by 2100 under A1F1, almost 40% of gross GDP is now going to pay for climate change adaptation on an annual basis, thereby cutting the "net" GDP basically back to the B1 scenario...

Leaving aside the wisdom of "preferring" an economy where 40% of its productive efforts is directed toward taming climate, or the bizarre
"precision" of these forecasts, is it even reasonable to try to trade-off an extra 5% net benefit a century from now for a much less certain, riskier environmental outcome? Apparently so, because it says so just upthread!

And again, this gets me back to the point about an abstract model that does not account for physical throughput... Anyway, I gotta go... I am very much enjoying the exchanges the last few days.

Got me wondering, Grist ... if I heard somebody talking like that I'd call the freaking cops!

Onward through the fog

Jerry Taylor writes, "Strictly speaking, no economist would contend that "infinite growth of some meaningful quantity [is] possible in a finite space." If nothing else, infinite means forever, and someday, the universe will likely either collapse upon us or thin out to such an extent that life will cease to exist. So no, infinite [human economic] growth not possible. Michael probably meant something else by this, but to know whether an economist would agree or disagree with Michael's proposition requires us to be a bit more precise about what time period we're looking at and what our definition of 'finite space' might be."

Let's get a little more specific.  The current world per-capita GDP (purchasing power parity) is approximately $10,000 (see Wikipedia).

Who thinks the world per-capita GDP can reach the following values (year 2007 dollars):  $20,000?  $50,000?  $100,000?  $500,000?

Mark Bahner

I've never understood all these pointless jibes at economics. I do not think that Jerry Taylor means that scientists should have no influence on the public-policy debate. Clearly they should. (And, having met Jerry on several occasions, I know he has great respect for the scientific method.)

An area in which scientists' input is vital, for example, is in establishing fishing quotas. In many areas of the world, fishery biologists have a formal, legal role in advising what should the maximum allowable catch that would enable particular fisheries to continue on a sustainable basis. The actual setting of the quotas is always left to elected or appointed policy-makers, however. Unfortunately, these people routinely ignore the scientists' recommendations and opt for larger harvests -- mainly for what they consider to be economic reasons (the incomes of fishermen). But don't blame the fisheries economists: they usually, to a person, substantiate the advice of the fisheries biologists.

In the world of climate change, the decisions are not so easy, because they are not taken on an annual, but rather a multiple-year basis, and the options are less straight-forward. Climate scientists can certainly point to how much emissions need to be reduced to obtain a given reduction in atmospheric concentrations of greenhouse gases as of a particular future year (give or take a considerable margin of error), but they are usually not particularly versed in the art of policy making -- which, yes, requires a keen understanding of human behaviour, since it is humans that will be responding to whatever incentives and disincentives are created. (Rather, what we often get is: "Ban this! Mandate and subsidize that!")

It is through politicians being fed very simplistic arguments, ignorring the advice of (independent) economists, that has gotten us into the situation where we are today: where the flagship climate-mitgation policy of the United States and several other countries is ... agro-fuels.

It is economically rational to cause the extinction of myriad species because the cost of preventing such extinctions is greater than the benefit received by causing such extinctions.

Case in point: The critically endangered greater striped toowit (for arguments sake) has one habitat left which just so happens to be atop a rich mineral deposit. It is economically rational to exploit the mineral deposit effectively killing the the last of the toowits. Toowits provide no economic or any other tangible benefits to humans.

To broaden that argument; economic rationalisation argues that we should not spend too much money on mitigating climate change because the cost is greater than the benefit. This argument almost certainly allows additional climate change to what would occur if by some miracle humanity embarked on a massively costly mission to clean up its act overnight.

The economically rational additional climate change will almost certainly condemn many more species to extinction than would the massive effort to mitigate.

It is economically responsible for humans to commit SPECICIDE.

I find this completely peverse.

Ultimately the entrenched economic model will fail as critical species interconnections collapse and the global ecosystem unravels.

I do not undestand why this must be presented as a conflict.

Science provides information, looks at cause and effect, explains natural processes, provides an estimate of how our actions might affect other organisms, et cetera.

Economics can take this information and determine the most efficient means of maximizing human comfort and minimizing harm to the rest of the natural world.

Neither sciene nor economics should determine the actual policies followed. It should be up to voters to detemine what they want, how long they can wait, whether short-term or long-term costs are most important, what they are willing to sacrifice, et cetera.

My primary objections to economics are the tendencies to (1) look at economic activity in terms of averages -- I'm sure I'm using the wrong term here, but  hope you will understand -- rather than looking at  how trends affect individuals, (2) assigning positive economic value to activities like medical treatment of individuals exposed to industrial chemicals or cleaning up oil spills, and (3) not internalizing ALL costs. I think that's it.

It just doesn't make sense to say all is well because stock values are rising or GM's profits are up -- even though they might have just fired a bunch of workers! All is well when people earn enough income to own a modest home, feed and clothe themselves, have access to health care, send their children to school, and eventually retire between 60 and 70. Economics would make more sense and provide more useful information if they could come up with better indicators of economic health, PERSUADE BUSINESS TO PURSUE BETTER POLICIES, AND PERSUADE THE MEDIA TO COVER THE BETTER INDICATORS.

So... perhaps it is up to science to provide BETTER information for economists to work with. And it is up to both scientists and economists to better educate people so they have as much information as possible for making informed decisions. I'm generally quite cynical, but I still believe -- as Thomas Paine said -- that a large number of informed citizens will generally make the right decision.

There is a severe shortage of informed citizens at the moment, and creating an imaginary conflict between science and economics will only confuse them more.

http://ffrf.org/day/

By the way...

I read Jared Diamond's "Collapse" quite some time ago, but if I remember correctly, the folks on Easter Island suffered because they chose to invest their resources in constructing religious monuments rather than feeding themselves.

Something about a competion between different groups -- the island was divided into pie-shaped territories so each group would have access to upland forest, agricultural land, and shoreline -- to see who could build the largest statues.

They had to cut down trees to accomplish this, which resulted in: severe erosion, drought, degradation of their agricultural land, loss of plant and animal species they relied on, lack of trees for building houses, lack of trees large enough for building canoes, and elimination of their ability to use canoes for fishing or evne escaping the hell they created for themselves. Large numbers of people starved, surrounded by sea life they could not collect for food. The most frightening part of this, described by Jared Diamond, is that Easter Island is an example of the hazards of "creeping normalcy". Each generation probably thought all was well and the surivors encountered by Europeans thought their island was alway devoid of large trees...

Science and economics must cooperate to make sure that human civilization -- globally -- is not terminated by "creeping normalcy".

http://ffrf.org/day/

You conclude:

There is a severe shortage of informed citizens at the moment, and creating an imaginary conflict between science and economics will only confuse them more.

Amen. For once I am in 100% agreement with you.

That "Science vs Economics" thing isn't a phrase I came up with, and I also don't find it helpful.

That said I remain unconvinced that mainstream economic theory applies to the big questions of sustainability at all. It's just questioning economics, that's all.

I'm all for getting along, but I think it's fair to determine that someone is making sense before taking their advice at face value. I was unconvinced about mainstream economics when I wrote the article and I'm unconvinced now.

I'm struck by the lack of efforts to actually articulate a defense of their position in the present conversation.

Saying it's bad to be confrontational misses the point. This way to test and improve ideas is to question them, not to make some sort of turf trade. Are some of you folks suggesting that I agree to believe in economics if they believe in climatology? This to me is not an a very useful way of constituting beliefs.

I don't think we climatologists should be offended by people's doubts about our conclusions, and I don't think economists should be offended either by mine. Genuine skepticism should be treated as valuable.

Climatology which emerged from a harmless scientific backwater is ill-prepared for this, to be sure. Economics, however, seems well-defended. Alas this defense seem not so much a system of ideas and evidence but as bluster, arguments from authority and even intimidation.

We aren't discussing the structure of society here, we are discussing models of that structure.
I'm proposing nothing more than re-evaluating and extending our models to deal with newly relevant conditions. Is that really so out of line?

mt

I thought the "defense of mainstream economics" became redundant, once we saw the Pigou Club, with its roster of "mainstream economists."

Noise since then has tended toward uninformed rants against an extreme strawman (there are those who deny "externalities" but they are hardly "mainstream.")

This goes back to my point that economics can prescribe policies that will elicit (relatively) predictable behaviours in the market. So, a Pigovian carbon tax (or a cap&trade) should be expected to decrease production of that negative "good" by "x". Or R&D subsidies would ameliorate it by "y", +/-.

Fine. Thanks. Good. Let's use those prescriptions. I am all for that contribution from mainstream economics. Who wouldn't be?

The problem is that we keep (reluctantly) bolting these "solutions" onto a vehicle that seems to be systemically producing ever more "externalities" that need to be dealt with - often alarmingly late in the game (SO2, CFC's, overfishing, etc.).

What's next? Nitrogen tax anyone? At least we will presumably have the "dance" well-rehearsed by then!

There is something wrong with "economics-as-usual" if it's solution is going to be to keep moving the vehicle in the same direction, ever faster, spewing out ever more negative issues to deal with. In a world of finite resources, finite waste sinks and finite regenerative capacity of ecologic services, an economic paradigm that abstracts those realities away with theoretical promises of substitutability, innovation and adaptation (and alchemy!) is deficient.

So, yes to the Pigou Club... Yes to the Montreal Protocol... Yes to SO2 cap&trade... Yes to fishing ITQ's... Thank economics and economists for their contribution to these successes... But don't think that their models of the "world" are "working"... although in the near-term, we've got to work with what is basically the only game in town...

The problem is that we keep (reluctantly) bolting these "solutions" onto a vehicle that seems to be systemically producing ever more "externalities" that need to be dealt with - often alarmingly late in the game (SO2, CFC's, overfishing, etc.).

That's the role of science, right?  To identify externalities?

The converse, to identify "sustainability," is the same thing, just viewed differently.  Like those optical illusions, one is a silhouette of the other, or vice versa.

Put differently, and maybe this is the key for "economics haters," you can put any sustainability argument into the language of economic externalities.

You can use the language of market boosters to explain when the market alone is not enough.

A few answers to direct questions posed to me:

First, I believe the $2 per ton (mode) estimate of environmental externalities that come from greenhouse gas emissions is probably more accurate than the $14 per ton median estimate and $93 per ton mean estimate found in the literature for reasons that are made clear in the text of Richard Tol's paper.  If you go beyond the executive summary - to page 2069 and then through to the end - you will see why.

Second, there are plenty of economic models that have been constructed that impose constraints on resource availability.  Economic models, after all, are simply chained if/then propositions, and there are hundreds of environmental economists out there - many of whom would feel quite at home here at Grist - who worry about resource availability and its impact on the economy.  My experience has been that, when evaluating these models, if you accept the "ifs," the "thens" are perfectly defensible.  Just, I might add, as it is climate models.  The real debate is usually not over the calculations but over the assumptions.

Third, it is conventional wisdom with the economics profession that there will be continuing improvements in per capita GDP.  I am not aware of any consensus on a 3% annual growth rate, however.  Different economists assume different figures for the sake of calculation given the uncertainties involved.

Now, let's move beyond the questions to the more interesting comments.

The contention that economics is not science depends on how you define the latter term, which is not all that clear to me.  For instance, if I study cheetahs for a living with a particular focus on how they interact with one another, and I have degrees in biology or some other related field, few would quibble with the claim that I am a scientist.  If I study humans for a living in the subset of their activities that involve commercial interactions with other humans, how is that different in any functional way?  Some economists, of course, are engaged in purely theoretical pursuits where proof or disproof is hard to come by.  But so are a lot of physicists.  That should not trigger scorn and dismissal.  

Regardless, this is a semantic dispute of little import.  Lots of disciplines do not qualify as science as some of you might define the term.  It doesn't mean they're engaged in the functional equivalent of voodoo.

The argument that there are other scenarios of the future used by the IPCC that are of equal or greater interest than the A1F1 I cited is true ... sort of.  I think the A1F1 scenario of the future was the most interesting for the purposes of this conversation because it yielded the greatest amount of warming, sea level rise, etc. - and seeing what society looks like under that scenario - better! - was quite striking to me.  

But let's look at the B1 scenario that a poster cited above.  It assumes the least amount of CO2 concentration in 2085 (527 parts per million), the least amount of temperature increase (2.1 degrees C), and the least amount of sea level rise (22 centimeters) of all the models considered.  It also assumes the least amount of energy use and the most amount of energy efficiency.  Here's what the world looks like in 2085 relative to 1990:
the population at risk from hunger declines from between 15-17% at present to 1.3%;
the population at risk from water stress increases from 26% to 28%;
the population at risk from coastal flooding increases from 0.2% to something between 0 and 0.5%;
the amount of cropland needed to feed the world drops from 11.6% of the global landmass to 7.8% of the same;
net per capita GDP in developing countries increases from $875 to $36,300 and from $14,500 to $65,700 in developed countries; and
total human mortality from hunger, malaria, and coastal flooding will decline from 4.4 million to 2.1 million.

Hence, it's unclear whether the "hottest" world is really worse off than the "coolest" world - at least as these scenarios are constructed.  The hottest world is better than the cooler world on the 2nd, 3rd, and 4th metric.  The coolest world is better than the hottest world on the 1st and last metric.  It's about the same regarding the 3rd metric.  But the differences between the two aren't that great even when one seems superior to the other.  I find that quite interesting.

Regarding the resource scarcity discussion, let's think like scientists for a moment.  The hypothesis at hand is that we're running out of resources.  How might we test that hypothesis?  Check to see whether resources are truly becoming scarcer.  How do we do that?  The best metric regarding relative scarcity is price.  What happening to resource prices?  After adjusting for inflation, resource prices trends - with only a very few exceptions - show declines (some quite dramatically), suggesting that resources aren't becoming more scarce.  In fact, the evidence suggests that they are becoming more abundant!

So what does one make of this?  Some of you seem to argue that things can become more scarce (relative to demand anyway) without the price for those things go up.  Well, we're in the realm of economics now, and I doubt that you can find a single economist who would generally agree with that proposition.  Common sense suggests otherwise.

Here's how most economists explain this bit of curious data.  Resources are simply those assets that can be used profitably for human benefit.  "Natural" resources, then, are a subset of the organic and inorganic material we think of as constituting the biological "environment," since not all of that material can be used profitably for human benefit.  But what can be used productively by man changes with time, technology, and material demand.  Waves, for example, are not harnessed for human benefit today and thus cannot really be thought of as a "natural resource."  But the technology to harness the movement of waves as a means to generate energy certainly exists, and the day when the cost of doing so is lower than the cost of alternative energy sources is the day when waves become a "natural resource."  Uranium, to cite another example, would not have been considered a resource a century ago but is most certainly thought of as such today.  Petroleum was not an important resource 150 years ago but today is thought of as perhaps the most important resource to modern society.  Thus, the "natural resource base" is itself a relative thing and its components vary greatly with time due to technology and material demand.  We have been creating resources - not depleting them - because our ability to identify natural assets that can be used profitably for human benefit has increased over time.

Empirical examination provides ample support for this particular hypothesis.  Economist Joseph Stiglitz in a classic study found that exogenous technological advances lead to long-run gains in per capita consumption in lesser developed countries under conditions of exponential population growth and limited, exhaustible stocks of natural resources (Joseph Stiglitz, "Growth and Exhaustible Natural Resources: Efficient and Optimal Growth Paths," Review of Economic Studies, Symposium on the Economics of Exhaustible Resources, 1974, pp. 123-38).  Economist Edward Barbier found that even in a growing economy, technological change is resource augmenting (Edward Barbier, "Endogenous Growth and Natural Resource Scarcity," EEEM Discussion Paper 9601, Department of Environmental Economics and Environmental Management, University of York (U.K.), 1996).

In sum, belief in mineral resource depletion strikes me as something akin to religious belief.  One has a very hard time marshalling evidence for it and a hard time avoiding all of the evidence against it, but belief in it from many quarters is completely unshakable.    

Two final housekeeping matters.  First, my engagement here does not signal that I implicitly believe that climate change is a significant problem.  It simply means that I hold out the hope that reasoned exchange between me and all of you might prove useful and intellectually worthwhile.  I actually like talking to the Left when I find myself in a serious and civil venue for it.  Second, I meant no offense by referring to Dr. Tobis as "Michael."  It was meant to signal friendly engagement - something I value.  

First, I believe the $2 per ton (mode) estimate of environmental externalities that come from greenhouse gas emissions is probably more accurate than the $14 per ton median estimate and $93 per ton mean estimate found in the literature for reasons that are made clear in the text of Richard Tol's paper.  If you go beyond the executive summary - to page 2069 and then through to the end - you will see why.

I guess my man-in-the-street boggle on this is that I think energy prices have risen more than would correspond to $2/ton in the last few (5?) years, with no decrease at all in CO2 emissions.

"no decrease at all in [global] CO2 emissions."

Yes they have ... demonstrating that it would take a major increase in the cost of fossil fuels to get even minor reductions in their use.  A very important point with a lot of implications.

...being a little bit familiar with Cato, don't you think it would make sense to slash the military budget and put the money into building intercity rail, light rail, or even just making governmental building zero emission?

Yes to the first proposition, no to the second.  My colleague Randal O'Toole, for instance, finds that the amount of greenhouse gases emitting by moving a person a mile over light rail is actualy greater than the amount of greenhouse gases emitted by moving a person a mile in a passenger vehicle.

Yes they have ... demonstrating that it would take a major increase in the cost of fossil fuels to get even minor reductions in their use.

For what it's worth, the other side of my man-in-the-street experience is that it's been trivially easy for me to slash my carbon footprint, while reducing my costs, and increasing my health and happiness.

I think pessimists (those who moan that "it'll cost us a trillion) just haven't tapped their own creativity.  Heck, maybe some are even afraid to open that door marked "creativity" for fear of where it will lead.

...and I'll check out your colleague's work.  My intellectual mentor was the late Professor Seymour Melman, who wrote for decades about the negative effects of military spending on the economy.  A libertarian social scientists once contacted me about his work, because Melman's work shows, in gory detail, how this particular governmental intervention in the economy has gone haywire.

I guess my general question was, wouldn't it be better to simply direct government money to build whatever it would take to decrease carbon emissions, rather than mess around with carbon taxes and cap-and-trade policies.  But I suppose that until you're convinced that it's that important, and you think market strategies wouldn't work -- which, knowing the thinking at Cato, would be quite an interesting situation -- then you probably wouldn't much like direct investment either.

A cap & trade program would be preferable to a command-and-control regulatory policy for all the conventional reasons that we need not go into here.  It would also be preferable to having the taxpayers foot the bill to pay for carbon reduction policies.  The feds are unlikely to know how to most efficiently spend that money to reduce emissions (markets figure those things out) or to resist the lobbying pressure to turn the whole thing into a giant pork barrel.

But most preferable - in my opinion - is to do nothing.  I hold that reducing greenhouse gas emissions will do more harm to human wellbeing than to live under a business as usual world given the current state of scientific knowledge.  Since I've already gone into why that is elsewhere, I won't hit do so again here unless invited.

Jon, you ask:

Wouldn't it be better to simply direct government money to build whatever it would take to decrease carbon emissions, rather than mess around with carbon taxes and cap-and-trade policies.

Given that there are hundreds of ways that carbon emissions can be reduced, could you please explain to us the process under which you envisage Big Brother the Government choosing among the different technologies, spending the money, and ensuring that both the contracts and the benefits alre allocated equitably?

The last time the Government attempted to intervene big in the energy area, for example, it wasted billions upon billions on synfuels.

I think that was the word you used on another occasion, Ron.  Now, evidently, the Federal government at this point is not being pushed by the grassroots enough to avoid the boondoggles of ethanol and synfuels, but the mistakes of government should not be used as a bludgeon, just as I'm not advocating the elimination of capitalism because of the mortgage mess.

So, having said that, how does government "pick" technologies, which seems to be the word that keeps coming up.  To some extent, it depends on how much of an emergency we think we're in.  If it's a big enough emergency, we discuss it, lobby, interests fight, and solutions -- say, putting solar energy systems on every roof -- let's say the solar technology the government picked would not the best choice.  Maybe it's the third-best choice.  (Actually, you could avoid all that by just giving every building owner a voucher to buy solar from whomever the building owner wanted, so it wouldn't even be picking).  But let's assume it was picking.  Even then, if the emergency is bad enough, then even third-worse would be better than nothing.

There's another idea which has been burbling around in my head, which is part-way between "command-and-control", as Jerry calls it, and the market -- building a limited set of a particular, picked technology, say, solar thermal farms, again maybe not with the best technology for bad political reasons -- but at least it would give engineers and managers the confidence and experience they would need to want to try more in the future.  I fear that one of the main reasons coal is preferred around the world is because engineers and managers are comfortable with it -- it's like the old idea that an IT manager would never get fired for picking IBM (or Microsoft now).

So, I'm not saying the process would be most efficient or optimal, but compared to the alternative, it might be better.

certainly doing war, it creates industries and the output of those industries has been used to successfully prosecute wars, at least through WWII.  And that is the only area in which Americans seem to feel comfortable letting the government intervene directly in the economy.  

But in any case, the examples around the world are quite demonstrative, and Americans are people just like everybody else, so there is no reason we can't learn from others.  Would there be dumb mistakes, screw ups, pork barrel?  Sure, just like in the private sector.  But it's better than the alternative, doing nothing (and I'm not saying instituting carbon taxes and cap-and-trade is not doing nothing, it's doing quite a bit, I just think that direct investment may be better, but that's obviously an unsubstantiated hypothesis at this point).

...the Russian historian Alexander Gerschenkron set off an interesting debate within political science circles when he published his essay, "The advantages of backwardness".  His basic thesis was that the further away a country was from the leading country, the more the government, or other centralized institutions, such as banks, had to become involved in the "catch-up" effort.  

In other words, it depended on the speed with which a country had to catch-up -- the most extreme case being the USSR, but the Koreans and Japanese also used various modes of intervention at various times in their history, as have others.

Similarly, if the speed with which we need to mitigate global warming is high, then that would indicate that the government would need to be more intimately involved in the economy.  Of course, the reverse operates as well -- if we have a decent amount of time, the market can be relied on more.

The biggest danger, the way I see it, is that if the market-oriented solutions -- say carbon tax/cap-and-trade -- don't work, and we find ourselves in the midst of a series of horrible disasters, then the government could very well step in and basically be forced to virtually take over the entire economy.  So -- and this may be a bit too abstract -- it might be better to have more government intervention now, because that will mean that much less government intervention will be required later.

Jon, I am tempted to quote back P.J. O'Rourke (Parliament of Whores: A Lone Humorist Attempts to Explain the Entire U.S. Government), but I'll take your suggestion seriously.

Let's assume, for argument's sake, that some crash program of investment (but why only investment?) is needed to reduce carbon emissions. I still don't see how that automatically leads to government command and control being the preferred option. The USSR, Korea and Japan were war-torn, semi-feudal societies at the time that they began their great leap forwards (if that term even can be applied to the USSR). The United States, with its highly developed capitalist system, and extensive and sophisticated physical and financial infrastructure (not to mention educated and skilled workforce), is a completely different kind of place. Its people and companies probably have more ideas, and can mobilize resources much more efficiently, than can the government.

You pooh-pooh market-oriented solutions like a carbon tax or a cap-and-trade, but the beauty of such policies is that each person, each economic agent, can decide best how he or she is going to economize in light of the policy. I shudder to think what boondoggles the U.S. Congress would think up if instead they were handed over a huge amount of the nation's treasure and asked to "solve" the climate problem. Are you worried about the influence of energy companies on policy makers now? (I hope so!) Just imagine their influence with a hugely expanded budget envelope.

Does that mean I see no role for government expenditure? Of course not. There is probably much more that could be done through increasing spending on R&D, for one.

I seem to recall that USSR was a world superpower, or was that a dream of some rabid communist?

That alone qualified them as a superpower. And they had a successful space program (also linked to their military resources). As we learned after 1990, the rest of their economic accomplishments were (think agriculture) were rather exaggerated.

Ron writes:Given that there are hundreds of ways that carbon emissions can be reduced, could you please explain to us the process under which you envisage Big Brother the Government choosing among the different technologies, spending the money, and ensuring that both the contracts and the benefits alre allocated equitably?

How about "democracy"? One person, one vote, electing people who respond to people's needs and guard against corruption. This does happen! Think of social security and medicare as successful government programs. Where government is corrupt in the economic sphere I would lay at the feet of undue market influence.

Markets operate according to the principle one dollar, one vote, thereby distorting the effects of wealth and priviledge. They are also blind, unaccountable, and just as open to corruption as government.

While markets can bring jobs and lead to wealth creation for a few, they also lead to exaggerated class division and inequality. But governments can redistribute wealth, in effect making markets acceptable to the majority of people. However, it is only through the struggle of working people, particularly through labor organizing, that we have such things as weekends, vacations and the minimum wage. These benefits we take for granted were opposed, often violently, by the business class. A good place for the uninitiated to learn about our economic and social history is Howard Zinn's, People's History of the U.S.

I am not talking about your strawman: "the sacred free market". I'm talking about broad-based instruments (e.g., a carbon tax) versus command-and-control, government-determined investment (e.g., in nuclear power, biofuels, whatever).

By "hundreds of ways", I mean distributed decisions. In order to avoid paying a carbon tax, any individual might: (1) turn down the thermostat and put on a heavier sweater; (2) move closer to work or school; (3) buy a smaller car; (4) bicycle or walk mor often; (5) replace their lightbulbs with more-efficient ones; (6) turn off their lights more often; (7) invest in a solar water heater; (8) ... you get the picture.

If you guys are prepared to debate those sets of choices, I will. But if this is simply going to be a "The free market doesn't deal with pollution!" rant, leave me out of it.

I find this whole thread to be rather fascinating, for conflicting reasons, both ultimately tied to the idea that the "economy" and the "environment" exist in a state of conflict.  Michael Tobis - standing in as a surrogate for the latter - does, I believe, overstate the gloom & doom scenario (and plays to Taylor's hands) with his implicit anti-growth post that essentially says "you can't have your cake and eat it too".  At core, I don't see that Taylor disagrees with Tobis' assertions about the cake - he just disagrees on whether we should be focusing on the having or the eating.

But both positions are, at core, based on a flawed economic theory.  Namely, that capital is efficiently allocated.  If it is, that means that any change from the status quo is associated with economic pain.  The "environmentalist" position is that this pain pales in comparison to the environmental pain we will otherwise feel and is therefore worth the cost.  The "economist" position is that - per Julian Simon's famous bets - the magic of markets always surprises and we shouldn't put too much stock in the gloomanddoomsters.  (ergo, "scientists shouldn't make policy".)  

But the underlying assumption is flawed - and the fact that both camps have opposite conclusions from the same underlying flawed assumption is irrelevant.  It's like a debate about what kind of superpowers the magic elves in my closet have - stupid, except for the consequences of the time we spend wasting on the debate.  

Consider: the biggest industry in the country isn't subject to market forces (the $650 BN electric industry) and is now one half as fuel efficient as it was in 1910.  They haven't allocated capital efficiently since the (first) Roosevelt administration.  Simply returning to 1910 efficiency levels would save $100 billion in fuel expense and lower greenhouse gas emissions by 20%.  In other words, massive reductions in AGW threats and economic growth.  Meanwhile, industrials who preferentially allocate capital towards their core activities have long starved their energy managers for capital, leaving massive opportunities for high-return, energy efficiency investments.  

In other sectors, one finds that the subsidies to oil & gas vastly exceed the subsidies to any clean energy source, causing further distortion of capital efficiency which - if corrected - would cause substantial shifts towards cleaner alternatives.

Much of our environmental and energy policy has been compromised by this false fight between "economists" and "environmentalists", who end up causing undue pain to both camps since the only thing they agree on is that someone must lose.  (Witness the Clean Air Act, which has been directly responsible for driving up energy costs AND increasing CO2 emissions.)  I think the time has come to do better - and while I'm intrigued by the debate above, it's also grown rather tiresome.  The more time we spend in academic magic elf debates is less time we have to focus on the real environmental and economic challenges of our day.  Sustaining the debate isn't in the interests of either - but it will take more thoughtful approaches from both sides to break the logjam.

Let's think of governance again.  Let's say there was a bill to do something similar to my solar energy proposal -- provide every building owner with a voucher to put solar energy systems on buildings.  And suppose a few 100 billion dollars per year were available to do that.  People would still choose, the government would provide the capital -- as Sean said, capital is being misallocated, let's allocate it.

Now, let's say we have a bill with RFS and a bill with the solar vouchers -- I contend that the solar voucher bill would be a good way to decrease support for the RFS bill.  I think one of the motiviations for the RFS bill, besides the obvious self-interest, is the desire to do something.  So I just leave it as something to think about, that there is a "do something" motivation to some policy proposals, and we should propose better do something's so that ethanol doesn't have a field day.

Sean, I have a feeling that you feel that the reason capital is misallocated is that the government distorts markets, and much of that is true.  But sometimes the markets, even if not warped, would still misallocate.  It's a little difficult to tell which is worse, government or the private sector -- witness the subsidization of suburban sprawl while the cities are allowed to decline -- and since this is the real world, we can't do experiments and figure out who is the worst offender.  Another huge waste of capital for the last 50 years has been the military budget, for instance.  

So there's plenty of blame to go around.  So it seems reasonable to me to say, "OK, let's unwarp the markets, let's use market-based systems like carbon taxes, and let's do some direct investments."  That way, we're covering all of our bases, and getting going with mitigating global warming (and plenty of other problems besides).

That is the bottomline of the fallacy swarm of "free" market, libertarian economics based political theories.

It is behind the very popular Ron Paul's surprising call to abolish social security.

Growth is good.  Taxes hinder growth.  Taxes are bad.  Government always spends money more foolishly than business.  

If government must do business, contract it out to real businesses (like Halliburton and blackwater).  Free marketeers wish to sell the national highway system to Halliburton or some other Dubai based corporate entity.

Growth is good, the simple self evidently true (for fungi and human culture as well) fact of life is not so simple as it sounds.  

Pure growth in human population, is that good?  Nope.

Growth in pure consumption, is that good?  More kwh or gallons of oil used per citizen?  Nope.

Growth in quality of life, health care, nutrition, education, exersize, happiness, fullfillment, financial security?  That is the growth you want.

Growth in productivity and efficiency, standard of living based on all the real quality of life related factors.  

We aren't just fungi growing out underground to spread our spores eventually (not to say we are better), but even that largest organism on the planet  (a fungi colony discovered in the UP of Michigan) a seemingly simple colony of the most primitive of life forms.  Even that sluggish behemoth, adjusts it's growth in order to pop up some mushroom caps and spore out.  Spore out dood!

Arguments based on pure growth as some ultimate good, fall upon these rocks.  And are thus dashed to pieces in the powerful waves of bloggerel.

http://amazngdrx.blogharbor.com/blog

I liked Sean's post.  Especially the first half, because the bit about 1910 efficiency levels begged incredulity a bit ;-)

To me it's all about the broad engagement we have on the problem, and the amazing right-middle-left dialog we see on carbon taxes and economic solutions.

I think Mr. Taylor's vulnerability, as he tries to shape an extreme as a moderate one, is when he jumps from saying:

I am all for internalizing negative environmental externalities. So are most economists.

... to trying to wiggle out of that again.  He's all for internalizing negative environmental externalities ... except when he can undermine their severity or overplay their costs.

I'm not sure you all caught his other contradiction either, when he first endorsed $2/ton taxes, and then said essentially "of course they wouldn't do anything" - they'd have to be much higher.

But I actually don't worry too much.  I don't think we'll convince Mr. Taylor (or at least we won't change his public opinion).  We can on the other hand take some joy from the fact that he is the far right, most free market, placeholder.  Look how far that placeholder has come!

The key thing to remember is that it is a tendency and not a law.  It is true sometimes, in some markets, and not in others.

(My new Asus Eee PC uses 1/10th the power of my old web-surfing desktop ... can I possibly surf 10x more with my newfound efficiency?  I don't think so.)

Is accusing people of having a fetish about something (and then not getting that something right), or assuming people's political party affiliations (and not getting that right either) being polite?

Yes, it's true that if carbon taxes were to start to bite, the before-tax price (and perhaps the after-tax price) of petroleum (and coal) would come down. But then so would production. Less would be produced from high-cost areas ("leaving carbon in the ground").

Some adjustment probably would have to be made to the tax rates from time to time. Alternatively, with a cap-and-trade system, the price of CO2 quota would adjust in line with supply and demand.

But focusing only on supply-side solutions -- e.g., reducing the cost of solar-generated electricity to match that of electricity produced from fossil fuels -- also has its pitfalls. Lower the price, and people will want more. If the economy cannot keep up with the pace of demand, then the marginal electricity supply will still for some time come from ... fossil fuels.

From Jerry Taylor's post

Hence, it's unclear whether the "hottest" world is really worse off than the "coolest" world - at least as these scenarios are constructed.

This construction, of course, ignores the one biggest fear about abrupt climate change: that it is, in fact, abrupt, that it is happening at a rate that does not allow the natural world to adapt without interfering rather dramatically with the resilience of the Earth's ecosystems.

(Pile that on top of the standard destruction of ecosystems during the industrial era, with (as Leakey and Lewin suggest in The Sixth Extinction) a species-extinction rate 1000 times the norm throughout most of natural history...)

http://www.dailykos.com/User/Cassiodorus

Yes, it's true that if carbon taxes were to start to bite, the before-tax price (and perhaps the after-tax price) of petroleum (and coal) would come down. But then so would production. Less would be produced from high-cost areas ("leaving carbon in the ground").

How is it inferred that "production would go down"? We live in a world-system, in which taxes on one set of carbon consumers make prices cheaper for another set who don't have to pay 'em.  Once again, in today's fossil-fuel economy, fossil fuels follow Say's Law.  Don't make me repeat this again.

http://www.dailykos.com/User/Cassiodorus

LegumeSam asks:

How is it inferred that "production would go down"? We live in a world-system, in which taxes on one set of carbon consumers make prices cheaper for another set who don't have to pay 'em.

I was assuming a world in which a majority of countries would be subject to a tax or an overall cap on their emissions. I presumed you were, too.

If you are assuming no such thing, then whether the reductions in U.S. oil use are achieved indirectly, through a tax, or through investing in non-carbon alternatives, the result in the rest of the world will be the same, no? That is to say, the USA's reduced consumption will exert a downward pressure on the price of oil globally, spurring demand elsewhere -- but also discouraging exploration, development and, over the longer term, production -- until a new supply & demand equilibrium is reached.

This is to sort of 'debunk' Jerry Taylor's Cato Institute libertarian position.

Insurance companies are run by who? Statisticians and economists, some of the most important 'players' in the realm of public policy; you know, what with the whole payout and weighing of risks.

They are extremely worried about the effects of global warming, because they are 'on the ground' and they will be losing money. That's part one.

Part two is that Cato Institute is supposedly run by the same people. Well, maybe not statisticians, which may be the root of the problem. And they're not worried about GW at all. They (Jerry Taylor's position) are actually CHEERY about it. Seems that they're either absolutely misguided, or funded by people that tell them to be cheery. I find it hard to be convinced by their position, which uses MODE as a reasonable statistic.

After all, there could easily be 100 estimates, with two of them producing the same number. If no other estimates agree on the same exact number, than those two are MODE, which means NOTHING.

I have never seen ONE statistician using mode, which is why one of the posters had to google it. I cannot side with Jerry Taylor on this one. And because of that and many other reasons (including underlying assumptions of typical economics), I cannot relinquish 'public policy' to economists, particularly at the Cato Institute.

P.S. environmental economics, which I have seen mentioned several times, are not ECOLOGICAL economics. Environmental economics are a subset of  the common, neoclassical economics, with the typical assumptions, applied to resource use and commodity production.

At the same time, ecological economics are based on a different set of assumptions, that ground economic theory to biogeophysical reality, rather than hypotheses working off supply/demand curves.

    I have never seen a proposal as to how a carbon tax could practically be applied in a way that was not punitive to poor people.

    In order to change the behavior of those who cause most of the problem (the well off), it would have to be so high that it would destroy the lives of the poor.  Talk of tax rebates are meaningless if the checks arrive at homes where the inhabitants have starved to death months earlier.

    There is one tax that would work.  A whopping income tax would reduce the ability of the well off to consume so much.

    And the money could be applied globally to helping end poverty in a sustainable fashion.

    As to the market, it has never worked very well for the poor, since the rich can never resist the temptation to manipulate it, all the while crying "free, free".

patrick in Beijing

atreyger, maybe Jerry seems cheery because Patrick Michaels, of warming denier fame is the main global warming "expert" who publishes for Cato, and Jerry is actually ...what's the word... ecotopian compared to Michaels.

I also wanted to make the point that business economists can be a whole different bunch then think-tank economists, particularly at Cato, which is so anti-government that they don't like the military budget -- so they're actually on the "correct" side on military issues, in my opinion.  business economists are much more concerned with what is going on on the ground.

And thanks for differentiating ecological from environmental economists -- are Herman Daly and Joshua Farley ecological economists, then?

Ron, when LegumeSam started talking about fungi, I couldn't help thinking about your post about ethanol subsidies.  One of my biggest fears is that the craze for liquid fuels to power the infernal combustion engine will destroy what's left of the world's ecosystems (and agricultural land).  Just seems like fungi out of control, or algae, or whatever organism you want to use.  To me, the bigger question about ethanol is exactly the need for liquid fuels -- and the only way to get away from them is either renewably electrified trains, or renewably electrified cars, no?

That is to say, the USA's reduced consumption will exert a downward pressure on the price of oil globally, spurring demand elsewhere -- but also discouraging exploration, development and, over the longer term, production

Cheaper oil = more economic growth = more oil consumption = more exploration

More expensive oil = less economic growth = government retraction of oil taxes as part of its job of economic maintenance.

http://www.dailykos.com/User/Cassiodorus

..made the reference about fungi to which I alluded earlier, not LegumeSam...and hey, LegumeSam, glad you found this thread!

.

http://www.dailykos.com/User/Cassiodorus

Yes and yes

The version they prefer is contracted out military industrial defense.  Like blackwater.

With Halliburton moving to Dubai and the Iraq wAr set to wind down, how will the military contractors get payed?  By raising gas prices.

The corporate libertarian (neoconservative) ordered world would pay an extra 2 bucks per gallon to oil corporations and they would pay contractors to keep the endless war for oil going.  Until it's all pumped out.  No government forces needed anymore.

Then highway travel would be payed for by the mile to the contractor who runs the highway system.  but no fuel taxes.  Hehey.  paradise.

http://amazngdrx.blogharbor.com/blog

This could easily be accomplished by making it illegal to walk upright.

Society can afford not to be "economic" when everyone's basic needs are satisfied (or at least with a social form that actively pursues common basic need satisfaction).  Eating, sleeping, that sort of thing.  Nobody has a right to eat, mostly for lack of effort in establishing such a thing.

http://www.dailykos.com/User/Cassiodorus

There are two ways to solve ecological dilemmas such as that posed by abrupt climate change.

Get rid of the people.  The people are causing the problem.  No people, no environmental problem.

Get rid of the environment.  If we didn't have a real live environment (one that had to be part of everyone's lives to the extent that it was NECESSARY to create a global, ecologically sustainable, society) there wouldn't be any concept of environmental disaster, and nobody would worry about it.

Can anyone think of a third?

http://www.dailykos.com/User/Cassiodorus

Hey LegumeSam,

       It ain't the poor people who are causing the problem, it's the well off and the leaders of the well off swells who are causing the problem.  So your first choice should be to get rid of the rich.  This is unlikely until things get worse, so is not a viable solution at the moment.

      As to number two, a lot of us get confused about the real world versus cyberspace anyway.  Perhaps the Matrix would be a good model for us (as long as it's real life impact was minimalized).

patrick in Beijing

Your economic rules are not everyone else's, and certainly there is no genetically-determined rule that everyone is an "economic actor" in the neoclassical sense from birth onward.

I never said there was such a thing, or that our economic nature was our only nature.  Indeed behavioral economics documents some interesting things about cooperation as well.

(For instance we have a bias toward cooperation, even when it costs us "profit," but this bias is strongest when we are face to face with another person.  The more "remote" a person seems, the less the cooperative impulse.)

Obviously my point is that some people want to ignore, or worse, rewrite our nature.

(I believe police work within our nature, and not in opposition to it.)

I funny thought occurs, as I sip my coffee.  I imagine a really off the wall question I might as Jerry Taylor ... consider it 1/2 cup of coffee talking:

Behavioral economics tells us that we humans have a bias toward cooperation.  Recent twin studies tell us that this cooperation bias has itself a genetic bias.

Have you ever paused to think about how people with a low (or high) genetic bias for cooperation might cluster at certain organizations?

Wouldn't it be amusing to get some skin scrapes at iconic institutions of the right and left and then run the scans?

I kind of wonder how this will play out in future decades (if we do not turn away from science).  I wonder if balanced-moderates will start to question how much influence extremes (outside the median nature) should influence things?

... I guess the joke would be on me if the median, mainstream, rejected that science.

I'll score myself half credit.  I got that "moderate proposals" have a history, and that your post was meant to be ironic ... but I did not know the Swift reference at all.

But I guess you don't recognize sarcasm in return, Legume? One variant of responses to any "Modest Proposal" is to embrace it and extend it to its logical conclusion.

A bit of (I have a feeling unwelcome) advice, L.S.: you'll get along better in life if instead of assuming that the people with whom you choose to argue are stupid ignoramuses, far beneath you, that you assume (at least until proven otherwise)that they possess some intelligence, learning and wisdom.

Pangolin, I'm not going to attempt to once again explain the difference between the application of economic principles in policy making and the fright-masked straw-man notion of tooth-and-claw economics that you and several others keep holding up in an attempt to discredit the profession.

However, you do ask a good question, one that shows some of the problems that economists try to grapple with when devising policies:

Why then are we freaked out about the government replacing my air conditioner with a geo-exchange [heating, ventilating and air conditioning] HVAC unit or putting solar panels on my roof? Somebody?

"Freaked out" is probably too strong a word. But let's deconstruct the problem.

Especially if we are talking about a federal policy, clearly there are numerous geographical issues that immediately come to the fore -- namely, that only people living in certain parts of the country need both air conditioning and heating. Many people living in upper New England, the upper North-west and Alaska do not need an air conditioner, and many parts of Hawaii and some areas of California (where a ceiling fan suffices) have both low cooling and low heating needs. So a policy to subsidize replacing air conditioners will only benefit people in certain parts of the country. In effect, taxpayers in Maine will be cross-subsidizing home-owners in Texas.

Even within areas of the country where air conditioning has become a must-have item (somehow people before the 20th century survived without them), the relative cheapness of operation of a geo-exchange HVAC will differ according to local climate and the efficiency of the air conditioner that it replaces. That is to say, in some additional parts of the country, paying to replace an existing AC with a geo-exchange HVAC would not rate high in terms of cost-effectiveness. What might be more cost-effective? Probably a lot of investments, including installing window awnings, or better insulation.

The policy would probably be regressive: that is to say, the uptake of the subsidy would likely be much greater among relatively affluent home-owners than people renting small apartments and using detachable ACs (especially if the subsidy covered only part of the costs of the installation, since that part of the geo-exchange HVAC that is not mobile would stay behind when the renter moved). Moreover, replacing an existing AC with a geo-exchange HVAC in a private home would likely increase the value of that property. Hence, those home-owners would get an added bonus when they decide to sell their homes.

Indeed, realizing that they could recoup some of the cost of replacing an existing AC with a geo-exchange HVAC when they decide to sell their homes, some home-owners may have already been planning to make the investment on their own. Hence, for some cases, the subsidy will be a pure transfer, since the recipients will have already decided to make the investment in any case.

The government would in any case need to be careful that the subsidy does not create artificial scarcity in the good whose consumption it is tring to encourage. History is full of such examples, such as when the Dutch Government in the 1970s decided it would be a dandy idea to subsidize the replacement of single-pane with double-pane windows. Since demand was boosted suddenly, and the Dutch double-pane-window industry was already working flat out, all the subsidy did was to raise the price and drive most of the business to Belgian producers, who were the nearest ones with spare capacity.

Think also about the consequences of too-quickly expanding the capacity of the industry to meet that demand. For a couple of years, manufacturers of geo-exchange HVACs would make out like bandits. But then, once the market was saturated, there would be a bust.

There would likely be some claw-back in the gains in energy efficiency. Recipients of the new, more-efficient ACs, might decide to pay as much as they did before for air-conditioning, by keeping their homes cooler, or the ACs running more hours of the day.

**

One of the advantages of (dare I use the term again?), "market-based approaches to policy" is that they avoid many of these problems. Because no particular "solution" is favored, the effect on the markets for the different possible ways to deal with the problem (installing ceiling fans, dressing lighter and enduring warmer homes, improving insulation, planting trees around the house) is more diffuse: the subsidy does not simply end up being frittered away through a rise in the price of the targeted item.

Something like a carbon tax would also simultaneously both encourage fuel and electricity savings in areas with high heating, as well as cooling, demand -- i.e., its burden would be more equitably spread around the country.

In short, it is not that economists are loath to governments doing anything. Rather, they seek to steer policy makers away from promulgating policies that will yield fewer benefits for society than other ones.

But I guess you don't recognize sarcasm in return, Legume?

I thought I was responding to sarcasm; these ideas about changing the genetic code and passing a law against walking upright and such.  I just figured it was more of the same.  Oh well.  Sorry, whatever.

http://www.dailykos.com/User/Cassiodorus

   Yeah I got it....

   Did you think my matrix idea was a serious response???

patrick in Beijing

Ron, I do appreciate having an economist here to dialog with, though this thread is growing so long that your answer to Pangolin might perhaps be better in a productive new thread.

It is definately good to have concrete examples to show how abstract ideology plays out in the real world. For the record, I do think carbon taxes and trading have an important part to play. But I'm not convinced from your examples that they show that government is a relatively poor regulator/distributer of pollution/goods.

For instance, I think Jon has already answered your "one-size-does-not-fit-all" objections to "command-and-control" (by the way, a perjorative designed to stifle debate) subsidies. Namely, the government could distribute funding to localities to tackle their own energy use using their local knowledge base. (Further, the government could employ the services of economists to ensure that equity issues are addressed as much as possible.)

Neither does the example of subsidized windows from Holland lead to any radical conclusion, other than localities may need to import goods from other localities. Subsidized renewable energy in Germany, for instance, has made them leaders in the field.

Finally, the Jevons pardox that you touch on in point 7 leads me to the conclusion that we need a closer integration between government and citizens, rather than a deepened reliance on the market.

Thanks for your reasoned reply. If I can find time, I will develop a separate string based on my reply to Pangolin. I think we are coming closer to agreement. In theory, Governments can be efficient aggregators of their citizens' desires. In practice, they can often be very bad at it.

Re-distributing funding to localities to solve their local carbon-abatement problems according to their own lights is a very different pproach than Jon Rynn's initial response, which was for government-led investment in government-chosen "solutions", and very different from Pangolin's suggestion for a very technology-specific subsidy.

My reference to the Dutch example was simply to illustrate that when governments decide to subsidize things, they'd better make sure the market conditions are right. To quote my source on this episode (Dirk J. Wolfson): "Targetting crucially depends on whether one can get the relevant elasticities under control; if not, subsidization amounts to shooting from the hip." ("Towards a Theory of Subsidization", 1990). In this case, the subsidy was almost like throwing money down the drain, since the price of the targetted good rose by almost as much as the subsidy. Its impact on the budget was significant; its impact on consumer behaviour was insignificant.

Personally, like you, I have no problem that foreign producers, as opposed to Dutch producers, were the main beneficiaries of the subsidy. But many people (I uspect Jon, for one, though he can correct me if I am wrong) feel strongly that if something is subsidized, that subsidy should benefit only domestic producers and consumers.

As for Germany, and the fact that their subsidization of renewable energy has made them leaders in the field, I have two responses:

That tells me nothing. If you subsidize any domestic industry enough (and you have smart people working for it), it will make that industry a leader in the field. That begs the question of whether the subsidy was cost-effective. In particular, is the aim of the subsidy to increase, for example, more wind-generated power, or to build up a domestic wind-turbine industry? During the late 1980s and throughout the 1990s, European governments threw a lot of money at their wind-turbine industries, each trying to get the better of their neighbour. It was extremely wasteful, and only ended when EU competition authorities put a stop to it.

Subsidies to PRODUCTION OF TECHNOLOGIES are one of the reasons why negotiators in the WTO now are having a hard time getting developing countries to agree to liberalize trade in goods related to renewable energy. Brazil and India, for example, are now significant producers of wind turbines and components. But they are struggling against the market leaders (Danish companies in particular), who gained that lead in no small part due to government help. This is an unfortunate situation. It would benefit the world for all countries to apply zero or low tariffs on renewable-energy technologies, but thanks to (understandable) suspicion by developing countries that they will never be able to compete with the pocketbooks of developed countries, they are holding back and refusing to sign up.

Ron, you bring up a whole slew of interesting issues, here are a few:

I think Colin's idea of funneling money to localities, and letting the localities figure out how best to uses renewable finance capital sounds great.  I was using the example of national vouchers just to bring up the idea of using government as the source of finance capital, but not the "deciders" when it comes to specific technology (and that goes double for the Feds, who should just be distributing capitgal).  On the other hand, if the government was doing this, it would still have to have certain guidelines of how to use the money, obviously, which leads me to

I don't know if there is a difference, in your opinion, between a subsidy -- that is, paying part of the price of something that somebody buys -- and an outright grant.  If the government gives an outright grant, it opens up the interesting possibility (at least to me) that the government could keep certain property rights in that good -- say, a geoexchange unit -- to the effect that the geoexchange unit could not be sold to someone else, except with the building, and if replaced would have to be properly recycled.  Which leads to

One advantage of, to somewhat contradict my first point, having everyone use one particular kind of technology, say geoexchange, would be that noone would have a relative advantage over another owner of a building that didn't have one.  It may also be that you would want to have a level of grants that was so high that you could simply do everything: geoexchange, solar, retrofitting, tree planting.

As for the Dutch example, yes, I think that subsidies (or grants) should be part of an overall strategy of establishing a coherent sustainable manufacturing base, and should not be simply bought from outside the region (at least, not most of it); although in the European case, I would consider Europe as one economy.  But this need not lead to no use of foreign technolgy; the Koreans and Chinese have been very effective in allowing in foreign factories, as long as eventually "natives" learn the technology, and even take over the factory.  That's sort of a win-win.  Which leads to

I can understand why India et al are leary of completely free trade in renewable technology, and perhaps you can give your take on this: the idea that infant industries need protection for a while.  Again, put in the context of a holistic effort to build a manufacturing sector, and also embedded in a performance-based economic policy, such as the Koreans have, this can work -- as long as it's not forever.  The Koreans gave their conglomerates (chaebols) very favorable trade policies, but if the chaebol screwed up they would actually dismantle it and give the better chaebols the various pieces.  That might be extreme, but it shows that performance can be a part of infant industry protection.

I absolutely concur that you don't want boom-and-bust cycles in machinery production -- that's what often leads to recessions, or even depressions.  The US machine tool industry (and many other industrial producers) has been whipsawed by boom-and-bust cycles, much to their detriment.  The solution would seem to be to introduce the subsidies/grants slowly at first, to give the producers the time to ramp up.

Finally, (phew!) I want to reiterate that all of these possibilities depend on the speed with which we need to attack climate change.  We need to do more explicit "picking" if the hour is getting too late.