… is from pages 265-266 of Ron Bailey’s insightful and learned 2015 book, The End of Doom:

It is unfortunately the case that government meddling on a global scale has massively distorted energy markets through pervasive subsidies, mandates, and price controls.  The result is retarded innovation in the technologies of energy generation.  A big first step toward renovating our energy supply systems would be to eliminate those impediments to understanding the real competitive benefits and costs of the production and use of energy.  Ultimately, the better and far more effective way to ameliorate and avert future climate change is to mobilize human ingenuity through market processes to drive down the costs of no-carbon energy sources.

DBx: Among the many reasons that I oppose a Pigouvian tax on carbon emissions is that calling for such a tax strikes me as being akin, say, to homeowners whose homes have been routinely vandalized calling on the vandals to vandalize also the factories that produce the spray paint, sledge hammers, and crow bars used by vandals.  Such vandalization would indeed reduce the amounts produced of these outputs and thereby reduce the amount of vandalism suffered by homeowners by making vandalism more costly.  (I note, by the way, that the affected factory outputs are used not only for bad purposes but also, and mainly, for good purposes.)

My vandal analogy is imperfect, I know, but it does point to the consistent failure of most Pigouvian-tax proponents to account for public-choice considerations.

Let’s assume, contrary to fact, that it’s possible to accurately calculate the difference between what Pigou called (in his The Economics of Welfare) the “marginal social net product” of industries that use carbon energy as an input and the “marginal private net product” of those industries and then, also, to accurately calculate the tax (or, more realistically, the vast and ever-changing schedule of taxes) that would cause all producers to reduce their outputs to ‘socially optimal’ levels.  (“Product” here means, loosely speaking, ‘rate of output.’)  What good reason is there to believe that the same agency – the state – that has routinely distorted energy, and other, markets in ways that few can doubt deliver concentrated private benefits to the relatively few at the larger expense of the general public will reliably implement and enforce such an optimal tax?  In what part of the analysis is it shown that government becomes a faithful and apolitical social engineer?  All such demonstrations, as far I’m aware, include the assumption of a miracle.

Once again, if it’s an acceptable scientific move simply to assume that individuals in institutional setting X act with more knowledge and less self-interest than they act with in institutional setting Y, then it’s an acceptable scientific move to assume that individuals in institutional setting Y act with more knowledge and less self-interest than they act with in institutional setting X.  It is, therefore, no longer justifiable to conclude that any problems that arise from the fact that individuals in institutional setting Y act with too little information and too much self-interest will be solved by empowering individuals in institutional setting X to override the decisions of individuals in institutional setting Y.  (Let X be “government” and Y be “private sector.”)


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