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Quotation of the Day…

… is from page 282 of James Buchanan‘s 1979 collection What Should Economists Do? (H. Geoffrey Brennan & Robert D. Tollison, eds); specifically, it’s from Buchanan’s 1979 postscript – “Retrospect and Prospect” – to this volume (original emphasis):

Economics is a very peculiar “science.” As previously noted, there is a “science” of economics, but it bears little or no similarity to the physical-biological sciences, as the latter are normally conceived. Economics is “predictive” in a totally different sense, and the indirect implications for “control” are not comparable. The problems in economics are not amenable to scientific solutions, and progress is not to be expected by pushing back the frontiers of science.

DBx: When Buchanan writes that “problems in economics are not amenable to scientific solutions” he means that problems in economic policy are not amenable to scientific solutions. This important theme was struck often by Buchanan (as it was and continues to be struck often by Austrians).

It’s an utter delusion, for example, to think that the question “Should governments impose carbon taxes and, if so, how high or low should these taxes be?” is a scientific question in the same way that are the questions “How many earth-day’s does Venus take to orbit the sun?” or “Do carbon emissions have a greenhouse effect on the surface of the earth?” The clue to the principal reason for the difference is the word “should” in the first question. The subjective preferences of all of the country’s (or all of the globe’s) individual human beings matter here – and these preferences (1) are known – to the extent that they are known at all – only to each of the individuals who hold them, (2) differ across individuals, and (3) change over time.

Because reducing carbon emissions is costly, the benefits of reducing these emission must be weighed against the costs of doing so – but benefits and costs are ultimately reckoned subjectively only by individuals. If only because the weights that Smith attaches to these benefits and these costs differ from the weights that Jones attaches to these benefits and these costs, there is no objectively determinable answer to the question”Should governments impose carbon taxes and, if so, how high or low should these taxes be?” Smith and Jones might discuss the matter and come to agreement on a policy. And if Smith and Jones are the only people affected by the policy, then the outcome agreed to by Smith and Jones would be the economically correct one. But this ‘solution’ is no more objectively correct than is the solution to the question “How many gallons of vanilla ice cream should be produced in 2019 in the state of Delaware?” Both outcomes are the result of bargaining among the affected parties; neither outcome is a ‘scientific’ outcome that is, even if only in principle, discoverable beforehand by an unbiased third-party analyst wearing a lab coat or equipped with the latest econometric tools.

The absence of any scientific answer to the carbon-tax question becomes even more obvious – or should become more obvious – when account is taken of the fact that many more than two people are affected by the policy and, hence, actual discussion and meaningful bargaining among all affected parties is practically impossible. Further complications arise from the reality that not only do different individuals have different (and changing) preferences, but different individuals also have different assessments of the ‘objective’ consequences both of government interventions and of market responses to these interventions.

These last complications can be reduced by genuine scientific analysis of the likes of the physical consequences of carbon emissions, and also genuine scientific analysis of the operation of markets and the likely consequences of this operation. Yet as long as individuals differ in their assessments of these ‘objective’ consequences – or until science can bring everyone into agreement on the likely ‘objective’ consequences – differing assessments of these ‘objective’ consequences itself prevents any scientific solution to the policy question “Should governments impose carbon taxes and, if so, how high or low should these taxes be?”