RE: Economists’ Statement on Carbon Dividends

I just got an email asking me to sign on to an open letter arguing for some carbon tax policies. I’m seeing some push back from (smart, economically literate) Facebook friends, but I think it’s a viable step in the right direction.

Here’s the statement paraphrased:

We think global warming is an important and urgent issue and we recommend these five things:

1. A carbon tax is the best, most cost-efficient way to do as much about carbon as needs to be done. [For a given level of carbon reduction, I agree. How much carbon reduction should happen (and how much at government behest) I am deeply agnostic about.]

2. We think this should be phased in over time and should be revenue neutral. [Yes on both points, but the rest of the statement makes it seem like they’re talking about a pretty short time horizon. I’m not sure how fast is too fast, but I’m sure there’s such thing.]

3. A carbon tax is more efficient than a set of specific regulations. [Certainly!] It’s also less likely to be subject to changing political winds. [Is it though?]

4. We should also apply a carbon tax to imported goods. This would reward energy-efficient American firms and prod other countries to follow suit. [Hmmmm… I can’t really disagree with the general principle, but this sounds like it will require bureaucratic oversight that will be subject to regulatory capture. On the other hand, we’ve already got that.]

5. We should give the revenue collected back to U.S. citizens, to offset increases in energy prices. [Okay, but if it’s going to be revenue neutral and come with a transfer scheme, that’s going to take some detangling!]

I buy into the notion that carbon emissions create large scale externalities that will probably be more bad than good on balance. Not universally bad, mind you. And not something that humanity won’t ultimately adapt to. But I think the people who will face the brunt of the bad outcomes will be the world’s poor (who we should help migrate to better climates!).

I don’t think we can just impose “the right” carbon tax and have everything come out just right. Even though I routinely draw out the case with a supply and demand graph in class, the truth is that nobody has access to those curves in real life. But a small tax can serve to reduce the inefficiency of pollution even if we don’t get it exactly right.

The revenue neutral part is important–we’re currently taxing lots of things we actually want more of (like investment). So if we can cut those taxes by taxing things we want less of (pollution), we’re reducing two sources of inefficiency in the current setup. Of course you and I have bolder views about what policy should look like in 100 years, but restricted to a 10 year window, a revenue neutral carbon tax looks pretty good to me.

The letter dramatically over-simplifies things. Climate change is probably a problem, but probably not as big a problem as proffered by proponents of proposals to prepare for apocalypse. It’s not clear to me that we have a good idea of a) all of the effects (good and bad), b) how people will adapt, and c) how people will adapt to a changing policy regimen.

Figuring out how to handle the tax on imports will be difficult and rife with rent seeking. Unmentioned is the impact on exports. If all our trading partners follow a similar policy, there’s no problem, but in the mean time there’s a tension that will probably be resolved with some unfortunate bit of rent seeking.

I’m sure most reasonable people would agree that instantaneous change would probably be unduly costly, but it’s not clear what the right speed of implementation is.

There are some miscellaneous rhetorical points I have issue with, but I suspect those are in there to throw a bone to people who aren’t me.

I hope that 10 years from now this open letter looks a bit silly. But I also hope that 10 years from now pollution taxes start to replace more inefficient taxes. On balance, I’m happy to see the letter prodding us in that direction.

Economists are special, but what about Palestinians and American blacks?

I’ve got the post-Thanksgiving flu. I know which toddlers are guilty of infecting me, and which aunts and uncles are responsible for this egregious assault on my happiness. Revenge will be sweet.

I’d like to get to Warren’s smackdown of my reparations proposal and also to Matthew’s thoughts on justified violence against the state (which were indirectly related to my own post on Ferguson), but first I’ve got to get to two interesting topics that have piqued my interest.

The first is Irfan Khawaja’s recent critique over at Policy of Truth of Jason Brennan’s new book on voting. As usual, Khawaja brings up a number of great points (too many, actually, for a lowly ethnographic enthusiast like me), and they deserve to be read by all (be sure to check out the ‘comments’ thread, too).

Here is an excerpt (Khawaja has flipped the tired script of many American academics by bringing in a fresh perspective):

I can’t work through all the details here, but take a look at Brennan’s argument in light of the preceding. Either my East Jerusalem case is a counter-example to his thesis, or it’s a defeater for it. In the first case, it refutes the thesis as stated. In the second case, it suggests that the thesis is highly misleading as stated. Given that, my argument requires that Brennan qualify his claims about the ethics of voting in ways that take more explicit stock of cases like the East Jerusalem one–something that would substantially change the “flavor” of his theory.

Brennan’s work has, of course, gotten a lot of excellent treatment in libertarian circles because of both his blogging activities (hint, hint, slackers) and because libertarians have a long, storied distrust of democratic politics (though this is largely an anarchistic distrust rather than the conservative-aristocratic one we North Americans think we are familiar with).

Switching gears, I also need to comment on an interesting paper (pdf) about the “Superiority of Economists” I came across over at MR. It was written by two sociologists and an economist, and it has a number of excellent insights (MR‘s link to the paper was broken, but MR also provided a link to comments by economist Paul Krugman, and his link to the paper was unbroken).

Most of the paper is a rehash of arguments about economics relative to the other social sciences (and the humanities) that libertarians have been having for a long time. (In my anecdotal experience, libertarian economists are quickest to defend the profession of economics from detractors, but they are also the quickest to defend the other social sciences from detractors (and, more importantly, incorporate non-economics research into their own). Leftist and conservative economists, by contrast, condescendingly acquiesce to attacks from other disciplines, but are also very, very disdainful of The Others’ contributions to research.) Libertarian economists generally share the same suspicions as The Other disciplines about the ability of economics to imitate the physical sciences using mathematical models (or that these models are even indicative of how humans “work”). See Warren’s piece (pdf) in Econ Journal Watch for more on these suspicions.

The last section before the conclusion (“A life of their own”) is really good and totally worth the click. It’s about economists and their relationship to everybody else in their society (this paper is made better by the fact that it is written by French academics with an intimate understanding of life in both the US and France, just like some other scholar that we all know and loathe love).

On page 18 the paper cites a few studies and lab experiments which have purportedly shown that people who study economics are, on the whole, less likely to cooperate than everybody else. There are a number of implications that the paper goes over (“does economics attract a certain type of personality?”, for example), but I wanted to focus on what is not discussed in the paper: The fact that economists probably have a different (actually, a more coherent and precise) understanding of the meaning of cooperation. Many criticisms of economics are clearly made of straw. One of the things that initially attracted me to libertarianism was the intelligent, well-informed critiques of economics as I then understood it (“homo economicus“) that were given by libertarians.

I also learned, on page 19 and contra Dr Amburgey’s repeated assertions, that economists are politically (and decisively) to the Left of the average American voter.

Another fascinating page 19 insight is that there is more income inequality ($57k gap between the top 10% and the median) in economics relative to other disciplines, but on this point the authors lose a golden opportunity to do some real sociological analysis (the authors focus instead, and predictably, on the economics profession’s recent prosperity as a whole relative to other academic disciplines; that is to say, on the income inequality between economics and The Others within academia). Earlier in the paper (7-14) an organizational comparison between economics and The Others highlighted the fact that the economics community tends to be more hierarchical, more incestuous, and possesses a “unitary disciplinary core,” which means that virtually all graduate schools teach the same concepts. The Others, in contrast, are “more decentralized, less cohesive, and [possess] less stable prestige rankings.” (9)

The most basic insight that stood out to me when I read the data on incomes was that the disparities and organizational structures of the social sciences and humanities represent a microcosm of society as a whole (pick any ole society you’d like): When rigid hierarchies are enforced, conformity and parochialism (incestuous is too strong a word here) arise, income inequality is more prevalent, and the pecking orders are more entrenched.

In contrast, societies that are “more decentralized and less cohesive” have more variety, much less deference to an established authority (such as a pecking order), and less income inequality ($42k gap between the top 10% of sociologists and the median). There are less women in economics relative to the other disciplines, and the median economist almost has the same income as a top 10% sociologist ($103k to $118k, a difference of only $15k).

Well, this post has already gone on for far too long (I hope to use it as a springboard for future musings) but I will end by noting that on page 23 the paper points out that economics is a very moral discipline, which is something non-libertarian economists vehemently deny. Libertarian economists, on the other hand, have been pointing this out for centuries.