Carbon Footprints and Central Planning
By Arnold Kling
Megan McArdle discusses the issue of whether urban hipsters or suburban ticky-tackies have the more carbon-intensive lifestyle.
This is one of those questions for which the answer is too difficult to calculate. For example, there was a story making the rounds about a month or so ago to the effect that if you walk to the supermarket, you will use up so many calories that the additional food you eat will ultimately require enough carbon-emitting activities that you would be more “green” by taking your car instead.
These are the sorts of calculation issues that vex central planners. Nobel Laureate Wassily Leontief tried to solve the problem with input-output tables. Those work fine, other than that they assume away substitution and innovation. In other words, they are not reliable at all.
A similar problem affects calculations of energy savings. Does that Prius really save energy, or does it use additional energy in the assembly process that, in present-value terms, offsets the energy savings while driving the car? Do biofuels really save energy, or does the energy used in agriculture undermine any savings?
The beauty of markets is that they make these calculations for you. The price of energy and the price of carbon emissions will find their way into the prices of goods and services, in effect calculating your carbon footprint and your energy footprint for you. Pigou Club members will argue that we need taxes to raise the prices of energy and carbon emissions. However, if you have what you think is the right tax, the market will do the rest.
If you think you have a choice between a low-cost lifestyle and a lifestyle with a low carbon footprint, chances are if you choose the latter you will be getting neither. Central planners cannot outsmart the market, and neither can you.