If governments really believed that anthropogenic CO2 emissions will seriously harm their citizens or subjects, and if they were really pursuing the general welfare, isn’t it prima facie obvious that reducing these emissions would be their first priority, as opposed to competing priorities based on debunked, prescientific economic theories?
Looking at what is happening in practice provides a good introduction to how governments actually work and what they pursue. Western governments are “protecting” their subjects from less costly imports of solar panels and other “green” products, in order to reduce competition and keep prices higher for domestic producers. Joe Biden’s “smart” investments favor inputs “Made in America” for green projects. He has maintained most of Trump’s solar panel tariffs. With a view to increasing tariffs on EVs made in China, the European Union government just announced an “anti-subsidy investigation” into the extent to which they are subsidized by the Chinese taxpayers. The US government also impose tariffs on Chinese EV. (See “China Attacks EU’s ‘Naked Protectionist Act’ on Electric Cars,” Financial Times, September 14, 2023; “Chinese Carmakers Are Under Scrutiny in Europe,” The Economist, September 14, 2023.)
Chinese, American, and European EVs are all subsidized by their manufacturers’ governments. In passing, it is a strange argument that subsidies from one’s own government, that is, from one’s fellow taxpayers, are deemed good, while subsidies from foreign taxpayers are bad. This idea is based on the same 17th-century mercantilist and dirigiste theories.
But why subsidize with one hand and push up prices through custom tariffs with the other? Either the US and EU governments don’t believe in the large risks officially attributed to anthropogenic CO2 emissions, or else they are not benevolently pursuing the general welfare, or both. Much economic theory and historical evidence suggest that governments as we know them (“the state”) do not pursue anything like the “general welfare,” if this expression has any meaning. Instead, they pursue power and, for that purpose, favor the cronies and clientele on which they depend for support and propaganda, such as domestic manufacturing lobbies, to the detriment of the general public. Public-choice analysis (including Anthony de Jasay’s theory) tries to explain the state as it is, not how it should ideally be according to such or such philosopher-king, social engineer, or armchair ideologue.
It is true that the state’s corporate cronies pay a price for their subsidies and protection against foreign competitors. They are subject to government mandates to increase their production of EVs. For example, the Wall Street Journal reports that “Ford lost nearly $60,000 on each EV it sold in 2023’s first quarter (“An Auto Strike Made in Washington,” September 15, 2023). This churning—subsidizing domestic producers, protecting them against foreign competitors, bossing them around and undermining their profitability—is paid by American taxpayers, consumers, and shareholders. That the earth is reportedly burning does not seem to be a real priority for governments; they are just in the business of power as usual.
If half of that is true, it would be a tragic illusion to let governments grab more power to fight another trumpeted emergency that is quite certainly less threatening than the preservation of a free society.
READER COMMENTS
Richard W Fulmer
Sep 16 2023 at 11:46am
If America’s legislators really thought that climate change is an existential crisis and not just a political opportunity, they would risk trade union ire and repeal the Merchant Marine Act of 1920 (the “Jones Act”) and the Passenger Vessel Services Act of 1886. They would risk angering Iowan farmers and end ethanol subsidies and mandates. They would get serious about improving the management of the forests in our state and national parks. They would stop blocking domestic mining and production, which pushes operations to less environmentally conscious countries.
Thomas L Hutcheson
Sep 16 2023 at 11:57am
Doing those things would be good even if CO2 accumulation in the atmosphere had no costs at all.
Richard W Fulmer
Sep 16 2023 at 12:48pm
Agreed. All would increase efficiency and reduce waste. No doubt there are plenty of other examples of “no regrets” actions we could take that would make things better and signal that Washington is taking the problem seriously.
Instead, our leaders are sending the very clear message that the solution to global warming is for them to fly to international conferences on private jets where they will determine how average citizens will be forced to deal with the problem.
Consider, for example, the C40 Citizens Leadership Group – a global network of 96 mayors including those from New York, Los Angeles, Chicago, Houston, Phoenix, and Philadelphia – that proposes that by 2030, people will be allowed no meat, dairy products, or private vehicles, and will be limited to “three new clothing items per year.”
https://www.c40.org/
https://expose-news.com/wp-content/uploads/2023/06/Arup-C40-The-Future-of-Urban-Consumption-in-a-1-5C-World.pdf
Thomas L Hutcheson
Sep 17 2023 at 8:05am
Temperamentally, I’m disinclined to think that people who see problem W with large costs X requiring measure additional state power Y in power to effect measure Z as being dishonest and really only interested in increasing state power even when I think they are mistaken about the magnitude of the costs X and the effectiveness of Z. I thought this about COVID, and I think it about CO2 accumulation in the atmosphere, immigration, urban crime, import restrictions, “wokeness”, etc.
But even if this is true for some advocates of Z, my inclination is to take their advocacy at face value, for some of the people they address so take them, and argue that their estimate of X is not X but only X’ (if zero then zero) and that the cost of Z exceeds X’, the proper measure (that passes a cost benefit analysis test) is Z’. In particular, I think it is a logical and practical flaw to cite an exaggerated estimate of X as an argument that X’=0 or that the costs of Z’ exceed X’.
Thomas Hutcheson
Sep 16 2023 at 11:47am
If governments really believed that anthropogenic CO2 emissions will seriously harm their citizens or subjects, and if they were really pursuing the general welfare, isn’t it prima facie obvious that reducing these emissions would be their first priority, as opposed to competing priorities based on debunked, prescientific economic theories?
And if the analyst (“governments”?) had though clearly and consistently, yes
Thomas L Hutcheson
Sep 16 2023 at 11:52am
Protection did not get any less bad when its costs run through less efficiency at reducing CO2 emissions than when it is reducing real income by distorting the relative prices of importables.
Pierre Lemieux
Sep 16 2023 at 12:01pm
Thomas: You’re right, but it shows what are the priorities of governments. Climate intervention offers one more excuse for protectionism (and dirigisme in general).
Thomas L Hutcheson
Sep 16 2023 at 11:55am
“If half of that is true, it would be a tragic illusion to let governments grab more power to fight another trumpeted emergency that is quite certainly less threatening than the preservation of a free society.”
This is the “political” reason I favor and think other should favor taxing net CO2 emissions: less room for ancillary damage.
Richard W Fulmer
Sep 16 2023 at 12:53pm
How do you propose ensuring that carbon taxes don’t push production to countries with few or no environmental restrictions? Consider, for example, that China’s GDP is lower than that of the U.S., yet it emits more CO2 than the U.S. and the EU combined. Shifting production to China means more emissions, not less.
Thomas L Hutcheson
Sep 16 2023 at 6:51pm
Border adjustment duties on imports from countries that do not have equivalent taxation of net emissions.
Richard W Fulmer
Sep 17 2023 at 10:50am
We import tens of millions of different products every year. Determining the carbon footprint of each would be a monumental task. In the end, the adjustment duties would be as arbitrary as were prices in the USSR.
Thomas L Hutcheson
Sep 18 2023 at 11:00am
Even pretty crude measures should be enough to persuade others to adopt what is also the least cost way for them to address CO2 accumulation.
But if you think taxation of net emissions of CO2 is not the best policy, what is?
Pierre Lemieux
Sep 18 2023 at 11:12am
Thomas: Assuming that global warming is tantamount to an imminent asteroid hit, and that current states are small and innocuous, the answer suggested by your question would be obvious and I would be with you. If one of these conditions does not obtain, it seems that the answer would be the same as to the question, “But if you think the taxation of photon pollution by immoral advertising is not the best policy to fight eternal damnation, what is?” Otherwise, you have to explain why some externalities matter and others don’t.
Matthias
Sep 16 2023 at 7:32pm
You can structure any carbon tax like a VAT. In the sense that you make it a tax on consumption, not on production.
Then it doesn’t matter if production shifts to China.
Richard W Fulmer
Sep 16 2023 at 8:50pm
I think that you’ve got the economics right but the politics wrong. Raising taxes on evil oil companies gets votes, raising them on drivers doesn’t (even though both result in higher prices at the pumps). In addition, every time the price of gasoline goes up – which is, presumably, what Biden wants – he taps the Strategic Oil Reserve or runs to OPEC and Venezuela to beg them to increase production.
Like immigration, climate change is a great vote getter and money raiser. Politicians don’t want to “let a crisis go to waste,” and a forever crisis is made to order. Why rock the boat?
Thomas L Hutcheson
Sep 17 2023 at 8:14am
Actually, it does matter if production shifts to China since the accumulation of CO2 in te atmosphere is equally harmful from whatever source. That is why on should argue for a universal excise tax on net CO2 emissions (not a VAT) not a single country tax on net CO2 emissions.
Richard W Fulmer
Sep 17 2023 at 10:55am
Getting every nation to agree, much less honestly enforce, a universal excise tax is wildly unlikely. Better to concentrate on responses that are within the realm of possibility such as taking “no regrets” actions such as those I listed above, researching scalable and dispatchable energy sources, and adaptation.
Matthias
Sep 16 2023 at 7:40pm
I like a carbon tax, too. Also because the guy who reacts to the tax by just driving less, using less aircon in summer and less heating in winter gets rewarded for that action automatically and without paperwork. (Assuming that petrol and electricity etc sold to retail customers will automatically include the carbon tax already.)
Compare that with a almost any subsidy regime, where you’d have to buy one of the government’s chosen winners, lik say solar panels or an electric car, to qualify. And if you pick something else, like switching from a driving a car to riding a bike or moving closer to work, or putting on a jumper instead of turning up the heat, you don’t get rewarded.
Jose Pablo
Sep 18 2023 at 10:22pm
Yeah, maybe. But “subsidies” are “good” and get you votes, and “taxes” are “bad” (except, obviously, when you tax “other people I hate”) and take votes away from you.
That’s the reason why you can expect the government to subsidize gas comsumption when gas prices increase or, even, subsidizing coal if a coal producing state became a swing state.
Trying to understand government behavior with the “rationality framework” that you seem to apply, can only drive you to not understand government behavior at all.
Scott Sumner
Sep 16 2023 at 1:34pm
“Trust the science” doesn’t seem to apply to the science of economics. Is the theory of global warming more firmly established than the theory of comparative advantage? I doubt it. In both fields, only a tiny minority dissent from the consensus view.
Todd Kreider
Sep 16 2023 at 3:55pm
These are different.
Comparative advantage is obvious from theory and later observation. While most climate scientists thing the global warming over the past 70 or 100 years is partly or fully due to human activity (fossil fuels) 20% surveyed in 2015 said they didn’t know by how much or said “it couldn’t be known.” 35% thought between 70% and 100%+ was caused by humans. 20% thought less than 50% human caused.
With respect to temperature rise to 2100 assuming nothing changes – a ridiculous assumption – only 1% of climate scientists thought another 3.5C or higher. That is, the result of the doubling of CO2 in the atmosphere by the end of the century. 5% responded another 2.5C by 2100. (60% declined respond to this climate sensitivity question.)
Bart Strengers, Bart Verheggen and Kees Vringer 2016
https://www.pbl.nl/sites/default/files/downloads/pbl-2015-climate-science-survey-questions-and-responses_01731.pdf
Jose Pablo
Sep 18 2023 at 6:42pm
As you are well aware, we only hear the mantra of “trust the science” from government representatives when “trusting the science” result in a bigger / more interventionist government.
This is not the case with “comparative advantage” so you can’t expect the government supporting “trusting the science in this case”, but with climate change (or covid) …
Paraphrasing Adam Smith: “If scientific evidence suggests that getting a haircut is detrimental to your health, you shouldn’t anticipate your barber advocating for trusting the science.””
Thomas L Hutcheson
Sep 16 2023 at 7:00pm
Is this the forthcoming post you mentioned in a reply on Economics in Half …?
Clearly it is your post, but I though you were going to go through the application of your preferred externality response protocol to CO2 accumulation. And I was going to ask that at the first step, the measurement of the costs that you distinguish uncertainties around the measurement of the physical effects (temperature rise, ocean acidification, sea level rise, extreme weather events) from estimates of the costs those events would entail.
Matthias
Sep 16 2023 at 7:43pm
The article would have been stronger if it had carefully omitted any opinion on how big (or how small) of a deal the author view climate change as.
Just pointing out the hypocrisy and letter the reader draw their own conclusion would go a long way towards a bigger impact.
Pierre Lemieux
Sep 16 2023 at 8:42pm
I’ll have a word with him.
Mactoul
Sep 16 2023 at 9:21pm
What does it mean to say that governments pursue power?
Factions within the regime may competitively pursue power but surely government as such can’t pursue power.
Also, when government are in business of pursuing power, why the entire world is not a totalitarian dictatorship?
So, in my opinion, this explanation is not satisfactory. Rather, some people in government seek to realize their vision of particular (outdated) economic theory while others seek to realize the low-carbon economy.
The concept of competitive visions that individuals seek to realize also conforms nicely with methodological individualism.
MarkW
Sep 17 2023 at 11:47am
Factions within the regime may competitively pursue power but surely government as such can’t pursue power.
Of course it can. A government can seek to expand its scope, tax revenues, and level of control of the people and organizations that live within its borders. And that’s to say nothing about seeking to increase the power of its military and ability to throw its weight around in foreign affairs.
Jose Pablo
Sep 18 2023 at 6:05pm
“surely government as such can’t pursue power.”
How do you name “the activity of favor the cronies and clientele on which they depend for support and propaganda in order to win the next election”
Isn’t that “pursuing power”?
Do you really believe that “some fractions” want to “make America great again” while other fractions want to “Restore the soul of the nation”?
steve
Sep 17 2023 at 7:14pm
Meh. I think this is mostly just how things work. In order to win elections and stay in office you need to keep the interests groups happy. That sometimes means conflicting goals.
Steve
Jim Glass
Sep 17 2023 at 11:08pm
No! A government’s first and commanding priority must always be to keep itself in power!
After all, if it’s not in power then, even with all the sincere good intentions in the world, it can’t do a single thing to avert global warming or any other threat to it’s citizenry. It’s survival is #1 … for the citizenry’s sake! QED.
I’m kidding, of course … but also, I’m not. This is a dilemma of politics.
All brave politicians who stand up and speak hard truths (“the entitlements we are paying to you are going to come back and clobber us all in 20 years”) get eliminated from the gene pool. Then who’s left? Do sincere and well-meaning politicians and governments help their people by committing suicide?
Maybe the citizenry has some agency and responsibility in this?
Some of us may remember that when Hillary Clinton was First Lady, her PR image was all “children, children, it takes a village to raise the children, especially poor children…” Then when she suddenly realized she was a Yankees fan and so decided to run for the Senate as a New Yorker, one of her very first campaign actions was to endorse the northeast milk cartel — to raise the price of milk, yes, for children, especially poor children.
When she was quickly called out on this her people responded, “Look, she needs the upstate farm vote to get elected, and if she doesn’t get elected she can’t help any children.”
Which struck many folk as being quite cynical — but also, actually very true. If someone every figures a way around this dilemma, let the world know.
Personally I’m with H. L . Menken, I don’t blame the politicians but the system…
“Democracy is the theory that the common people know what they want, and deserve to get it good and hard”.
Richard Fulmer
Sep 18 2023 at 8:47am
Sounds like yet another good reason to do as much through the marketplace and as little through politics and the democratic process as possible.
Thomas L Hutcheson
Sep 18 2023 at 11:05am
“As possible”
There is not yet a market in CO2 emissions. A tax on such emissions is the closest thing to such a missing market *I* can think of. YMMV
Jose Pablo
Sep 18 2023 at 5:52pm
“Chinese, American, and European EVs are all subsidized by their manufacturers’ governments. In passing, it is a strange argument that subsidies from one’s own government, that is, from one’s fellow taxpayers, are deemed good, while subsidies from foreign taxpayers are bad. “
This is just brilliant …
Thomas L Hutcheson
Sep 19 2023 at 12:07pm
The subsidies are bad. Taxing net emissions of CO2 is the way to go. With a low deadweight loss revenue source, a per mile driven in an EV might be a not-too-bad second best, but one would never suberize the production or purchase of an EV.
Jose Pablo
Sep 20 2023 at 10:17pm
“The subsidies are bad”
Not for the government delivering them, since subsidies can buy you votes (in particular if you can link a “voter friendly narrative” to these subsidies)
“Taxing net emissions of CO2 is the way to go”
Explain this, carefully, to Macron and to the “gilets jaunes”
Forgetting about practicalities, as you seem to suggest, a market of CO2 emission rights is a better option than taxing CO2. In particular, practicalities aside, if the maximum amount of CO2 emission is determined by market participants (the people) and not by governments.
Thomas Hutcheson
Sep 19 2023 at 12:00pm
Pierre:
Thomas: Assuming that global warming is tantamount to an imminent asteroid hit, and that current states are small and innocuous …”
My question is Not about extinction, it’s about a problem worth say 1% of world GDP/year (but some people will benefit) for Y years and a countermeasure with dead weight loss of say 1/2% of World GDP/year (greater for some people than others) with no less costly countermeasure in sight and A LOT of more costly countermeasures in sight.
I do not understand positions:
1) Global warming is not as bad as extinction
2) We can’t measure costs and benefits because they vary in sign and magnitude between persons.
Pierre Lemieux
Sep 19 2023 at 7:35pm
Thomas: These are big questions and I fear that trying to answer them will lead me to repeat the summaries and the links I have already given in this post or elsewhere on this blog. But let me try, and tell me if you have another solution.
1) Imminent extinction is a relatively simple case. Assume that public goods cannot be produced privately (for a critique, see de Jasay’s Public Good Free Ride). Presumably all rational individuals agree with a general rule to the effect that if the lives of 100% of mankind are imminently threatened and governments can prevent that, they have to take action. No such presumption exists for global warming.
2) Remember that interindividual comparisons of utility are scientifically impossible. My evaluation is no better nor worse than yours–or Mossadegh’s as Francis Bator would say. A social welfare function, like that of Mossadegh, must be imposed (Francis M. Bator, “The Simple Analytics of Welfare Maximization,” American Economic Review [March 1957]). The second-best, an estimation of the individuals’ “willingness to pay,” i.e., what they would pay if there were a market, is conceptually impossible; there is no price and quantity (GDP) data that can tell us if welfare (“real national income”) has increased or decreased. This was demonstrated notably by Paul Samuelson in “Evaluation of Real National Income,” Oxford Economic Papers [Jan. 1950]. Paul Samuelson’s, “Social Indifference Curves,” Quarterly Journal of Economics [February 1956], further showed that the Hicks-Kaldor test does not work. Hence the crash of welfare economics and cost-benefit analysis, although many economists have apparently not got the memo.
3) Assuming that all these conceptual problems don’t exist, another problem with weighing social costs and benefits is the data problem but, also and mainly, the incentives to get the results one wants. Have you ever seen a government, after a cost-benefit analysis of one of its pet projects, change its mind and declare that “the social costs being higher than the social benefits, your government has decided not to go ahead with the project.”
Pierre Lemieux
Sep 19 2023 at 8:00pm
Thomas: Let me add a passage I often quote (including to you, I fear!) from Anthony de Jasay’s The State:
I would be interested to know how you square with this approach some ad hoc state interventions for an apparent problem, the scope of which is not clear especially if you also consider the (more decentralized) option of mitigation.
Thomas L Hutcheson
Sep 19 2023 at 11:15pm
Perhaps we must leave it at this, but I remain in the dark about how Libertarian’s think about the large and growling costs imposed on the world economy by the accumulation of CO2 in the atmosphere.
I ask and I seem to hear generalities not cashed out to the specific issue I see.
Comments are closed.