Just bribe the country to do the right thing

[jducoeur]

One of the problems facing the climate-change debate has been the current political shibboleths, and specifically the anti-tax one. Every sensible economist is clear that the *right* way to deal with it is a flat carbon tax: it would address the problem head-on, would probably be least likely to distort markets in unfortunate ways, and would likely be pretty effective. But of course, anything called a "tax" gets peoples' backs up, so we instead wind up with the Democratic leadership creating a classic muddle, in the form of the wildly overcomplex cap-and-trade model. (Which is *probably* better than nothing, but I honestly can't say that with complete confidence.)

So I'm intrigued to read (in last week's Economist) about Maria Cantwell's "cap-and-dividend" proposal. From the description given there (and I need to learn more about the details), it sounds delightfully sensible. Basically, the notion is that any carbon cap will drive up prices: indeed, that's the point of any sensible proposal. So fine: auction off limited permits for all carbon-based fuels, and then bribe everybody with the proceeds. Seriously: take the money from the auctions, and distribute it to the populace. Their back-of-the-napkin kickback calculation is $1000 for a family of four.

It's not perfect, mind -- a carbon-tax system would still be simpler than a cap-based one -- but it's still far simpler than cap-and-trade. If the auction is mandatory and universal, it's likely to succeed in the goal of raising prices and thereby reducing carbon output. And the bribe (which is effectively a progressive redistributive tax, but a very well-disguised one) could be *very* popular if it was marketed properly.

I confess that I'm seesawing between being appalled at the concept, and admiring its elegance. The citizens'-responsibility puritan in me is vaguely unhappy at the notion of bribing the citizens to get them to agree to a system that will help everyone. But the economist in me just loves the way it aligns incentives, and the armchair political quarterback admires the simplicity of the message...

Comments

[jducoeur]

Once you bring in international players, this becomes a domestic tax. Consumers will buy products from China, and factories will relocate to India.

On the one hand, this is a good argument by classical trade theory. OTOH, the same argument applies to essentially *all* domestic regulations that increase the cost of goods -- which is most of them. World trade manages to stumble along successfully despite that.

That is, you're certainly correct that this would put domestic players at some sort of competitive disadvantage; however, I think you're overstating the end result. It would definitely make things messier, in ways not terribly unlike the way labor regulations do. Like labor regulations, it would become a long-standing bone of contention and argument, would serve as the excuse for periodic trade spats, and most likely would eventually result in some sort of compensatory tariffs if it turned out to make a major difference.

That's not an ideal situation by any means, but I don't see it as especially catastrophic in likely practice. Definitely an argument to make one pause and reflect a bit, and a *fine* argument for trying to craft a system that works at the global level, rather than hacking it at the local one. But waiting for global political change all at once is pretty much the surest recipe to make sure that nothing ever happens; in practice, these things have generally proceeded in fits and starts, beginning in the "first world" and extending slowly outwards from there. I don't see any particular reason to believe this case is likely to be different in the long run.

You have to choose who you're going to trust: Jim Hansen, or Richard Lindzen?

Tsk; strawman argument.

The true answer is that *mostly* I trust The Economist. It's a complex world, and I can't claim to have time to become sufficiently expert on most topics, so like everyone I need to choose my preferred data filter. On a wide variety of topics, I've found The Economist to be calmer, more honest, more balanced and harder to panic than any other source I am aware of. So if we're going to talk about primary influences, that almost certainly counts as my number-one.

On the specific topic of climate change, I've watched over the course of a couple of decades as the magazine has very slowly shifted from being broadly skeptical to broadly certain that *something* is going on here; again, that's based on a broad array of input data from a lot of sources, including the various refutations of the data. I'd summarize their general viewpoint as middle-ground: that the chicken-littles are generally overstating their case, but that it is nonetheless clear that things are broadly warming, and that this is already beginning to have a broad array of side-effects.

I find their presentation consistent with the rest of the information I've found, middle-ground and pragmatic as I generally expect from them, and generally convincing.

Domestic environmental taxes won't end our consumption -- it'll just move the production to someplace with a worse environmental record. How is that a positive thing?

Again, strawman. Nobody's talking about ending consumption. The point here is *reducing* fossil-fuel-based energy consumption, and I suspect the proposal at hand would be moderately successful at that. Yes, there would be side-effects that have to be mitigated (no plan ever survives contact with reality), and no, it's not a panacea. But it's extremely unlikely that *all* of that energy usage would be shifted offshore; indeed, I find it pretty unlikely that more than a modest minority would be, after all the social and political feedback loops play out. So again, I think you're overstating...

[meiczyslaw.livejournal.com]

The true answer is that *mostly* I trust The Economist.

Which is a long way to go to say, "James Hansen."

But why do you trust The Economist? What makes you think that they're the most reliable intermediary? What makes their writers less susceptible to the forces that befuddle the most well-intentioned journalists covering scientific issues?

To me, the anonymity of their writers is one The Economist's weaknesses. Because of this cloak, there's no way to evaluate their qualifications, biases, and histories. In contrast, I know that Ben Goldacre (of The Guardian) doesn't actually care to understand climate change (as he's said in not so many words), so he's not really a reliable intermediary on that subject. I also know his politics (and his religion!), so I know which articles of his to verify. But this also means that I know which issues I can trust him as an authority, because I know about his faults (and his background as a medical doctor).

Slightly off topic: In between his snark, Goldacre's site Bad Science (http://www.badscience.net/) is a good source for understanding the pressures that a science journalist faces. That education is one of the reasons I've started looking at the primary sources more, as it's excessively easy for a journalist to make an innocent mistake that changes the meaning of an article.