"Pay Your Air Share" - Libertarian think tank advocates carbon taxes!

I haven`t really participated much in the Forums, but I wanted to bring to people`s attention the following new post I`ve just put up on my blog:

http://mises.com/blogs/tokyotom/archive/2008/02/13/quot-pay-your-air-share-quot-libertarian-think-tank-advocates-carbon-taxes.aspx

1.  Check out the San Diego-based The Prometheus Institute, http://www.prometheusinstitute.net/, which has just launched a new website calling for carbon taxes: http://www.payyourairshare.org/.

They propose that:

• A tax be levied on all major emitters of greenhouse gases, set so that fossil fuel prices will reflect their true social cost, which will create a seamless market-based incentive for the development of alternative energy.
• Most of the revenue raised should be returned to the people in the form of an across-the-board income tax cut, but as the climate system has great inertia, a portion of the carbon tax revenues should support private sector and community-based adaptation projects to scientifically-demonstrated effects of climate change.

The site contains a number of articles to explain just how in the heck The Prometheus Institute (http://en.wikipedia.org/wiki/Prometheus_Institute) could convince itself to come up with this Pigouvian scheme. 

(h/t Greg Mankiw: http://gregmankiw.blogspot.com/2008/02/pi-joins-club.html)

2.  Another recent piece that I highly recommend is Edwin G. Dolan's "Global Warming: Rethinking the Market Liberal Position", from the Fall 2006 issue of The Cato Journal: www.cato.org/pubs/journal/cj26n3/cj26n3-3.pdf.  Dolan argues that a Lockean position does not permit an easy dismissal of calls for policy changes relating to climate change.

FWIW, Dolan was the editor of the Austrian classic, The Foundations of Modern Austrian Economics (Kansas City: Sheed and Ward, 1976).

(h/t Donny of A)

Comments appreciated, either here or at the blog 

"Libertarian" think tank? Really? There are criticisms concerning the "social cost" premise of such a scheme, but I'd like to just point out the obvious:

TokyoTom:

a portion of the carbon tax revenues should support private sector and community-based adaptation projects

The private sector cannot be supported by tax revenue as this is a performative contradiction! As soon a business is granted any kind of state privilege, it ceases to be private, and become part of the state aparatus.  To call any such scheme "libertarian" is an assault on reason.

 

  

 thank you A-R. It's a good principle that a program run by the government to rob people of their private property and redistribute it shouldn't be called libertarian. 

 The libertarians so-called who are slowly warming to policies like this amaze me. I mean, think of the proposition here: government is incompetent at everything except forging a global plan to change weather patterns through consumption controls. Ummm...

I believe that Mises convincingly demonstrated in Socialism (1920) that socialism cannot calculate.  Even a brilliant and well-meaning central planner cannot know the subjective valuations of all members of society. Without suffering profits or losses, there is simply no way for the state to know if it is meeting the needs of society in the best possible way.

Perhaps with free markets in "sea-level rise" insurance for beach-front properties, owners of such policies could make a case for partial compensation for the amount of the risk-premium paid. However, it would be up to the owners of these policies to make a convincing case to demonstrate the responsibility of, lets say, oil companies in actually causing these risk-premiums to increase above the level necessary to insure against natural climate fluctuations. Furthermore, it would be up to total population of property owners to act voluntarily in the inforcement of an adjudication in recognition of their common interest in defense of property rights.

I suspect that if left up to speculators to construct a CO-2 level to climate-change risk scale by trading futures contracts in the previously described insurance policies, we would see that the real social costs are in all likelyhood only a minute fraction of what is purported by the climate alarmist. Some proposed solutions to the perceived greenhouse gas problem go as far as recommending a 90% reduction in world energy consumption (as I recall was suggested on CBC public-radio around the time of the Bali conference). By all indications, the social cost of this solution would involve mass starvation and disease on a scale rivaling that imposed on the soviet population under Lenin and Stalin. A financial estimate on lost productivity incured by such a drastic solution would clearly amount to at least 10's to 100's of trillions of dollars. The implication made by the climate alarmist is that the social cost of allowing CO-2 levels to continue to rise up to their saturation point would have an even greater social cost! If the climate alarmist is telling the truth, then he can make an enormous profit by buying future insurance contracts against climate change risk. In fact, it would be profitable for him to bid the value of such contracts at least as high (higher if the solution is not likely to be 100% effective in offsetting climate change) as the cost of his proposed solution to the greenhouse gas problem. However, the climate skeptic stands to gain himself by trillions of dollars just by selling the contracts which he perceives as being totally worthless, to the extent that he has the collateral to back them. So this begs the question, how far would the climate alarmist go to put his money where his mouth is, so to speak?

I elaborate now on how such contracts could be denominated: Since the precise, mathematical relationship between CO-2 level and relevent climate factors is not known, a variety of different types of contracts could be traded. CO-2 neutral contract would exist, simply covering the climate-risk irrespective of future CO-2 levels. Another contract could be denominated in $ per unit of CO-2, so that the insurance value of the contract would double with a doubling of CO-2.  Yet another could be per unit of CO-2 squared, and so on so forth. Anyone who has taken 2nd year calculus is aware that a mathematical function can be approximated as a Taylor's Series, which is nothing more than the sum of various power functions. The constants in this climate-risk functions are nothing but the values of the various contracts. This is important, because certain climatoligists predict a "tipping point" event where supposedly, once CO-2 passes some critical value, a runaway feedback loop is triggered resulting in some sort of armagedon.  This would be apparent in a high value of a higher-order contracts. In any case, a causal climate-change model would be arrived at that would represent the best available information, unbiased by political motivation. If such a model did indicate an increased climate-change risk with rising CO-2, then it could be introduced as evidence in the previously described adjudication procedures.

My personal reading into the climate change studies which have been made has led me to conclude that there is in fact a net benefit to society to be gained from CO-2 enrichment of the atmosphere.

First, it is not at all clear that CO-2 levels are a driver to temperature. This theory is based on an unproven contention that higher CO-2 levels will increase humidity, which is by far the dominant greenhouse gas. CO-2, on it's own, is not claimed to significantly affect temperatures. In contradiction to this theory, historical evidence suggest that CO-2 levels naturally follow temperature changes, and that the highest CO-2 levels correspond with dropping temperature and vice-versa.

Second, experiments have shown that enriched CO-2 levels in fact increase the rate of plant growth. The increase is particularly beneficial for fast-growing plants such as food-crops. This could prove to be a blessing from the heaven for low-productivity individuals who must spend substantial portions of their income in meeting their basic nutritional needs. Also, the increased biomass also absorbs CO-2 from the atmosphere at an increasing rate, resulting in a saturation and levelling-off of CO-2 level. This levelling off is already beginning to occur in the case of CO-2.

And there are numerous other arguments putting in doubt the alarmist claims, which I won't cover.

The central fallacy in all types of environmental accounting and "sustainability" measures is that they are assuming that somehow a static equilibrium state ought to naturally occur. Any increase or decrease in any environmental factor is obviously unsustainable as the level of that factor cannot shrink below zero neither can it grow forever.  However, nature is and has always been, long before humans came along, a dynamical system.  It is not static. At any given point in time, nature itself is always changing in an unsustainable manner, in that the current trend obviously cannot be perpetuated forever. An example taken from elementary biology is the wolf-hare population:

As hare populations increase, wolves have more food available and begin to increase themselves after a certain time lag.  As wolf populations themselves increase, the hares are cought more frequently and their population begins to decline. The wolves then find themselves in shortage of food and their own population declines, allowing the cycle to resume. Clearly, at any given time, wolf and hare populations are changing in an unsustainable manner (at least to the ignorant ecologist).

Nature always seems finds a way to keep her various factors in check. These negative-feedbacks stand in contrast to the positive "run-away" feedbacks alleged by the alarmists.  In fact, if any kind of "run-away" feedback mechanisms existed, earth would have long-ago followed the way of Venus.  On geological time scales, levels of CO-2 (and of real pollutants) have been occasionally pushed orders of magnitude beyond levels which humans are capable.  This could have occurred as a result of major meteor impacts or volcanic eruptions spewing immense amounts of contaminants into the atmosphere. Yet, nature has always managed to re-equilibrate herself, and this for billions of years!

This is precisely the self-proclaimed libertarians that have ruined the image of the whole movement I've talked about in the past.

Let me add another little thing: this whole "greenhouse gases" thing seems to have driven usually rational persons into hysteria. Even Libertarians.

TokyoTom:

The site contains a number of articles to explain just how in the heck The Prometheus Institute (http://en.wikipedia.org/wiki/Prometheus_Institute) could convince itself to come up with this Pigouvian scheme. 

 

Would it be accurate for us to take this to mean that you reject carbon taxes and any Pigouvian schemes? What about cap-and-trade and other faux-market policies?

TokyoTom:

Dolan argues that a Lockean position does not permit an easy dismissal of calls for policy changes relating to climate change.

It's debatable. Perhaps for a strict Lockean position that accepts his enough-and-as-good and spoilage provisos, but see philosopher David Schmidtz on the general policy implications of these provisos. Also, "policy changes" is rather vague. I suppose I'll have to read Dolan's paper to find out what he means specifically, assuming he gets specific. But what specific policy changes do you have in mind?

 

A-R, would using the proceeds of a tolls on a federal or state highway to compensate private parties who suffer from damages from air, water or ground pollution/vibration caused by the highway itself or the passage of traffic similarly make the compensated "private sector" impermissibly a part of the state scheme?

My guess is that is the analogy that The Prometheus Institute would make.

Another concern would be that these revenues simply become another source of politically-determined pork-barrel spending.  How can politicians or bureaucrats determine the "most worthy" projects? 

I share Dr. Reisman's view that, even if we are forcing the climate to change, the state should not be involved in determining how we adapt.  Rather, that should be left to various private economic actors and to local communities.  Any revenues from a carbon tax should be used to offset income or payroll taxes.  But there is an equity argument to be made that some of the money should be used to compensate or speed adaptation

- a program run by the government to rob people of their private property and redistribute it shouldn't be called libertarian. 

Jeff, but you forget that we are talking about how to manage (and partially privatize) a commons, not only at home but internationally.  In many ways, the institution of private property itself was a government-sanctioned theft by the wealthy of traditional, group-managed common-property - was that "libertarian"?  And should we forget that we are also talking about ways to address an ongoing transfer of costs from fossil fuel users to others?

- The libertarians so-called who are slowly warming to policies like this amaze me.

Even so-called "conservatives" are warming to policies like these because the climate is clearly and noticeably changing, our own fingerprints are all over it, and doing nothing about it as the rest of the world develops is contrary to our own interests

- I mean, think of the proposition here: government is incompetent at everything except forging a global plan to change weather patterns through consumption controls.

Is there a single "government" forging a global plan, or many governments and interested private groups negotiating?  Granted, government itself is a commons on which rent-seekers graze, but no one group or nation is driving this discussion.  Rather, it is much more like resource users discussing how to share and manage a common pool resource.

A-R:

1.  Mises convincingly demonstrated in Socialism (1920) that socialism cannot calculate.  Even a brilliant and well-meaning central planner cannot know the subjective valuations of all members of society. Without suffering profits or losses, there is simply no way for the state to know if it is meeting the needs of society in the best possible way.

I believe you are correct, and this is a fairly strong objection.  But the fact of the matter is that our local, state and federal governments, at the instruction of our elected representatives, does make calculations and does tax us.  Given the problems that we experience with rent-seeking, I believe that a strong argument can be made that we would be better off and have a cleaner environment if we did not embark down the road of legislation and rule-making over better protecting private property rights.  Many environmentalists are sympathetic to this view, and the mainstream has certainly embraced quasi-market mechanisms in the form of tradable emissions rights over direct technology forcing.

On climate change, wouldn't it be a step in the right direction if we were to replace income taxes with taxes on externality-generating activities?Conservatives and liberatarians have lost what was a good opportunity under the Bush administration to trade off an easing of federal pollution standards and greater economic freedom and reliance on private action in favor of globally coordinated action on climate.

A-R:   Nature always seems finds a way to keep her various factors in check. These negative-feedbacks stand in contrast to the positive "run-away" feedbacks alleged by the alarmists.  In fact, if any kind of "run-away" feedback mechanisms existed, earth would have long-ago followed the way of Venus.  On geological time scales, levels of CO-2 (and of real pollutants) have been occasionally pushed orders of magnitude beyond levels which humans are capable.  This could have occurred as a result of major meteor impacts or volcanic eruptions spewing immense amounts of contaminants into the atmosphere. Yet, nature has always managed to re-equilibrate herself, and this for billions of years!

With this, thank you for providing a clear statement of James Lovecock's "Gaia" hypothesis about how life forms on Earth have through eons formed the Earth's ecosytems in a manner that is relatively stable and conducive to life, and aids in rebounding from shocks to the system posed by meteor strikes, vlocanic eruptions, giant tsunamis and the like.  http://en.wikipedia.org/wiki/Gaia_hypothesis

Even if correct, that hardly means that the explosion of man's popluation and industrial activities is NOT generating a shock to the system of a magnitutude that should concern us, or that we will enjoy that ways in which "nature" might "manage to re-equilibrate herself" again.  Our impressive biomass is, to say the least, an inviting target to microbes ready to take advantage of available food sources.

http://www.independent.co.uk/opinion/commentators/james-lovelock-the-earth-is-about-to-catch-a-morbid-fever-that-may-last-as-long-as-100000-years-523161.html

 

Kakugo:  this whole "greenhouse gases" thing seems to have driven usually rational persons into hysteria. Even Libertarians.

How interesting that you should note that.  But does it not cut the other way?

Dolan, in his linked essay, cites Hayek’s 1960 essay, “Why I am Not a Conservative” (1960), in which Hayek identified the following traits that distinguish conservatism from market liberalism:

• Habitual resistance to change, hence the term “conservative.”
• Lack of understanding of spontaneous order as a guiding principle of economic life.
• Use of state authority to protect established privileges against the forces of economic change.
• Claim to superior wisdom based on self-arrogated superior quality in place of rational argument.
• A propensity to reject scientific knowledge because of dislike of the consequences that seem to follow from it.

Do any of these "conservative" traits apply to libertarian positions on climate change?

In elaboration, Dolan has this to say:

... We need to address several questions. One issue is what the status is of the privileges and interests of those who are threatened by the possibility of climate change and of those who are threatened by proposed actions to mitigate it. Which of these has the greater claim to the sympathy of market liberals, when viewed in terms of the standards they apply in other areas of public policy? Another issue is what the values are that lie behind the positions taken by various parties to the debate. The issue of values may determine when market liberals can make principled alliances with one of the other corners of the triangle and when they want to make only tactical alliances. Still another issue is what manner of argument should be employed. For example, what is the proper attitude toward the purely scientific element in the global warming controversy? It will be worth taking a closer look at this last issue before proceeding further.

Hayek expresses himself so well on the role of science that it is worth quoting him at length:

Personally, I find that the most objectionable feature of the conservative attitude is its propensity to reject well-substantiated new knowledge because it dislikes some of the consequences which seem to follow from it—or, to put it bluntly, its obscurantism. I will not deny that scientists as much as others are given to fads and fashions and that we have much reason to be cautious in accepting the conclusions that they draw from their latest theories. But the reasons for our reluctance must themselves be rational and must be kept separate from our regret that the new theories upset our cherished beliefs. . . . By refusing to face the facts, the conservative only weakens his own position. Frequently the conclusions which rationalist presumption draws from new scientific insights do not at all follow from them. But only by actively taking part in the elaboration of the consequences of new discoveries do we learn whether or not they fit into our world picture and, if so, how. Should our moral beliefs really prove to be dependent on factual assumptions shown to be incorrect, it would hardly be moral to defend them by refusing to acknowledge facts [Hayek 1960: 404].

This passage raises obvious questions for the global warming debate. What lies behind the skepticism of market liberals regarding the propositions that the world is getting warmer at a rate that is unusually rapid in climate history, if not altogether unprecedented, and that this apparent trend is likely the joint product of natural cycles and human activity, rather than of the former acting alone? Are liberals correctly rejecting an inadequately grounded scientific fad? Or are they refusing to acknowledge facts for fear that doing so would upset their cherished beliefs?

Perhaps some market liberals believe that global warming poses an unacceptable dilemma that would force them, one way or another, to act against their deeply held principles. They might, on the one hand, believe that the mechanism of market adaptation through spontaneous order is too fragile to cope with the pace of environmental change that some climatologists foresee and, on the other hand, think that the only imaginable policies for coping with climate change involve an intolerable degree of state intervention. If so, they might refuse to consider evidence that a problem exists rather than face a perceived choice between roasting or succumbing to tyranny in order to remain cool.

Fortunately, the supposed dilemma is a false one. Liberals have long acclaimed the market as a way of adapting to change, and climate change should be no exception. … Also, market liberals should know well that effective environmental policy does not have to take the form of heavy-handed commandand-control measures. … The same kind of market-oriented policies should be possible in the case of climate change.

In short, if one takes into account both the market’s potential for adapting to change and market-based policy alternatives, there is no reason for market liberals to be anything but open-minded toward ongoing developments in climate science, whether those developments, as they unfold, reveal indications or counter-indications of global warming.

There could, instead, be another explanation for some market liberals’ apparent close-mindedness toward the global warming hypothesis. It could be that, when taking a position on issues of climatology, they are speaking not from perceived threats to their beliefs, but out of loyalty to conservative interests with whom they have struck some tactical alliance. For example, policies designed to reduce greenhouse gas emissions, no matter how carefully market-guided in their design, are likely to undermine the interests of politically powerful producers of carbon-based energy.

www.cato.org/pubs/journal/cj26n3/cj26n3-3.pdf. 

Are you sure you are adequately testing your reality?  Even scientists like Pat Michaels and Lindzen acknowledge that man is playing a role in altering the Earth's climates.

- Would it be accurate for us to take this to mean that you reject carbon taxes and any Pigouvian schemes? What about cap-and-trade and other faux-market policies?

Geoff, thanks for your discerning question.  Let me openly acknowledge that while I am very concerned about using government to deal with externalities, as I have noted on various posts I believe that for certain matters there is an essential and inescapable role for government to play.  In the present case, there is of course no single government acting, but rather a multiplicity of concerned parties negotiating.  I rule out no particular domestic policy, but strongly oppose direct government investment in or subsidies for "clean technologies".

With that, perhaps I should clarify my handle, as "Unclean TokyoTom", lest the unwary be fooled.  Let me thank you on behalf of the blog for flushing me out into the open.  But let me note that I'm used to not fitting in; it's what I grew up with, as I note under my user background, and is a fact of life where I live.  I don't mind being the resident alien/watermelon here as well, to all those who need the brace of confronting an enemy to help them clear their thoughts.

- Thanks for mentioning David Schmidtz; I'll have to read him to see his views on the general policy implications of the Lockean position enough-and-as-good and spoilage provisos.

- But what specific policy changes do you have in mind?

None in particular, Geoff.  But I am certainly in favor of increasing understanding of climate change and of the many ongoing private initiatives to shift away from GHG-intensive technologies.  The Climate Principles announced on Feb. 4 by three leading Wall Street investment baks is one such example: http://www.morganstanley.com/about/press/articles/6017.html

TokyoTom:

I rule out no particular domestic policy,

 

I must say this is not reassuring, despite some of the caveats that precede and follow it. You can appreciate, I hope, how this position can be a legitimate concern for myself and others here. If you rule out no particular domestic policy, it would seem that despite the caveats you could see yourself accepting very drastic and un-libertarian policies should you percieve things as getting bad enough. Hence, the nagging worry that you are an environmentalist first and a libertarian second, who when push comes to shove will compromise your libertarian principles (assuming you hold any in particular explicitly) in favor of your environmentalist intuitions or principles.

My intent in asking those questions was not to discredit you in some underhanded way, but to get you to be upfront and concise about your specific policy proposals so that we can all be on a level playing field in this discussion. You are not alone in not fitting in or feeling like an outsider; I daresay most of us are in the same situation with regard to your political views outside of forums like this. Even here, as an Aristotelian libertarian I don't fit in with the apparently predominant Kantian/Hoppeian orthodoxy.

TokyoTom:

None in particular, Geoff.  But I am certainly in favor of increasing understanding of climate change and of the many ongoing private initiatives to shift away from GHG-intensive technologies

I'm certainly in favor of moving to cleaner energy sources, etc., and I think a truly free market combined with environmentalist libertarian activism is the best way to encourage this. This includes ending corporate privileges given by the state. However, I don't think there is an essential or inescapable role for government to play in dealing with global warming. I'm not sure how you could solve the GHG and atmospheric commons problem without some sort of statist policies and I don't think such statist policies would be desireable. The approach I outlined in the first sentence of this paragraph seems like the more effective and libertarian alternative. This is all assuming that GHG's are the primary cause of global warming and that they are leading to a catastrophic warming, both of which I remain skeptical (and reasonably so, I think), particularly with regard to the latter.

A libertarian think tank that think tank is not.  Carbon taxes and governmental mandates are at least fascism and at worst communist in nature.  This would create an economic downturn that would open the door for socialism and communism in America.  This election cyle we are quickly going down that road.  Those fools are not libertarian in the very least. Even assuming that the fraud of global warming is real, not one person has pointed out any ACTUAL economic costs of warming. 

Geoffrey, I appreciate your constructive engagment, even as it still seems to me that you are a little too concerned about orthodoxy, or what MY "proposals" are. Well. don`t worry about being on the same playing filed, since by not strongly stating any I can hardly be felt to be advancing any particular agenda. However, isn`t it clear that there is obviously alot of common ground between us? We should NOT be subsidizing any technologies, and we should be actively trying to free up energy markets by ending corporate privileges. We could also partially deflate statist pressures by supporting - and pointing out and praising - voluntary measures, instead of mocking them. We can accept that many businesses that are starting to move have adequate bases for doing so, and we can point out that some of the skeptical views are unscientific. We can also argue openly the Lockean issues that Dolan has summarized and that Adler has accepted. etc. I do appreciate your continued pointers on definitions and doctrines. I remain educable - at least in part - despite my advanced age, and know I still have more to learn.

TokyoTom:

Geoffrey, I appreciate your constructive engagment, even as it still seems to me that you are a little too concerned about orthodoxy, or what MY "proposals" are.

 

I'm not concerned about orthodoxy at all. I'm concerned about truth and what is right and wrong - the real things, not just what some group thinks they are. I don't toe any party line.

I think I am justifiably concerned with what your specific policy proposals may be because you are going around loudly and vociferously calling for action now. But what action specifically? That's an important question that demands a forthright answer. To be fair, you've given a fairly forthright answer. It just isn't a particularly reassuring one to a libertarian.

Yes, we seem to share some of the same goals and policy prescriptions (except those involving government action), but since you won't take anything off the table even if it is a policy that would compromise or violate libertarian principles then it seems the basis for an alliance is rather shaky at best.

TokyoTom:

We can also argue openly the Lockean issues that Dolan has summarized and that Adler has accepted. etc.

Well, maybe. There are a number of Lockean doctrines that I don't accept, like the idea that the world belonged to all of humanity in common prior to parts of it being legitimately appropriated by individuals. The enough-and-as-good and spoilage provisos gain much, if not all, of their plausibility from this unfounded presupposition.