The Politics of Cap and Trade

by on May 18, 2009 at 7:25 am in Economics, Science | Permalink

Good overview in the NYTimes on the politics of cap and trade.  The bottom line:

How did cap and trade, hatched as an academic theory in obscure
economic journals half a century ago, become the policy of choice in
the debate over how to slow the heating of the planet? And how did it
come to eclipse the idea of simply slapping a tax on energy consumption…

The answer is not to be found in the study of
economics or environmental science, but in the realm where most policy
debates are ultimately settled: politics…Cap and trade…is almost perfectly designed for the buying
and selling of political support through the granting of valuable
emissions permits to favor specific industries and even specific
Congressional districts.That is precisely what is taking place now in the House Energy and Commerce Committee…

Here is how Tyler and I put it in Modern Principles: Microeconomics

With a tax, firms
must pay the government for each ton
of pollutant that they emit. With pollution
allowances, firms must either use
the pollution allowances that they are
given or if they want to emit more they
must buy allowances from other firms.
Either way, firms that are given allowances
in the initial allocation get a
big benefit compared to having to pay
taxes. Thus, some people say that pollution
allowances equal corrective taxes
plus corporate welfare.
That’s not necessarily the best way of
looking at the issue…

…To make progress against global warming, may require building
a political coalition. A carbon tax pushes one very powerful and interested
group, the large energy firms, into the opposition. If tradable allowances are
instead given to firms initially, there is a better chance of bringing the large energy
firms into the coalition. Perhaps it’s not fair that politically powerful
groups must be bought off but as Otto von Bismarck, Germany’s first chancellor,
once said,”Laws are like sausages, it is better not to see them being made.”
We can only add that producing both laws and sausages requires some pork.

Careful readers may recognize a friendly jab at a competitor. 

1 goodnessOfFit May 18, 2009 at 8:15 am

Of course as long as the overall cap is not affected, the initial allocation of the permits will not affect the efficacy of the program. Sure the firms get the rents rather than the government, but I am not so sure that Leviathan getting a taste of the “double dividend” is such a great idea for the long run efficiency of the policy.

2 Zamfir May 18, 2009 at 8:26 am

goodnessOfFit, one could argue that Cap-and-trade with allowances basically IS Leviathan spending the money in the worst possible way, namely as pay-off to interests. Most other uses, from debt lowering to defense pending to medical services, are arguably better than giving money to people who happened to pollute a lot in the past.

On the other hand, yes, that’s politics, and solving collective problems without dubious negotiations is not that realistic.

3 Homer May 18, 2009 at 8:44 am

Mmmmmmmmm…… Sausage.

4 indiana jim May 18, 2009 at 8:56 am

From the quote: “To make progress against global warming, may require building a political coalition. A carbon tax pushes one very powerful and interested group, the large energy firms, into the opposition. If tradable allowances are instead given to firms initially, there is a better chance of bringing the large energy firms into the coalition.”

Sophistic scientism. The presumption that “the debate is over” and that we NEED to control man made carbon to “make progress against global warming” in a textbook argues against my adopting it for my students. I suppose I could use the text the way Coase used “The Lighthouse in Economics”, as an example of great economists who grasped examples out of thin air rather than investigating the underlying realities thoroughly. Coase’s stinging rebuke of the use of such stylized examples as illustrations of “blackboard economics” appears to have been lost on two economists who I truly consider great ones; more is the pity!

5 MostlyAPragmatist May 18, 2009 at 9:06 am

Broder’s article (and Mankiw’s quoting of it) is irritating. Immediately after asking how a cap and trade eclipsed the carbon tax, he has a bit about the politics of the Clinton era, but cap and trade was widely regarded as very successful at limiting acid rain as introduced by George H. W. Bush. Broder says this, too, but he seems to be taking pains at being factually complete while avoiding the conclusion that Republicans are responsible both for a cap and trade success story and for opposition to it now.

And Mankiw’s quoting of it is irritating because it implies (although he never *states*) that Democrats have a monopoly on pork. I wish he’d spend less time on his “government always corrupts economics” hobby horse and more time discussing why (or if) he thinks cap and trade on carbon will be less successful than cap and trade on acid rain emissions.

I actually find Alex and Tyler’s position to be quite reasonable (and I’m shocked that I find myself agreeing with a point of view of Alex’s!) 🙂

6 b kalik May 18, 2009 at 9:24 am

Politics it is. Consider the Waxman-Markey bill:

The current plan is to give electric utilities (40% of carbon emissions) 35% of the allotment. At the other end of the spectrum, transportation (35% of carbon emissions) will be given 2% of the allocation (transportation = oil).

The rationale:

Electric utilities are regulated by state entities and are permitted to pass along costs to consumers. If utilities had to purchase (rather than be given) allotments, they would pass the cost along to consumers, who would howl that the government cap-and-trade plan had caused their electric bills to escalate.

Oil companies, on the other hand, will be given 2% of allotments (to cover emissions at refineries and similar stationary sources). AND…the oil companies will also be made responsible for carbon emissions generated by consumers from cars, trucks, buses, trains, airplanes that use gasoline or diesel or other petroleum-based fuels. Even though the oil companies have no control over those emissions. Thus, oil companies will have to purchase allotments. No one expects that they will be able to pass along all the cost to consumers. But to the extent that they do, consumers will howl that the oil companies are ripping them off. So investors in oil companies (40% of shares are owned by retirement funds, pension plans, 401(k) and IRA plans) will have to eat the costs.

Neat trick. Make sure that electric bills don’t go up, so the government can be blamed…and at the same time stick it to the oil companies and make certain they get blamed for rising prices at the pump.

7 Slocum May 18, 2009 at 10:06 am

Of course as long as the overall cap is not affected, the initial allocation of the permits will not affect the efficacy of the program.

But if handing out permits to special interests becomes the political core of the program, then there will be powerful pressures to increase the number of permits available (which is, of course, what happened in Europe–where the carbon market collapsed because so many permits were handed out).

And even apart from that, it’s still not true that the overall cap assures the efficacy of the program. There are various ways that U.S. emissions could come in ‘under the cap’ but still have an ineffective program (with respect to global CO2). So energy-intensive manufacturing can move off shore. Same for server farms — those can go pretty much wherever carbon costs are cheapest (are we going to charge carbon tariffs on internet search results?)

And then, of course, there is almost unlimited potential for bogus offsets to be created (and we can expect intense political pressure for those offsets to be domestic — e.g. biofuels from American sources — rather than international).

8 Yancey Ward May 18, 2009 at 10:25 am

We are witnessing a colossal, political disaster in the making. If this bill appears it going to pass, one should sell the share of every single oil company ASAP.

9 John Thacker May 18, 2009 at 11:39 am

“If the climate change models are right, then there is a tipping point in terms of total carbon emissions, which we want to avoid. Which argues for cap-and-trade.”

Close but not quite, TracyW. It only argues for cap-and-trade if we can determine the tipping point fairly easily.

I certainly agree that in general the tax is good for “eliminate all emissions that we can eliminate cheaply,” or “eliminate all emissions below a certain marginal cost” (that measures the externality of carbon emissions,” whereas the cap-and-trade approach is better when our goal is to get to a certain emissions level, regardless of cost, because there is a tipping point.

However, simply because models agree on the existence of a tipping point does not mean that they agree on where that tipping point is. Tiny changes in assumptions can lead to massive changes in the estimated tipping point– and we can assume that those bidding for permits (or who want extra permits granted freely) will be pushing for changes that increase the cap. And of course a far too stringent cap based on faulty models presents its own problems.

Acid rain is easier for a US program because the effects are still relatively localized in the US, as opposed to global, and the outcomes are easily visible in the short run. A US-based cap-and-trade program for carbon emissions is much more difficult because it is a global problem (the Krugman idea of punishing China seems difficult), and because measuring the outcome is much more uncertain, particularly over the short run. Acid rain can cease and areas recover in much shorter time than climate can be affected. (There are also fewer countervailing cycles and patterns to eliminate from the numbers.)

You may also consider it a plus or minus that a cap would have essentially no effect during a recession. For example, emissions are already down dramatically (and were down in general over the entire Bush presidency, as compared to their massive increase during the Clinton presidency), so a cap would have no effect this year. Indeed, a cap enacted in 2000 would have had little effect because US carbon emissions growth has been so restrained, even during periods of economic growth, during that period. You may view this as an automatic stablizer– but if so, would you support decreasing gas taxes when prices are up and miles traveled are down?

10 Rob Bradley May 18, 2009 at 11:43 am

For those interested, Enron pushed hard for cap-and-trade all through the 1990s.

Ken Lay gave $1mm to Resources for the Future in appreciation for their work on this issue. RFF’s stable of PhD economists, not coincidentally, favored cap-and-trade over a simpler carbon tax.

11 Richard A. May 18, 2009 at 12:42 pm

It appears to me that those pushing for the revenue neutral carbon tax as a group tend to be somewhat to the right of those pushing for cap and trade. It is obvious to me that the revenue neutral carbon tax is much more compatible with a market economy. Cap and trade will lead to command and control and the creation of such monstrosities as Enron–and rent-seeking run wild.

12 indiana jim May 18, 2009 at 2:24 pm


“Revenue neutrality” is one thing “incentive neutrality” is another entirely. Suppose you have a president, just suppose, who thinks it would be a good idea to “spread the wealth around.” Might revenue neutrality be a smoke screen to mask redistribution (that alters economy wide incentives negatively)????

I hope you already thought of this.

13 john byrne May 18, 2009 at 3:32 pm

if you liked the last 30 years of regulation/litigation under the CAA and its amendements, you will LOVE the next 30 of implementing the various (estimated at 30-35) regulatory schemes the bill tasks EPA with implementing. It’s the life-time employment bill for the next generation of Federal/state regulators/lawyers and their industry/NGO counter-parts….

14 indiana jim May 18, 2009 at 7:32 pm

Barkley wrote: “The net effect of rising CO2 levels in the atmosphere is to tend to
raise average global temperature, even if the precise strength of this
effect continues to be debated (and thus may be overwhelmed by other
factors as is the argument of the more serious skeptics).”

Well Barkley, you know me, what do you take me for: a “more serious” or less “serious” skeptic. Yes, we have met only once and we both had drinks in hand, but my guess is that you are a shrewd judge of character. So?

Well, whatever your opinion, skepticism, as you well know is essential to the pursuit of truth; that is, I think, something we both value.

Without question, and whether you judge me a “more serious skeptic” or of lesser seriousness, my point remain: a presumption of capital “T” truth (to put it as McCloskey so persuasively does) is unwarranted. Indeed, the magnitude of the role of man made carbon dioxide in global temperature fluctuations may turn out to be another Lighthouse in Economics. Coase was right to implore economists to adopt a wiser and more skeptical approach; one that does not invoke as capital T truth matters that are at best ambibuous.

BTW, as you know (so I’m saying this for the benefit of the young folks out there), another great example of how unwise it is to assert as capital T truth is Cheung’s paper on the “Fable of the Bees”. Even decades after Cheung exposed the falseness of this “market failure”, a prominent economist (who I will not embarass by name) wrote into his textbook the very example of bee externalities as market failure. Fortunately for him, the guy in the office next to me, who was a reviewer of the text, told the prominent economist not to pull stylized examples out of thin air.

The “prominence” or status of an academic is not the point; I do not hail from a place that would allow me to be called “prominent”. But if that is the way you judge whether a skeptic is “serious” or less so, well then I have misjudged you completely.

15 Daniel May 18, 2009 at 9:20 pm

Your hard diplomatic reality isn’t quite accurate. When you say ” we pushed cap and trade on the rest of the world at Kyoto over taxes, and now look like total hypocrites even trying to bring taxes up again.” You don’t mean we, you mean Al Gore. Gore and the Clinton Administration pushed for cap and trade, the Senate voted 98-0 in favor of the Byrd Resolution which told the world the Senate wasn’t going to ratify Kyoto.

I’m not familiar with the the “stories about low costs in Europe from cap and trade.” Are you referring to this story about energy intensive industries fleeing Europe?

And I’m sure you know that Europe’s greenhouse gas emissions are increasing faster than emissions in the United States, despite a cap and trade in Europe and no cap and trade in the United States. If indeed there are stories about “low costs in Europe from cap and trade,” one reason for this would be because cap and trade isn’t driving serious emissions reductions.

16 Barkley Rosser May 18, 2009 at 11:51 pm

John Thacker,

Whether or not a particular cap and trade system sets its cap too high or too low is not in and of itself a criticism
of cap and trade in general. Yes, that can happen, but likewise a tax can be set too high or too low. The model cap
and trade system was the SO2 program in the US, put in place by Republican president, George H.W. Bush. It is widely
accepted that it has worked well. I would also note (this is for you, Indiana Jim), that the original impulse for
cap and trade systems (formerly called tradeable emissions permits) was from people who read Coase and said, “Ah ha!
What we need to do is create property rights in environmental quality so that the market can work!”

Indiana Jim,

Oh, don’t get all sensitive and hurt on me here. I was just trying to get you to avoid mixing up the climatic with
the economic and ideological issues. Too often they get mixed up around here. You raised a question about the so-called
consensus on the science, and then shifted to rumbling about Coase and incentives and all that. Really, they are separate
questions, and they should be kept separate. Both are complicated enough as it is. One can question the science but still
say “we should do something” because of the possibility that the bad outcomes might happen,” or one can accept the accepted
science but say, “But the free market will work to allow us to adapt, so let us do nothing, no Markey-Waxman, etc.”

Serious scientists in any field can be wrong, but indeed, “seriousness” does have something to do with how much one has
studied a subject, with publications in the subject being a sign of that, even if in the end the arguments in the
publications are fallacious. I read too many clowns here who simply repeat some drivel they heard on talk radio or
some other place that “global warming is a hoax,” or whatever, with no support at all. Did not want to see you falling
into that sort of ranting, although as I indicated, I agree that there are serious (see, no quotation marks around it)
climatologists who disagree with the broader consensus. In that regard I agree with John Dewey. As I said, I really
do (or did in the case of one who is now dead) know some of these more serious skeptics. I have been working with these
folks off and on for more than a third of a century, indeed, since the days when indeed a lot of folks were worrying about
global cooling, which many worried about warming today deny was ever the case. And, as I noted, it is indeed the case that
these very serious skeptics do not have a unified or clearly coherent case, even if they may be able to raise questions
about the broader consensus.

Also, the two points I put out as accepted are accepted. I did not put them out there to put you on the spot. I accepted
that they may be overwhelmed by other factors, and indeed right now it is likely that La Nina effects are at least offsetting
the general trend to warming due to CO2 accumulations that is going on. That trend can be offset by other effects, although
we are not certain about these matters.

I will reiterate what I said above. Cap and trade was inspired by Coase. Indeed, Coase is very useful for examining the
situation. Lighthouses were not all that hard to create property rights for and get fees out of users: you want to anchor
your boat in our harbor? Well, pay a fee to support the lighthouse at the entrance to the harbor. Likewise, the bee story
involved a situation where property rights were well defined and transactions costs were low. Two property owners adjacent
to each other cutting a deal about the orchard owner subsidizing the beekeeper. Global climate is harder. The property is
potentially global, and it is not surprising that the transactions costs are so high when one is dealing with a global
problem, and hence that there has been no resolution. But, cap and trade is derived from a Coasian approach, and if there
is to be any agreement, that is probably where it is going to go. Otherwise, well, it will be every country and market
for themselves to adjust however (which may yet be OK, especially if the warming skeptics are more right than wrong).


Just Gore? No, that was a widespread consensus in the US at the time arising from our successful SO2 program put in place
by the first President Bush. See above, and do not be a knee jerk partisan repeating what you have heard from idiot media.
Oh, and it was Byrd-Hagel, and the vote was 95-0, and most of the world knows about it, and thinks it makes us an entire
nation of hypocrites for telling anybody else anywhere what to do about this issue. Get real.

Oh, and as for cap and trade in Europe, which is it? Is the cap too high so it is not doing anything, or is it so tight
that it is driving away energy intensive industries? Are they fleeing France with its 80% of electricity supplied by nukes?

17 Tracy W May 19, 2009 at 6:57 am

John Thacker – not knowing where the tipping point is is a problem for carbon taxes too. And a further problem for carbon taxes is that you don’t really know willingness to pay for the carbon tax – eg you might impose a tax of $50/tonne and find out that people will pay it rather than cut emissions. So with a carbon tax you have two sources of uncertainty – where the tipping point might be, and what people’s willingness to pay is. And a far too high a tax based on faulty models would present its own problems too.

I don’t see how installing an international carbon tax could be any politically easier than installing an international cap and trade.

In terms of a recession causing a drop in carbon prices, I do regard a cap-and-trade as an automatic stabliser in that sense, like a proportional income tax. This seems common-sense to me – if you want to cut carbon emissions to level x, then the policy objective is to cut carbon. While it would be nice if the carbon was cut without the economy being wrecked at the same time, you’re still achieving your main policy objective. And I think that preventing global warming is enough of a massive political problem in and of itself without trying to add in other problems to it.
I don’t have a strong opinion one way or another about adjusting gasoline tax prices in response to gasoline prices, I’ve never really thought about it before. I suppose it depends on what you are trying to achieve with the gasoline tax. At first stab, if it’s paying for roads, presuambly roads cost roughly as much to maintain in a recession than otherwise, if it’s local air pollution, then also the recession makes me indifferent. If it’s reducing congestion, then theoretically you should drop the tax rate in the recession. Of course the administrative costs of doing so much be too high relative to the savings, or the political economy might argue against it anyway. Or I may be missing something about local air pollution or the costs of road maintenance that argues in favour of varying the tax. Or I may be foolishly entirely missing something extremely obvious. What do you think?

Cryus – how does a carbon tax get around the long-lifetime of carbon in the atmosphere? Also, Governments already have the ability to play around with income tax rates to their heart’s content.

18 Cyrus May 19, 2009 at 8:24 am

Here’s something to think about: in a cap-and-trade system, the supply of pollution credits is highly inelastic, so there are conditions in which price can increase rapidly.

What does an electric utility do when they price of pollution credits exceeds the price of electricity? Would they pursue this policy to the point of rolling blackouts? Is this an efficient outcome?

19 John Thacker May 19, 2009 at 10:44 am

“Whether or not a particular cap and trade system sets its cap too high or too low is not in and of itself a criticism of cap and trade in general. Yes, that can happen, but likewise a tax can be set too high or too low.”

Yes, but a tax will always produce some reduction, whereas a cap might produce none at all.

“The model cap and trade system was the SO2 program in the US, put in place by Republican president, George H.W. Bush. It is widely accepted that it has worked well.”

And as I said, the difference with SOX is that the negative externalities of SOX are mostly (if not entirely) localized within the US, and the noticeable effects of cleanup are easily seen within a few years. The same is true of other pollutants; the pollution spreads beyond the emitter, but US pollution mostly stays in the US, and US actions (like on sulfur in diesel) can massively improve US air quality without really affecting China’s. If cleaning up US SOX and NOX emissions helped everywhere else in the world exactly as much as it helped the US, it would be much harder to have an effective cap and trade system.

The effects of too much CO2 are felt globally, which means that any nationwide (or EU-wide) program has a much greater incentive to cheat, as we’ve seen. Imposing costs for a public benefit contained in your own country is one thing, and likely to succeed. Imposing costs for a benefit mostly enjoyed by other countries is rarer.

A tax at least produces revenues for the government directly (though granted, so would auctioning permits, which does not seem to be happening), and thus produces at least some forces wanting it to go higher.

Tracy W.:

“I don’t see how installing an international carbon tax could be any politically easier than installing an international cap and trade.”

It’s not. But installing an nationwide carbon tax has proved easier than installing an effective nationwide (or EU-wide) cap and trade program for something like CO2 where the effects are felt globally. Cap and trade programs have an optimum size problem; SOX is not a good comparison because the negative effects of pollution (acid rain) are felt mostly within the US itself. A tax has one to some degree, but not only does a tax bring in revenue, but if you can only impose a national policy, it’s easier to get results by taxing away usage that is not easily shifted to other countries– e.g., fuel used for commuting, local power consumption, than production, which is easily shifted to other countries.

We have enormous evidence that tax regimes have been successfully implemented on a national or regional scale, but less so for cap-and-trade for CO2.

“not knowing where the tipping point is is a problem for carbon taxes too. And a further problem for carbon taxes is that you don’t really know willingness to pay for the carbon tax – eg you might impose a tax of $50/tonne and find out that people will pay it rather than cut emissions. So with a carbon tax you have two sources of uncertainty – where the tipping point might be, and what people’s willingness to pay is. And a far too high a tax based on faulty models would present its own problems too.”

It’s a problem, but it’s, IMO, less of a problem. With too low carbon taxes you still get some reduction, albeit possibly slight. With too high of a cap you get no reduction whatsoever. The willingness to pay problem is one that can be answered extremely quickly; we can gather much more economic data and be much more certain about response to the tax than we can correct problems with CO2 models.

Secondly, you bring up the possibility of a tipping point in people’s reduction of CO2. It may be that beyond a certain point it suddenly becomes dramatically more expensive to reduce CO2. You’re ignoring that, if that uncertainty exists for a tax, then cap-and-trade imposes a massive uncertainty about the possible costs of the program. It is indeed possible that the amount of CO2 reduction required may impose a cost that is greater than the costs of catastrophe.

Technically with a carbon tax you can reduce it to one uncertainty, that of the cost of catastrophe. If there is great uncertainty about the tipping point of CO2, it may be easier to estimate the value at risk of a catastrophe than the exact amount of CO2 required to get there. If you reject the idea of being able to value the catastrophe, then I suppose you must reject the work of Nordhaus et al. justifying action in the first place.

A carbon tax greatly reduces the uncertainty about the costs imposed on the economy; it acts as insurance in that sense. “Too high” a carbon tax that achieves “too much” reduction is nearly impossible; the worst that happens is that we achieve more reduction cheaply than we thought. Imposing “too much” of a cost is also nearly impossible, since we a priori chose the level of cost we were willing to pay.

20 mulp May 19, 2009 at 10:48 am

I would be interested in seeing the overview on taxes/taxation in Modern Principles: Microeconomics.

I took intro to macro to get the credit a couple of years ago using Mankiw, and the instructor, a business instructor, was like Mankiw in viewing taxes as essentially evil, positively stated as “dead-weight loss” and more negatively as “theft”.

Anyone who mentions taxes in a positive sense is for the most part in the US considered a socialist, and all conservative economists, who are always right, consider taxes evil and by extension, government should not impose taxes, apparently even for the things conservatives claim government should do, like have a massive standing army and to wage wars to control oil.

With cap and trade redefined as just a tax, but a corrupt tax, even cap and trade becomes evil. But if you argue for a carbon tax, then that is theft and evil.

The quote given from the text does a lot to portray government action as basically corrupt, which contributes to the stereotype.

Of course, in any business, a small firm or a larger firm, things that can be portrayed as corrupt or waste or whatever are rampant. For example, the founder gives his lazy son-in-law a job at he’s paid five times the damage he does to the business by his incompetent actions which his minimum wage secretary has to fix to save the company. For forty years, Bernie Madoff is a great wealth creator and a great benefactor to many people.

The overall impression created is that only corrupt people who are seeking to steal from the people go into government, that its all about personal gain, and no one in government is there to serve society. The true servants of society are the Bernie Madoff’s…

So, given all that, comparing government to making sausage is hardly appropriate until you show the people being forced into the grinder at one end and the fat corporate bosses gorging themselves on the sausages at the other end.

My first exposure to a pollution tax was reading Friedman, and he described it as a means of incorporating the cost to society into the activity that generates the harm. But that is true of all taxes. To have a society where there is division of labor means that at times some individuals will be without a job and thus the income to support themselves. Taxes on all of society pay for the stick, police, courts, and prisons to deal with those who resort to crime to make up for lost income, and the carrot, welfare, training, etc.

I was struck by the description of early Greek society where every thing was decided in public, and the records of spending were public record, the expenses and payment engraved in the public works that the tax and spending created. Of course, the taxes were raised by invading other city states and pillaging and plundering…

Bottom line, if the intro texts to economics don’t properly describe the role of government and taxes to an economy, then why would economists expect the general public to rationally chose taxes that are appropirate and rational.

21 indiana jim May 19, 2009 at 1:57 pm

Heritage Foundation has some sobering implication ; they indicate

Waxman’s “environmental” bill would:

* Reduce aggregate gross domestic product (GDP) by $9.6 trillion
* Destroy 1,105,000 jobs on average, with peak years seeing unemployment rise by over 2,479,000 jobs
* Raise electricity rates 90 percent after adjusting for inflation
* Raise inflation-adjusted gasoline prices by 74 percent
* Raise residential natural gas prices by 55 percent
* Raise an average family’s annual energy bill by $1,500
* Increase inflation-adjusted federal debt by 26 percent, or $29,150 additional federal debt per person, again after adjusting for inflation.

A question: Given the level uncertainty about the problems with man made CO2, what number could you divide Heritage’s numbers and still be rationally against Waxman’s bill? Wouldn’t most be against this Trojan horse even dividing Heritage number by at least 5?

Deirdre McCloskey has told us again and again that magnitudes matter; now she is a serious skeptic.

22 John Dewey May 19, 2009 at 3:45 pm

mulp: “Anyone who mentions taxes in a positive sense is for the most part in the US considered a socialist”

Over the past century, governments in the U.S. have hugely expanded their control over the output of Americans. They could not have done so without significant increases in taxation. Every new tax has enabled greater government control over economic resources. If that’s not socialism – in the modern definition – I don’t know what is. So anyone who mentions taxes in a “positive sense” – whatever on earth that means – rightly deserve to be considered a socialist.

23 indiana jim May 19, 2009 at 9:58 pm


The truth will set you free. The Heritage numbers bother you; good for you; I’d expect no less from you. The devil is often in the details, but my challenge that even dividing by 5 they would be troubling has you thinking; good for you!
I knew my impressions of you under the influence of chardonay were solid.

On Coase: its not misrepresentation or misquoting I’m really talking about. Its ignorance of the majority of his writings in “The Problem of Social Cost” paper; the majority of Coase’s papers are not about the so called Coase Theorem. Coase’s discusion of the railroad example IS, in my view, the real genius: IF a judge assigns full liability to the so called “polluter” side of the market and ignores the so called “victims” role jhen Coase’s insight is that that judge is liable to end up making society less wealthy via moral hazard. Coase was right, but being right matters little beccause the point is NOT being transmitted writ large. Damn shame in my view.

24 valuethinker May 20, 2009 at 10:05 am

John Dewey

You talk about economic costs, but actually you are a Denialist.

Good to know that there is, in a sense, no point having a debate.

Remember if you don’t think global warming is happening, there is no point doing anything about it. It’s not a cost-benefit discussion, it’s a straight out ‘do nothing’.

Spending 1 cent on cleaner coal burning is a waste of economic resources in your universe.

Unfortunately, in mine, which happens to be on the same planet, we have a serious problem we have to address.

But I wish you’d quit pretending to ‘debate’ when you don’t believe the science. You don’t give a damn about the costs of abating carbon emissions, because on your first assumption, there is no point in so doing.

25 indiana jim May 20, 2009 at 12:01 pm

John Dewey wrote: “Quite frankly, I don’t see how economics or climatologists or medieval wizards or any combination of those professions can make such assessments, given today’s levels of climate knowledge and technological forecasting.”

Unfortunately John, economist’s have a grand tradition of composing articles that are devoted exclusively to two tasks:

1) setting the stage with a story built solely upon “stylized facts”; and 2) creating a mathematical model that: explains the stylize facts and is supported by “proofs” that establish the internal consistency of the mathematics.

This has, not surprisingly, ending up putting egg on the faces of some prominent economics. You are probably familiar with Coase’s discussion of “The Lighthouse in Economics” and Cheung’s “Fable of the Bees.”

Evidence and history are inconvenient truths to economists who really like the story they are telling and the reactions they get for telling the stories in certain cocktail circuits.

I don’t think Barkley, by the way, is one of these types; misunderstandings are easy among bloggers and of course sometimes errors are made by people who think better of things later.

Still, I like your post and your interest in serious skepicism.

26 Cosmotarian Overlord May 20, 2009 at 12:41 pm

valuethinkers is right. Science means you must have faith in what the IPCC tells you. It is ok to debate the best way to bring down the fever, but we are not ever to discuss the premises.

“the premise of positive feedback loops which the IPCC uses to project that global warming caused by CO2 emissions will lead to accelerated global warming caused by increased water vapor;”

I am not sure this “premise” is accurately stated. This is why it is best to leave the real science up to the scientists. You are not expert enough to discuss this so called premise.

27 maggy simony July 4, 2009 at 6:23 am

I want to know specifically how cap in trade will affect (1) airline transportation for the general public vis a vis (2) private airplane transportation (leased or owned).

There is something comical about Gore being the guru for saving the planet by limiting energy AND flying around the world in his private jet. Was there EVER a more wasteful addition of carbon and pollutants to the atmosphere than private airplanes???

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