tag:blogger.com,1999:blog-8524070301101240472.post1887848865361468984..comments2023-09-28T08:13:11.489-07:00Comments on Only In It For The Gold: The Problem with a Carbon TaxMichael Tobishttp://www.blogger.com/profile/08229460438349093944noreply@blogger.comBlogger46125tag:blogger.com,1999:blog-8524070301101240472.post-84689845808761866462011-08-03T13:18:27.304-07:002011-08-03T13:18:27.304-07:00Sigh, second try with the equations:
1. Reduced-f...Sigh, second try with the equations:<br /><br />1. Reduced-form<br /><br />R_a_k = (-751 + 123.2 * T - 4.52 * T^2 + 49.627 * P) *(L_a_k/L_a_US)<br /><br />2. Ricardian (not Ricatti!)<br />R_a_k = r*L_a_k<br /> (1639 + 171.9 * T - 23.7 * T^2 + 91.7 * P - 75.7 * P^2) + 0.177 * ln(CO2)<br /><br /><br />T is temperature of the country in C, P is precipitation in mm. They comment that the reduced form might not be terribly realistic as they assume farming is impossible even now in places where it's done... <br /><br />I realize the Stern review used some more advanced models too.Gravitylosshttps://www.blogger.com/profile/06169853327061102628noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-91754952014062337342011-08-03T13:10:32.067-07:002011-08-03T13:10:32.067-07:00But can we assume that the relationships between a...But can we assume that the relationships between amount of money vs the amount of resource stay the same when we move beyond really small changes in local resource availability?<br /><br />Ie the hypothetical, can you measure the effect in current food price if climate disruption destroys a significant portion of world farmland 50 years from now? (I don't think such a thing is likely, this is a thought experiment.)<br /><br />Does it give any context? Is it useful? Is it misleading?<br /><br />The 0.1% discount rate seems like a diversion. 0.999^50 is only 0.95. We're trying to estimate orders of magnitude here.<br /><br />I dug up some of Stern's references from Mendelsohn 1998, country specific market impacts of climate change (available as free pdf at http://www.cetesb.sp.gov.br/userfiles/file/mudancasclimaticas/proclima/file/publicacoes/cenarios/ingles/countryspecificmarketimpactsofclimatechange.pdf ) and found some equations Mendelsohn used for the USA Agriculture (also forestry, residential energy etc are included):<br /><br />1 Reduced-form<br /><br />R = (-751+ 123.2 * T -4.52^2 + 49.627*P) * L_k/L_us<br /><br />2. Riccatian:<br />R = r* L_a_k * (1639 + 171.9* T - 23.7 * T^2 + 91.7* P -75.7 * P^2) + 0.177 * ln(CO2)<br /><br />etc etc<br /><br />R s dollar value of agricultular land, T is temp in C, P precipitation in mm, CO2 is CO2 concentration. L_k is area of country k, L_a_k is farmland area of country k and r is the interest rate.<br /><br />Comments?Gravitylosshttps://www.blogger.com/profile/06169853327061102628noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-87601421883086648652011-08-03T12:47:18.786-07:002011-08-03T12:47:18.786-07:00Okay, I can get behind a .1% discount rate.
"...Okay, I can get behind a .1% discount rate.<br /><br />"<i>We're actually measuring economic resources.</i>"<br /><br />I would think we are measuring the benefits and harms of employing those resources, and the forgone benefits and harms that could have come from employing them another way.<br /><br />"<i>Money's just the unit of measurement, not the thing itself that we are measuring.</i>"<br /><br />Agreed, but money does not have to be the unit of measurement, and it does not provide a consistent measure of value across people. Economists know that; they argue in theory there is some underlying unmeasurable quantity called "utility" which cannot be measured in any units but which in theory could be used along with each person's budget to derive the person's "willingness to pay", a more concrete value which can be measured. <br /><br />But there is no theoretical justification for assuming a benefit that a poor person is willing to pay $5 for has the same utility as what a rich person will pay $5 for.<br /><br />You note the absurd result that the measurable dollar value of a human life goes up with their wealth. I am suggesting that if a poor person is willing to pay less to prevent some certain amount of risk to their life, that does not mean they value their life less, it could mean that the needs they would address with their money are more valuable. I am furthermore suggesting that if it is possible to work out the relationship between wealth and the dollar value of a human life, then it is possible to measure any benefit that you can measure in dollars in "equivalent human lives" instead, and this may provide a more consistent measure of value across people. Once again, we're not measuring actual lives here, or not just lives anyway, we can measure all the costs and benefits in this unit.<br /><br />Of course, whatever units you use, the sum of value across people isn't the only thing that matters; justice/fairness are important too.Eric Lhttps://www.blogger.com/profile/17688525347746547529noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-45791479154121150462011-08-02T22:59:07.552-07:002011-08-02T22:59:07.552-07:00Eric, with discounting, you're going through i...Eric, with discounting, you're going through it as if no economist has ever thought of such things. Which simply ain't true.<br /><br />For a start, basci governmental practice (at least where I come from) is to agree that humans are subject to hyperbolic discounting. Placing too much weight on the near future and not enough on the far future. Thus when looking long term, especially on matters environmental, we do not use market interest rates to discount, we use much lower ones.<br /><br />And when we get to Stern, we end up effectively using a 0.1% one. For the quite simple reason that it's reasonable enough to assume that something other than climate change might come along and screw us all up instead: asteroid strike, super volcanoes, whatever.<br /><br />So this has been thought about and adjusted for.<br /><br />"In fact the latter would make more sense to me, but tell me, does it make more sense to you to say that the poor value their lives less or that they value money more?"<br /><br />We're not meausuring money though so this piece of rhetoric rather passes by. We're actually measuring economic resources. As economic resources are what we will have to mobilise to beat climate change, this seems reasonable. Money's just the unit of measurement, not the thing itself that we are measuring.Tim Worstallhttps://www.blogger.com/profile/13161727860817121071noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-80300724737767064282011-08-02T14:33:55.343-07:002011-08-02T14:33:55.343-07:00A thought experiment I like to use here is the ide...A thought experiment I like to use here is the idea of a DDT tax. Right now we have a command-and-control approach: you can use DDT for malaria control, and nothing else. But my inner economist suggests, why do you think you can truly know which uses are valuable and which are not? Set a reasonable maximum limit, price it accordingly and let the market direct how DDT gets used.<br /><br />Of course, this means the price of DDT has to rise to make it not worthwhile for most farmers to use it. Meanwhile a disease affecting the poorest parts of the world is costlier to address. Either fewer bed nets are made or people have to cut back in other places.<br /><br />It seems obvious to me that a market based approach to dealing with DDT is a horrible idea. It's not so obvious whether it's a bad idea or a great one in the case of carbon. Given the wide variety of ways fossil fuels are used, the advantages of the market are bigger (at least until we get to the point where we can eliminate most uses of fossil fuels -- at some point regulating it down to the last few necessary uses becomes smarter than imposing a ridiculously high fee), but the downsides are similar.Eric Lhttps://www.blogger.com/profile/17688525347746547529noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-89578786840575847302011-08-02T14:20:40.616-07:002011-08-02T14:20:40.616-07:00Tim,
Let's start here:
"what value do w...Tim,<br /><br />Let's start here:<br /><br />"<i>what value do we in fact place on life given what we actually do? For N America this is around the $5 million mark. In poorer countries it's less because poorer people value life less in monetary terms.</i>"<br /><br />This goes back to my comment about dollars not being a consistent measure of value across people. And so we get the absurdity that a multi-millionaire's mansion is worth many Bangladeshi lives, or one or two American lives, but not that multi-millionaire's life. But there is nothing special about money that makes it any more correct to measure how people value their lives in terms of money than it makes sense to measure how people value money in terms of their lives. In fact the latter would make more sense to me, but tell me, does it make more sense to you to say that the poor value their lives less or that they value money more?<br /><br />This does suggest a potentially interesting way analyses like the Stern report could be done: If we can work out the relationship between dollars and human lives, perhaps we can convert dollar costs and benefits to "equivalent human lives"?<br /><br />On the subject of infinite costs...<br /><br />The problem with infinite costs is that not all infinite costs are equal, but you can't do math with infinite costs. $2000 dollars a day from here to infinity is clearly better than $200 dollars a day from here to infinity. If you apply discounting, these both get finite values and you can compare them. And you can compare more complicated things, like a million dollars now versus an income stream that starts at $10,000/year and rises at 4% a year. But then, if you try to compare an income stream rising at 10%/year to one rising at 11%/year and your discount rate is 10% or less, the math is no longer so wonderful, as both of these have infinite value. Fortunately the real world rarely presents us choices like that.<br /><br />Once you've made the math possible, you can use it in analysis, and so there is a tendency to view it as correct. But there is no theory proving that this is the right way to do things, only that economics can be done this way. It's clear that people do behave as though they discount, but it also appears to be the case that they do not use the mathematically beautiful exponential curves when doing so. And the question gets thornier when you realize you're comparing values across different people. If we discount at 5%, while assuming the economy grows at 3% and the value of a human life in dollars grows at the same rate, then the value of human life is discounted at 2% a year. At that rate, the present value of my daughter's life when she reaches my age is less than 60% of the value of my own, and the value of her children are similarly discounted. If you add up her life, one of her kids' lives, one of theirs, and one from each generation on to infinity, in total all of their lives are worth just a little bit more than mine. That strikes me as an appallingly large amount to discount a generation, but economists are quite comfortable with larger discount rates in part because I would likely discount my future income by more than that.<br /><br />Of course, if we said each generations' lives are worth just as much as the previous generations' lives, then we will likely find we are back in the world of infinite costs, and you can't do math with infinite costs, so that's clearly not right.Eric Lhttps://www.blogger.com/profile/17688525347746547529noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-86046128037707815062011-08-02T09:21:21.111-07:002011-08-02T09:21:21.111-07:00Eli, on the other hand, Amazonia is not prospering...Eli, on the other hand, Amazonia is not prospering. There's some debate as to how large a direct climate forcing the decline of the Brazilian rain forest is, carbon neutrality notwithstanding.Michael Tobishttps://www.blogger.com/profile/08229460438349093944noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-20250670655299946382011-08-02T09:19:29.121-07:002011-08-02T09:19:29.121-07:00This looks relevant:
"Some economists and p...<a href="http://is.gd/4RKu" rel="nofollow">This</a> looks relevant: <br /><br />"Some economists and philosophers have even argued that in cases of environmental preservation 0 percent is the only ethically defensible number. That is, no discounting at all. But this debate over percentages may actually be a distraction from a more serious problem with the formulas used in discounting.<br /><br />...<br /><br />"Revising the assumption of a never-changing discount rate leads to results totally at odds with current economic practice, Geanakoplos and Farmer have shown. To understand their argument, consider the next half-century. Year by year, the true discount rate (which no one knows precisely) will probably fluctuate in some complicated way, following one of many possible up-and-down paths. Since we don’t know the future, to determine the effective discount rate for the 50-year period, we should average over all possibilities."Michael Tobishttps://www.blogger.com/profile/08229460438349093944noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-61459668322495284592011-08-02T09:11:25.346-07:002011-08-02T09:11:25.346-07:00Brazil went to an ethanol economy and is prosperin...Brazil went to an ethanol economy and is prospering.<br /><br />Stern was right. See for example "A Perfect Moral Storm" by Stephen Gardiner for why <a href="http://rabett.blogspot.com/2011/07/models-suck-part-i.html" rel="nofollow">econometric models suck</a> over long times and distances.EliRabetthttps://www.blogger.com/profile/07957002964638398767noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-67743731191356399662011-08-02T09:04:30.863-07:002011-08-02T09:04:30.863-07:00Brilliantly stated, GL.
I think this can be expan...Brilliantly stated, GL.<br /><br />I think this can be expanded into a stronger argument. More to follow.Michael Tobishttps://www.blogger.com/profile/08229460438349093944noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-34806520157964506592011-08-02T04:10:11.639-07:002011-08-02T04:10:11.639-07:00Let's play a thought experiment. Let's say...Let's play a thought experiment. Let's say food costs one dollar per kilogram and the world's food production is one trillion kg. So the value of world's food production is one trillion dollars.<br /><br />So what's the monetary value of the destruction of farmland that produces 1000 kg per year? Perhaps it's 1000 dollars per year. That money can be used to purchase the food from elsewhere. So the person who can make more money than that by using the farmland for something else is rational and does it.<br /><br />What's the value of destroying half of world's food production? 500 billion dollars? <br />That's small peas, less than the US military budget. So it won't have much effect on the world really, right?<br /><br />What about 99%? 100%?Gravitylosshttps://www.blogger.com/profile/06169853327061102628noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-19571351711084519162011-08-02T00:11:25.356-07:002011-08-02T00:11:25.356-07:001) Stern's calculations are wrong of how peopl...1) Stern's calculations are wrong of how people value things. OK, go prove that to be so.<br /><br />2) Your valuation is higher than that of the average person. <br /><br />Note that the possibility that Stern is wrong because an objective valuation would be higher is not there. Because there is no such thing as an objective value. We abandoned that idea in the 1870s: value is subjective, it's a function of the valuation that the human being doing the valuing places on matters. It is not possible to say that a lake is worth $x. Only that people value a lake at $x.<br /><br />All of which means that, if 2) is the correct explanation for your valuation being higher than tyhe average valuation, is that it is you who is out of step.<br /><br />But this can be cured: you just have to go convince 6.99 billion of your fellow humans that they are wrong in their valuations and you are right.<br /><br />And when you have done so the average valuation placed upon climate change will agree with your own valuation: and thus more resources will justificably be used to avert climate change.<br /><br /> Good luck!Tim Worstallhttps://www.blogger.com/profile/13161727860817121071noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-33400383481740235772011-08-02T00:11:11.437-07:002011-08-02T00:11:11.437-07:00"I think that not stabilizing climate essenti..."I think that not stabilizing climate essentially does have effectively infinite cost. Indeed I find it obvious. But others don't, and that is a problem.<br /><br />Looking for suggestions for people who explain this in language economists can understand. "<br /><br />Economists understand that quite well. Infinite cost means that infinte expenditure to stop it is therefore justifiable. And infinite does indeed mean infinite. Killing everyone who uses fossil fuels after 3 pm Tuesday is less than an infinite cost: but if the cost of climate change is infinite then it's justifiable.<br /><br />But I doubt very seriously that you agree that killing all those people justifies not having climate change. Thus you don't think that the cost of climate change is infinite.<br /><br />We could be less emotive about it. We could just say no new fossil fuel using technology, of any type, can be constructed. We've got to start, at least, to stop using those that we already have.<br /><br />Millions would die, as they do die already from the absence of things like electiricty and fossil fuel based farming. Heck, the lack of refrigeration for vaccines kills millions.<br /><br />This is a less than infinite cost to solve an infinitely costly problem and thus justifiable.<br /><br />But if you're not willing to do that then you don't in fact think that the cost of climate change is infinite.<br /><br />Which brings us back to: if the cost of climate change is less than infinite then so are the resources we are willing to dedicate to avoiding climate change. And the economist's logic at this point is irrefutable. We are willing to dedicate resources of a value up to the cost of what climate change will be. <br /><br />If we use more resources (and this is in the widest sense, the death of someone now is a cost to be put against the cost of the possible death of someone in the future) to avert, then we are all poorer than we need to be. If we use fewer resources and thus have more climate change then again we are all poorer than we need to be.<br /><br />So we still want to identify the socially optimal effort to be put into averting climate change.<br /><br />Which leaves us with, what is that amount?<br /><br />Now, clearly, you place a higher value on averting climate change than do many others. That, of course, means that others place a lower value upon it than you do.<br /><br />And we don't run the world according to your tastes or valuations (nor to mine for which everyone is most grateful). Even if we were to be omniscient and benevolent dictators, we would and should be trying to run the world according to the average valuations of everyone.<br /><br />So the death of a person is not infinitely valuable for example. It's the statistical value of a life: what value do we in fact place on life given what we actually do? For N America this is around the $5 million mark. In poorer countries it's less because poorer people value life less in monetary terms.<br /><br />And so on and so on and we find ourselves rebuilding the Stern Review. Yes, we can shout about discount rates, add in Weizman on uncertainty, but this is essentially what Stern was doing.<br /><br />What value do people, on average, put on the things that climate change will destroy and what value do people put on the things that we'll have to use or give up to beat climate change?<br /><br />Which brings us, finally, to the comment that Stern's $80 is far too low. There are two possible reasons for the value being "wrong".Tim Worstallhttps://www.blogger.com/profile/13161727860817121071noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-15033916705390927482011-08-01T13:11:42.368-07:002011-08-01T13:11:42.368-07:00Belette, good questions.
To my knowledge this has...Belette, good questions.<br /><br />To my knowledge this hasn't been done effectively. But I always have the sense that what economics does get done misses the risk spectrum spectacularly.<br /><br />I think that not stabilizing climate essentially does have effectively infinite cost. Indeed I find it obvious. But others don't, and that is a problem.<br /><br />Looking for suggestions for people who explain this in language economists can understand.Michael Tobishttps://www.blogger.com/profile/08229460438349093944noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-71180312221134986612011-08-01T12:59:17.439-07:002011-08-01T12:59:17.439-07:00> The maximum utility solution is clearly and u...> The maximum utility solution is clearly and unambiguously very near zero net emissions within the century... The best outline of the argument that I know of is... http://www.copenhagendiagnosis.org<br /><br />Well, I looked at their summary. They say "To stabilize climate, a decarbonized global society – with near-zero emissions of CO2 and other long-lived greenhouse gases – need to be reached well within this century."<br /><br />That seems to me to be a long way away from your claim. They don't even talk about maximum utility. If you've decided, a priori, that "stabalising climate" gets infinite weight, then your conclusion follows, but not otherwise.<br /><br />Given that the title is "The Copenhagen Diagnosis, 2009: Updating the world on the Latest Climate Science" and the authors all look like climate scientists, it would be fairly odd if it talked extensively about the economics. Are you sure that is the source you meant?William M. Connolleyhttps://www.blogger.com/profile/05836299130680534926noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-60050084347555038262011-08-01T12:32:12.208-07:002011-08-01T12:32:12.208-07:00Changed Google settings, I'm the same guy as a...Changed Google settings, I'm the same guy as above.<br /><br />You could also have a small leak in your in-the air CO2 share, something like 20% of 2000-2009 emissions divided by current year world population.<br /><br />This would control the amount, not the emissions.<br /><br />Normally in control theory you have proportional, integral and derivative of control minus output based methods: adding proportional gain speeds up the control but can introduce overshoot and oscillations, derivative can reduce those problems and increase speed and integral gain removes fixed errors (ie finetuning) but can introduce oscillations. Well roughly that.<br /><br />Perhaps a good way to optimize for most utility (climate impacts vs fossil usage benefits) would be to have both the derivative (yearly emissions) and the proportional (total emitted amount) in the cost equation.Gravitylosshttps://www.blogger.com/profile/06169853327061102628noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-52372875319899745662011-08-01T12:07:46.304-07:002011-08-01T12:07:46.304-07:00If you go to the physical effects <=> cost m...If you go to the physical effects <=> cost models, shouldn't it be so that per emitted kg, you start paying a fee every year for something like 1000 years? <br /><br />And if major disasters appear, you'd (or rather you'd have to have a fund after you died, which would be subject to the tax. The CO2 heritage would be left to your offspring the same way as the monetary heritage.) be collected the money for the reparations in proportion to the total CO2 that you have emitted either directly or indirectly.<br /><br />Like if you buy milk, you have to buy a CO2 burden or responsibility share of 100 grams for the next 1000 years, and if you buy beer, maybe 30 grams...<br /><br />In reality you'd need CO2 banks for this to handle CO2 debts and funds like there are for pension payments or real estate that are often bigger than one person work career things.<br /><br />:)Gravitylosshttps://www.blogger.com/profile/06169853327061102628noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-38760044486368132372011-08-01T00:52:28.060-07:002011-08-01T00:52:28.060-07:00A Siegel,
I think that's the right way to do ...A Siegel,<br /><br />I think that's the right way to do a carbon fee if we're going to do one, but its basic shortcoming is the slow phase-in. Not that a fast phase-in would be preferable, but people don't really respond to future prices. Which has more influence when someone is buying the car, the price of gas, the price of the car, or anticipated future gas prices? I would say, in order, the price of the car, then current gas prices, with the eventual carbon fee having the least impact. <br /><br />People generally aren't good at making decisions that involve trade-offs between the short term and long term. I'm not even sure economists would come to an agreement on the calculation they should be doing when buying a car or a house. So I don't think future price incentives on fossil fuel use are sufficient (I could go either way on whether they're necessary.) We need current incentives on decisions that can have a long-term effect on fossil fuel use. And we need not be restricted to price based incentives -- the new CAFE standards are a good start.Eric Lhttps://www.blogger.com/profile/17688525347746547529noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-13139382162784631632011-07-31T23:21:17.025-07:002011-07-31T23:21:17.025-07:00"The efficient markets hypothesis states that..."The efficient markets hypothesis states that goods will be produced by whoever can do so most cheaply and go to whoever is willing to pay the most for them."<br /><br />Maybe you should check your old college textbooks. That's not what the EMH says at all. What it does say is:<br /><br />"In finance, the efficient-market hypothesis (EMH) asserts that financial markets are "informationally efficient". That is, one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis, given the information publicly available at the time the investment is made.<br /><br />There are three major versions of the hypothesis: "weak", "semi-strong", and "strong". Weak EMH claims that prices on traded assets (e.g., stocks, bonds, or property) already reflect all past publicly available information. Semi-strong EMH claims both that prices reflect all publicly available information and that prices instantly change to reflect new public information. Strong EMH additionally claims that prices instantly reflect even hidden or "insider" information. There is evidence for and against the weak and semi-strong EMHs, while there is powerful evidence against strong EMH."<br /><br />It doesn't say anything at all about the allocation of resources.<br /><br />Further, there is no general theory stating that markets are more efficient at allocating resources than any other system. For we all agree that there are externalities and public goods (which is a special sort of externality). We might use the example here of negative externalities, emissions and pollution.<br /><br />Yes, there have been market solutions to some examples (copper gangues and spoils in Arizona I think it was) but the entire profession agrees that there are some which need public solutions, ie non-market ones.<br /><br />Similarly, we can have positive externalities, say herd immunity from vaccination, the wealth created from the general literacy of the population. These again point to collective, not market, solutions. These points were first made by Marshall, in the 1890s, in the standard economics textbook of the day. They're not oddities in economics, they're at the heart of the subject.<br /><br />However, before we conclude that market failue is so ubiquitous as to make them near useless, do remember that government failure is also fairly common. I point you to the ethanol program as an example.....Tim Worstallhttps://www.blogger.com/profile/13161727860817121071noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-29844773550563228572011-07-31T20:49:29.169-07:002011-07-31T20:49:29.169-07:00Couple things:
1. RE Tim, the carbon emissions o...Couple things:<br /><br />1. RE Tim, the carbon emissions of 8.8 kg per gallon of gas is a stove-piped look. That is the carbon emission just out of the tail-pipe and doesn't count the full system-of-system (drilling, transportation, refining, etc ...). More appropriate to consider each gallon of gasoline in the range of about 12.3 kg / 25 lbs with that additional system carbon load. (Which, of course, varies based on source / etc, but the 25% 'tax' for the system is a reasoned, but not perfectly exactly, rule of thumb.)<br /><br />2. However, imagine a carbon impact fee that goes in gradually. Starting at $15 ton (a typical start point in discussions), we're talking less than 20 cents per gallon. Compare that figure to the major fluctuations we've seen in fuel prices over the past decade. This is nearly a rounding error. And, well, getting to $1 / gallon over a decade -- the reduced fuel usage due to institutions and individuals reacting to the tax would end up reducing fuel use such that the overall oil/fuel price would likely be lower than BAU due to that reduced use. (Hard, of course, to do the specific calculation but there has been excellent work done on how much past shortfalls have driven up prices. A carbon fee that drove US oil use down 20% from a BAU case, or in the range of 3.5 mbd, would likely have a significant impact on global oil prices.)<br /><br />3. I have to say that I take exception with calling it a "tax". We really should be discussing a "fee". If I have an old mattress and want to take it to the county dump, I pay a tipping fee for getting rid of my waste. We pay trash companies fees, not taxes. When I want a permit to use a public space, I pay a "fee". This is about put a cost on something that is using and abusing the public domain. We should talk of a waste fee or such. (See, for example, http://getenergysmartnow.com/2011/07/31/engage-the-debt-via-win-win-policies/ and http://getenergysmartnow.com/2010/06/30/a-simple-set-of-thoughts-for-a-carbon-fee/A Siegelhttps://www.blogger.com/profile/17153733998025770648noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-62326375982207039912011-07-31T18:09:37.972-07:002011-07-31T18:09:37.972-07:00Thanks, Eric. While I do not identify myself as le...Thanks, Eric. While I do not identify myself as left (rather "liberal" or "centrist" or "pragmatist") I agree with much of what you say. The baldness vs malaria pioritization is exactly the sort of thing I am talking about here.<br /><br />I think that the wider the range of individual resources over the population, the more likely these dysutilities will be chosen. So in global problems they are severe, as well as in socially less progressive countries like America.<br /><br />In such situations, the price signal works counterintuitively, and the whims of the rich take increasing precedence over the needs of the majority.Michael Tobishttps://www.blogger.com/profile/08229460438349093944noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-50840204039670240242011-07-31T17:45:16.630-07:002011-07-31T17:45:16.630-07:00I am increasingly convinced that one of the big pr...I am increasingly convinced that one of the big problems with the left today is that we all went to college and took economics. That seems to be a factor here in a few ways.<br /><br />First of all, economists do not seek to get "the most human utility" out of the system. If your microeconomics class went like mine, you learned about utility in the first few days, only to show how someone's "willingness to pay" for a good can be derived from its utility, other goods' utilities, and the person's <i>budget</i>. After that lecture, you never hear about utility again, only "willingness to pay," and sometimes you pretend it is the same thing. But utility can't be measured in dollars; it does not provide a consistent measure between people or even for one person with a changing financial situation. But utility can't be measured at all in any units, so it gets very little attention in economics.<br /><br />What markets are supposed to maximize is "consumer surplus," the difference between what each consumer was willing to pay for what they got and what they actually paid, summed over the population. The efficient markets hypothesis states that goods will be produced by whoever can do so most cheaply and go to whoever is willing to pay the most for them. I cringe at the word "efficient" being applied here because it's a value-neutral word covering up a value judgement about what we should seek to optimize. If pharmaceutical companies devote far more resources to finding a cure for baldness than for malaria, there is no market failure, resources are "efficiently" being allocated to their most profitable uses. The basic assumption that this is what we should want isn't often discussed in economics or in neoliberal circles.<br /><br />There are also political problems that go along with the left's obsession with economics. Most of the country was never forced to take economics, so you have to forget all this to understand how these ideas play politically. But so much of the left will only take seriously those policies which they could sell to their econ teacher. We only consider economically correct policies, rather than looking at all options that would solve the problem, and in the process leave out politically easier solutions. We talk about raising gas prices that are going up anyway; meanwhile every other policy you might consider to reduce gasoline consumption sounds better in the light of high gas prices. And we dismiss "command and control", forgetting that almost all transportation infrastructure in the developed world was planned, built, and funded by governments, not markets. We pretend just pricing the fuel correctly will get the market to make decisions about all sorts of things it has rarely bothered itself with before.<br /><br />Anyway, that's enough of that rant for now. I certainly consider a carbon tax preferable to doing nothing, but I'm not at all convinced it is the least bad option, and even less convinced that it is the most politically palatable.Eric Lhttps://www.blogger.com/profile/17688525347746547529noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-23489200649434918052011-07-31T14:12:01.904-07:002011-07-31T14:12:01.904-07:00William T., the discount rate is important, as is ...William T., the discount rate is important, as is what you decide to value. But in the absence of climate stabilization, dire consequences within the lifetimes of people now living are probable. <br /><br />By dire I mean beyond disastrous to history shaking. Disasters already appear to be happening.Michael Tobishttps://www.blogger.com/profile/08229460438349093944noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-19188667064901994302011-07-31T14:07:30.175-07:002011-07-31T14:07:30.175-07:00Making the case is not a matter for an afternoon&#...Making the case is not a matter for an afternoon's diversion. <br /><br />To be honest I don't have chapter and verse to point to, but this certainly is the consensus of the people I know who know what they are talking about.<br /><br />The best outline of the argument that I know of is the <a href="http://www.copenhagendiagnosis.org/executive_summary.html" rel="nofollow">Copenhagen Diagnosis</a>.<br /><br />http://www.copenhagendiagnosis.orgMichael Tobishttps://www.blogger.com/profile/08229460438349093944noreply@blogger.comtag:blogger.com,1999:blog-8524070301101240472.post-33904340062711597542011-07-31T14:05:00.305-07:002011-07-31T14:05:00.305-07:00> The maximum utility solution is clearly and u...> The maximum utility solution is clearly and unambiguously very near zero net emissions within the century<br /><br />The assumption underlying this statement is that we should be considering the "utility" of all those people who will live in the 22nd century and beyond, at anywhere near the level that we consider the utility of people presently alive. If we discount the utility of those far future people, then it seems that most of the costs fall on us (rich carbon users) and hardly any benefits...William Thttps://www.blogger.com/profile/13285679538054366979noreply@blogger.com