In the present article I wish to continue my criticism of Krugman’s writings in support of Waxman-Markey. We will see that even on mainstream, neoclassical economic terms, Waxman-Markey fails a cost/benefit test by a huge margin. It’s not even close.

Incidentally, you could say the same thing about respecting the property rights of holdouts when the public needs their land for an important project.

CBA, all the way.

Mr. Krugman is an economist; however, when he discusses economics he generally speaks foolishness that is motivated by politics, power, and professional remuneration and advancement. Did we really believe that his analysis of climate change issues, both those aspects that rely on the natural sciences and those that rely on economics, would be any different? The court economist is also the court climatologist.

With climatology we are witnessing the perversion of another area of scientific inquiry to political control. Similar to mainstream practitioners in economics, other social sciences, and history, mainstream climatologists are typically paid propagandists for politicians and certain special interest groups. I hate to sound pessimistic, but statism and totalitarianism continue their advancement.

One of the biggest fallacies in economics is to project current trends indefinitely into the future. If you want to see how wrong Krugman’s analysis can be, go back 40 years in Zimbabwe, (I think in was called Rhodesia in those days), and project forward 40 years.
Keynes is famous for the quote “In the long run we are all dead.” Under the current “Keynes on steroids approach”, the long run may be the end of 2010. Waxman-Markey is a tax.Where is the economic production going to come from to pay this tax?
The inefficiency of alternative energy sources is reflected in the price. To generate 1MWH of electricity costs about $30 for coal, $90 for wind, and $120 for solar. To claim that this effect is minimal is contrary to common sense.

http://zaptheirs.ning.com/video/the-other-side-of-green

So why don’t they think the economy can cope with limits on greenhouse gas emissions? Under cap-and-trade, emission rights would just be another scarce resource, no different in economic terms from the supply of arable land.
Krugman, an economist, doesn’t understand the difference between political barriers and the natural limits of a truly scarce resource? Sure, the economy could adapt to cap-and-trade, easily, but that doesn’t make it economically necessary.

@Michael_A._Clem: Like Bob_Murphy, you’re the one with a hole in your understanding of scarcity. Assuming the claims about greenhouse gasses are true (the premise of both Krugman’s and Murphy’s writings that you’re addressing), then the emissions of CO2 by some people come at the cost of consumption by others (in the form of property rendered unusable).

Any time one person’s consumption means another person cannot consume as much, there is scarcity. Yes, the two goods are different in this case (fuel vs. land), but the concept remains.

Don’t feel bad; Bob_Murphy made the same mistake. But yes, there is natural scarcity here.

Let’s assume for the moment that reducing carbon emissions is an urgent priority. Then a proper economic analysis would do a cost benefit analysis to determine the most cost effective way to achieve the desired result. In this case, we would look at a number of alternatives (excuse the grammatical mistake!).
Using the same technology as France and Japan, we could replace the coal fired plants with nuclear plants. This is proven, safe, zero CO2 emission technology. The (all-in) cost is very close to that of coal ($28 vs $29), and about one third of the cost of alternative energy. This would cut the US CO2 emission from electricity generation by half. This is huge.
Cap and Trade does not even guarantee a reduction in CO2 emissions – it just provides a penalty. Hollywood and Al Gore will just pay the penalty and continue to pollute – again assuming that CO2 is pollution. Also, as with the prisoner’s dilemma, we can not control what China, India and other countries will do. They are entitled to demand the same CO2 per-capita pollution rights as the US. In this case the CO2 reduction attempt will fail.

Any time one person’s consumption means another person cannot consume as much, there is scarcity.
Laws passed by government create a forced scarcity, an institutional barrier, not a natural scarcity, and thus does not provide valuable economic information about the resource itself. Cap-and-trade won’t address any particular person’s emissions, but instead attempts to deal with it at the industry and company level–and, of course, how much emissions are permissible will necessarily be a political decision, not an economic one. Artificial scarcity creates misery without necessity.
Of course, that’s making the assumption that such emissions are, in fact, a major factor in climate change (but that’s another argument).

The problem with the carbon tax isn’t that we shouldn’t tax carbon, it is that is shouldn’t be an “added” tax.

The income tax raises about a trillion plus per year. We should simply eliminate the income tax and replace it with a carbon tax that raises a trillion. The feds don’t deserve a trillion but it would never get done otherwise.

There should be no “trading”, simply tax carbon at the source, just as it exists in the ground, keeping it simple.

There is no need for “greenhouse” logic. If we help the climate, so be it, but it doesn’t need to be the reason.

The reason is the income tax is immoral. A tax on carbon, on the other hand, would raise revenue by taxing that which is not produced. Everyone has a right, as individuals not in the collective sense, to the resource since no one produced it. Individuals [or corporations] can “purchase” that right from everyone else and the carbon tax is a good way.

One of the main austrian criticisms of socialism is the lack of pricing. Well, resources suffer the same fate. They are not priced in any market sense, they are doled out by the state at a huge discount. How can we have a free market system when the basic resources, building blocks of any product, are not priced?

If we clean up the environment at the same time, all the more reason.

No income tax, simple carbon fee, no carbon trading.

“Paul Krugman is a very sharp guy, conversant in many different fields. Yet his analysis of the economics of climate change is as wrongheaded as his analysis of depressions.”

The first sentence was a peculiar and unnecessary in your closing arguments.

How can he be a very sharp guy if two of the disciplines you cite (climatology and economics) demonstrate his flawed logic and poorly constructed opinion? And one of those is his career focus, to boot!

There is NATURAL scarcity anytime one person’s consumption conflicts with another. Whether government “gets the numbers right” is irrelevant to this question.
Who’s blurring the issue, you or me? Krugman’s article was written to advance a cap-and-trade scheme that would put politics in front of economics, but he tries to argue that it would really provide economic incentives (“market-based carbon trading”), when all it would really provide is political incentives and no good economic feedback.
Whatever natural scarcity may exist in these emissions is the separate question that you are trying to mix into the discussion, because cap-and-trade can’t truly address that natural scarcity.

Trading carbon can’t address natural scarcity but taxing it can.

First, we need to eliminate the tax that ruins economic feedback, the income tax.

Then tax carbon to an equal amount or less [good luck with the less part!].

Those who use will be paying for the use of the resources to those who don’t use or don’t use as much. It solves the natural scarcity issue that occurs with any natural resource.

But, I couldn’t be for simply adding another tax, michael is right in that it is simply a political ploy. if they really wanted reform, they would be offering to “trade” taxes, not carbon.

I think it is worth clearing something up-carbon dioxide, in the cap-and-trade system or any other related “carbon legislation”, is not a natural resource that companies can access, but a byproduct of their production of something else, such as electricity. Taxing carbon dioxide does not create a price for a natural resource, but rather increases the cost of business.

While usually wrapped in environmental crusader-talk, “carbon legislation” is aimed at eliminating small competitors of big business because big business (a) wants to destroy competition and (b) is easier for the government to control.

It gets down to whether we view “state” property as common property or collective.

Neither. It’s not legitimately claimed by anyone.

Friends don’t let friends do Georgism.

RWW,

I agree, no property can be “legitimately” claimed without “government”.

I am all for anarchy, but that is a different universe.

@SailDog

lol

Gene, explain to me how any tax can be moral. All taxes are evil, and theft, and I can’t see why stealing because you have money(income tax, verse stealing because you own land (property tax), stealing because you consume(consumption tax), to stealing because carbon dioxide was created. It’s all stealing, and I honestly can’t see how any one theft is on a higher moral plane.

“A tax on carbon, on the other hand, would raise revenue by taxing that which is not produced. Everyone has a right, as individuals not in the collective sense, to the resource since no one produced it. Individuals [or corporations] can “purchase” that right from everyone else and the carbon tax is a good way.” -Gene

How is it that they are taxing on that which isn’t produced, it is supposed to tax the carbon produced?

Also I don’t understand why your against trading of carbon emissions. If it cost a company 100 fed notes, to reduce a ton of carbon dioxide, and me only a dollar, why can’t the company pay me to reduce carbon emissions. Otherwise we have a very inefficient mechanism for lowering emissions.

Sail dog, lol. Typical one step logic. We use resources, we have limited amount of them, therefore we will out of them all and die. I hope that this isn’t your view, but thats what I extrapolated fromt he analogy.

Hi Matt,

First, I will agree that all taxes, forced contribution, are immoral.

So, like I mentioned, anarchy is fine but it just isn’t happening right now.

I mentioned taxing at the “source” [the resource as it comes out of the ground], not the emission, although carbon content can be used to set the rate, if that worked. I am against “trading” because if we are viewing carbon emission as “harm”, it isn’t “legitimate” to “trade” harm. If it isn’t harm, why are we taxing the emission? and like thinker mentioned, cap and trade is being used to lose the smaller players.

If we have taxes and if they are to support government which makes it possible to have “property” and a society, not to mention all the lousy things government does, we must have a tax. income tax is the worst, taxing produced goods, etc.

Resources, as they lie in the ground, are not products. No human has produced them. Everyone has a right to them, not only state privleged individuals and corporations. So, taxing extraction simply transfers that right the best way we have at the moment. It simply becomes a “cost” of extraction, sets the basic price and everyone who consumes at the end point pays for the right to use to those who don’t consume or consume less, etc.

In a perfect world, we could have a more direct transfer without government.

I can understand the “no tax” approach but it has to correlate with the no government approach also. But, if that is the case, what is the point of a tax [or carbon] discussion? wouldn’t it be more “practical” just to start planning the “revolution”? They have nukes, they are not going down easy!

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