“cigarettes as they were another great market failure because like fossil fuels today, the cost of using them was thrown onto society as higher medical costs while the benefits went to the producers. Thanks”

Are hamburgers and fried chicken market failures too? The idea that uhealthy habits ‘market failures is misleading, as the costs of such things are borne most directly by those who themselves die younger, and the imposition of health costs are most effectively imposed on others through taxpayer financed health care. Ever hear of the term “government failure”?

And it’s interesting that you bring up cigarettes as they were another great market failure because like fossil fuels today, the cost of using them was thrown onto society as higher medical costs while the benefits went to the producers. Thanks.

You’re wrong about that.

On average, over the course of people’s lives, states spend more money to provide health care for non-smokers than they do for smokers.

This is because smokers are essentially committing an extended form of suicide. As a result, they die much sooner than do non-smokers. And although smokers often require short periods of intensive medical treatments towards the ends of their lives (e.g., chemotherapy), non-smokers require much long periods of ongoing medical care towards the ends of their lives (e.g., years or decades of nursing home care).

As it turns out, the cost of providing sustained care over a period of multiple years quickly dwarfs the cost of short periods of intensive medical treatment.

The “settlement” against the big tobacco companies was an attempt—a successful one—by the states to extort money from the market in order to solve an immediate problem (budgets shortfalls). Sure, they’ve actually increased the overall cost of providing medical care into the next years and decades, but what do they care? They’ll all be out of office by then; that’ll be someone else’s problem.

(And, for the record, the big tobacco companies weren’t all that opposed to the settlement, as it represents a huge barrier to entry for any new small tobacco companies that might attempt to enter the market and compete against the big established companies.)

Whenever the State attempts to solve a problem, the result is inevitably the same: the State only occludes the original problem instead of solving it, while at the same time it creates a related series of much bigger problems.

I share your concern that anthropogenic global warming might be causing changes that will have negative long-term effects on our species and other species. But if this is indeed the case, the solution will come from the free market, not the State.

A quote from Obama’s Chief Economic Advisor, Robert Reich, in an address to the House of Representatives supporting Obama’s Stimulus Bill: “I am concerned, as I’m sure many of you are, that these jobs not simply go to high-skilled people who are already professionals or to white male construction workers.”

Following and supporting Mr. Reich’s address was Mr. Charlie Rangel, Chairman of the Ways and Means Committee who had this to say: “And one thing you can depend on, you don’t have to be worried about what the middle-class is gonna do. Things are so bad: They have to put food on their tables. Clothes for their kids. Get them in school. I think this is a tremendous opportunity for a stronger America.”

I myself am a white male construction worker and have been practicing the trade for over 10 years now (I am currently 25 years old). Shouldn’t my efforts and expertise over this time period make me eligible to receive government contracts in conjunction with the requirements my company already meets for such contracts? Wouldn’t buildings and bridges being constructed for the public be the safest and most cost effective if built by “high-skilled people who are already professionals” such as myself?

Moreover, why is this racist slander permitted in the halls of Congress and on national television with not so much as a word of reprimand from anyone present? If one were to state the same thing but substituted the word “black” or “hispanic” instead of “white”, that politician would be impeached and chased off Capitol Hill; we’d have weeks of marches and demonstrations; violence and looting ensuing in every metro area. In addition, publicly announcing that the middle-class (i.e. my family) is too busy working to stay afloat in a sinking economy that such racist comments and fiscally insane bill proposals will go unnoticed is borderline scandalous, deeply offensive, and downright iniquitous.

These same ‘public service’ agents oversaw and advised the GSE programs that awarded mortgages to people without the means to repay them and then knowingly sold securities based on those bad investments, leading the world into the current economic black hole. Looking at it from completely outside the box – we have a group of powerful politicians whose legislation sponsored a worldwide economic meltdown resulting in massive and widespread unemployment. Now their plan is replace some of those laid off with unskilled labor of any ethnic group other than Caucasian. That does not sound like the Unites States of America that I studied in high school history books, but rather the subtle attempt of a power grab by a dictatorial coup in a third world country. Let us as patriots and protectors of freedom keep the former from slipping to the latter.

The fact is – this is a country of AMERICANS. Not a country of blacks or whites or purples. Let’s help the AMERICANS as a whole get back on their feet and not exclude any group from financial recovery based on the color of their skin. But this bill is not about stimulating the economy, increasing consumer spending or unfreezing bank credit for businesses. This bill is about the Democratic agenda and helping special interest groups. It is nothing more than a wasteful spending bill cloaked as a stimulus package by fiscally irresponsible policymakers. Recent history, such as the 10+ years of the Great Depression or Japan’s “Lost Decade,” has proven without a doubt that the provisions included will not only do nothing (especially for white males out of the gate apparently), but prolong economic stagnation and suffering.

Please do what you can to stop the passage of this bill. Write/Call/E-Mail your representatives. Thank you for taking the time to read my thoughts.

Francisco–I didn’t quite understand this either. Are you saying the shape of the demand curve for these products actually changes–becomes more inelastic– when the price is rise is due to artificially-imposed means as opposed purely market causes? From the consumer’s point of view, I don’t see what difference the cause of the price rise would make on one’s elasticity, thanks.

Mike, you said these are your rules:
1)I will take responsibility for my life.
2)I will treat others as I would like to be treated.
and finally,
3)I will allow my elected representatives to do nothing for me that would conflict with 1 or 2.

I call it “The Responsible Party”

If you are serious about your rules, how can you propose a carbon tax or any other tax for that matter?
1. When you ask for a carbon tax, you are shifting your responsibility for the environment onto the government, and a very poor choice of agent you have chosen to carry out your duty, a heavy-duty polluter of the first order..
2. The Golden Rule as Jesus stated it precludes the use of taxation to accomplish your purposes, no matter how noble or base your purposes may be. I know that you don’t like paying taxes, so why would you tax others?
3. And how do you propose to control your elected representatives to that extent. In the United States as regards the federal government, it is likely that once you have elected a representative, you have by law surrendered control of him or her until the next election, and even then, you cannot in your own right even vote the bum out. The only way I believe you can live by your third rule is to become a voluntaryist. Don’t vote! Have nothing to do with the political process. Go to work in the one area where your work will definitely show results and where you will make a difference.

What perverted reading of libertarian philosophy would lead you to such an odd conclusion? This is a distorted, cartoon version of libertarians created by those who don’t think man is worthy of freedom or those who just don’t understand libertarian philospophy.

” All the rules are:
1)I will take responsibility for my life.
2)I will treat others as I would like to be treated.
and finally,
3)I will allow my elected representatives to do nothing for me that would conflict with 1 or 2.”

Basically you want others to be coerced into behaving as you think they aught to behave. What makes you think others would like to be treated as you would? That’s quite presumptuous, don’t you think?

What on earth makes you think that your elected representative gives a crap about what you will “allow”? Because every 2 or 4 or 6 years you get to cast one vote in millions to decide whether he or some other like minded opponent, bought and kept by the same people, get to have the job of redistributing the productive output of the citizens and telling them what to do?

The naievete’ is breath taking.

What you are really trying to say is that you want an entity who has the power to legally commit violence to make people behave as you see fit. That doesn’t sound nearly so high-minded. But ultimately these elected representatives will choose how to use that violence as they please, not as you would wish anyway. So your not that dangerous to the rest of us after all.

— George Washington, Farewell Address [September 26, 1796]

You stated, “Also, it would certainly NOT reduce the demand for petroleum based goods as long as the market (that is, everybody) knows the extra cost is NOT a reflection of scarcity.”

Are you saying here that cost does not affect demand? Because if you are, your economics does not fit the models I’m familiar with.

You stated, “the extra taxes on cigarettes have not slowed down the demand for cigarettes”

Do you have any information to back up this statement? And it’s interesting that you bring up cigarettes as they were another great market failure because like fossil fuels today, the cost of using them was thrown onto society as higher medical costs while the benefits went to the producers. Thanks.

You stated, “If by artificial means you raise the cost of energy by taxing fuels…”

Remember, I started this whole thing by saying the income tax should be replaced with the carbon tax. I, like you, do not want to place additional burdens on my fellow citizens. I, perhaps unlike you, do wish to provide an economic incentive to my fellow citizens to replace fossil fuels with other forms of energy because of the affects of using fossil fuels. I’m sure in a straight up vote many citizens would chose to substitute the carbon tax for the income tax.

You stated, “If savings have been lowered thanks to the cuddly carbon tax that everybody has to pay (petroleum or carbon based fuels being so ubiquitous), where will the company obtain the necessary capital to do this?”

From the income tax the investors didn’t have to pay. And they’d have the additional incentive to save even more for the windmill because it would lower their carbon tax even further in the future. Hell, they’d probably build an extra one and sell the power to their neighbors who would then, happily, not have to pay a carbon tax.

You stated, “They would simply stop purchasing other necessities, stopped saving or both.”

I believe I have a bit more faith in the ability of the citizenry than that. They would figure ways of making the income tax they didn’t have to pay lower their carbon tax even more. And in doing so, they would reduce (and finally eliminate) the carbonization of the atmosphere, saving the government (and thereby themselves) enormous amounts of money in the future when the effects of fossil fuel use become more prevalent in a warming world.

You stated, “You’re exaggerating. And, you’re wrong. Consider, the primitive Earth’s atmosphere contained much more methane and CO2 than today, yet life sprang, evolved and thrived.”

Am I wrong? Everyday, I hope I am. Are you ready to return to the Carboniferous Period with 6+ billion other human souls on the planet? Have you considered that those hundreds of millions of years ago the sun was a younger star and not as warm as it is today? Have you considered that the planet had thousands of years (not a very few hundered years) to adapt to the changes thrust upon it except in a few very dramatic instances when life here was almost extinquished? Then it took millions of years for life to again cover the Earth with its wonderful diversity. I suggest you study the probable affects of the present use of fossil fuels; there are plenty of excellent books and articles in the literature and more being added daily. I’m presently reading the EPA’s analysis of projected sea level rise on the Middle Atlantic States.

A final thought, the present economic straits we’re in was primarily caused by the loss of a few trillion dollars in real estate value. What will be the loss in real estate value when the populace realizes that most (all?) housing within a few feet of present sea level will be uninhabitable in a few years unless trillions more are invested in levees and other structures to keep the rising oceans away? Do I detect many more trillion dollars in real estate investment vanishing as citizens try to dump oceanside property for higher land? A “false dilemma”? You sure about that?

Or am I hopelessly optimistic?

Thanks for the clarification.

Chris,

Yes how to start a world without money, a question worth the thought.

I almost feel like we need a complete collapse for anyone to look our way and realize Government is NOT the answer to the economy.

Great post again…keep up the fight!

Mike, you need to be aware that there is a structure for productive endeavors in an economy. The producers of petroleum based products do not simply pass costs directly to consumers since consumers would not be the end users always. Most of petroleum based products are used by producers themselves, and such artificial hikes in the cost of energy affects producers first before they affect consumers. You may find it lovely and cuddly to tax carbon, but you do not realize the ripple effect of this intervention, which could become evident in the form of unemployment and higher costs of other seemingly unrelated goods. Also, it would certainly NOT reduce the demand for petroleum based goods as long as the market (that is, everybody) knows the extra cost is NOT a reflection of scarcity. For instance, the extra taxes on cigarettes have not slowed down the demand for cigarettes because people know they are still abundant – smokers simply allocate more of their resources to pay for their habit. The price system is also a knowledge system.

Second point. What the producer uses to refine the product he’s already paid the tax on because it’s paid on production at the wellhead or coal mine gate.

In my experience, such transferable taxes do not stay “transferable” for long, giving place to double taxation. Since there is nothing noble or moral about taking people’s money away, whoever taxes knows he can get away with taking more without remorse.

Third point. You’ve made my point. I do want to reduce the use of fossil fuels and I use the elimination of the income tax to get us along that road. Since we are fans of non-human energy doing our jobs I’m sure this tax substitution will be a great stimulus to alternate energy.

First, whatever you want is not going nor has to be the prerogative of others. Second, I do not understand why you brought up that humans are fans of non-human energy – do I sense some sort of pro-backbreaking effort chauvinism from your part? Third, the tax will not stimulate other alternative energy sources, it will simply make them less affordable. Let me explain why:

The economy is driven by savings and investment. In order for investment to exist, there must be savings. In order to be savings, people need to consume less. People normally save by not consuming things that are less valuable for them than more valuable, i.e. they forgo luxuries and keep necessities. This is true even in a credit-oriented culture, since debts must be repaid.

If by artificial means you raise the cost of energy by taxing fuels, people will have to shift resources from other expenditures they were planning or from their savings, in order to compensate. This will diminish overall savings. The reason for this is because people are already committed to a certain standard of living and living quarter location (i.e. their HOME). They require fuel to move to their destinations or to heat or cool their homes. Since people value this standard of living, they will simply shift their resources (foregoing savings, for instance) to keep their standard of living in the same level. This will mean they will keep driving to work in their cars and heat their homes, just paying more for it. It will also mean that people will not have surplus resources to allocate to savings, or will have less savings. Without savings, people will not be able to invest in new and more efficient cars or heating/cooling systems, and will have to forgo such expenditures.

Savings are important for investment because capital creation relies on the availability of savings, that is, capital creation requires the pooling of savings from individuals in order to apply them to productive projects. Let us say that with the new incentive for alternative energy available, a company wants to place a windmill farm. If savings have been lowered thanks to the cuddly carbon tax that everybody has to pay (petroleum or carbon based fuels being so ubiquitous), where will the company obtain the necessary capital to do this?

Ok, you would say: That’s what government is for. Except you have the same problem – government does not create wealth nor does it have wealth of its own. It takes wealth or capital from productive people and allocates it according to political needs. This means that government will raid people’s savings, leaving not enough capital for projects. This is regardless of the type of tax the government chooses to impose. If the government decided to subsidize alternative fuel projects, it would do so in detriment of other potentially profitable (i.e. economically sound) projects, and making people poorer to boot by taking their savings and by making them forgo other expenditures that raise their quality or standard of living. The end cost of the alternative energy project is being paid twice by people, in the form of higher prices and lower savings. Even if you have the first alternative energy system online, people would already be poorer for it, not being able then to afford it – they would STILL fuel their cars now that they cannot afford to change them to electrics (alternative energy not being as ubiquitous as carbon based energy and lack of savings create a credit crunch), and would still heat their homes with their older systems now that they cannot afford to change them. They would simply stop purchasing other necessities, stopped saving or both. The supposed advantage of alternative energy systems will not be evident, even if part of the consumers were convinced of its Earth-saving potential. In the end, most would not care, making it more difficult to sell them the idea of more of such systems.

In order for alternatives to be viable, they must come after people have had a chance to increase their savings and also giving the market a chance to make the offer of alternatives more affordable and attractive. If that means weaning out of fossil fuels due to their increased scarcity, so be it. Trying to make things happen fast would be counterproductive.

Fourth point. Methane (CH4) may well contain fossilized carbon if it is in natural gas.

Ok, first, CH4 IS natural gas. Again, you mean natural gas that came from carbon deposits or underground deposits, even though natural gas is also produced by biogenic decomposition at formidable rates, in nature. The point is that these gases represent such a tiny fraction of the atmosphere’s composition, that the worry about them as “greenhouse gases” seems like unwarranted exaggeration.

Fifth point and last I’m going to address here. I’d love to wait till the fossil fuels run out to make the switch to alternative forms of energy but by the time we burn all the petroleum and coal we’ll have an atmosphere that is so warm that that other greenhouse gas, water vapor, will become the most dangerous one and Earth will take on many of the characteristics of Venus.

You’re exaggerating. And, you’re wrong. Consider, the primitive Earth’s atmosphere contained much more methane and CO2 than today, yet life sprang, evolved and thrived. Also, you assume a rate of consumption of fossil fuels equal to today’s, without taking into account increased efficiency and cost lowering efforts by the market. This is the same problem with the much touted climate models: they assume a level of economic and technological advancement that’s similar to 10 years ago.

I’ll take a tax change over a toasted biosphere any day.

I prefer not to base my decisions on that false dilemma.

Money should be treated as something scarce and real that can’t be created out of thin air. If the abolition of fractional reserve lending is not a systemic change I don’t know what is.

Start a world without money at all? How can I express my preferences without some representation of value? Scarcity is real and really unfair. How about a world without government monopoly money?

There are many Austrian arguments against the current fiat monetary system, Mark, and the solution proposed has been mentioned and espoused innumerable times, which is: Let people decide what currency they accept and want to use, even if it is no currency at all.

Have been an environmentalist for many years and was a Libertarian from around 1979 till 2003 when I had an John Nash moment, see “A Wonderful Mind”, and determined that the group’s best interest is not necessarily realized by each individual acting in his own best interest. I didn’t go home and study game theory but I did come up with my own set of political requirements, one of which was “I will treat others as I would like to be treated.” Yes, the Golden Rule but not part of the Libertarian Creed. So I moved on. All the rules are:
1)I will take responsibility for my life.
2)I will treat others as I would like to be treated.
and finally,
3)I will allow my elected representatives to do nothing for me that would conflict with 1 or 2.

I call it “The Responsible Party”

Francisco,

First question. Tax the fossilized carbon as it is being produced and let the producer pay the tax and pass on that expense to the customer. No emission meter necessary just a production meter which all of the producers already have.

Second point. What the producer uses to refine the product he’s already paid the tax on because it’s paid on production at the wellhead or coal mine gate.

Third point. You’ve made my point. I do want to reduce the use of fossil fuels and I use the elimination of the income tax to get us along that road. Since we are fans of non-human energy doing our jobs I’m sure this tax substitution will be a great stimulus to alternate energy.

Fourth point. Methane (CH4) may well contain fossilized carbon if it is in natural gas. It is carbon that has been buried in the Earth for millions of years and is now being pumped into the atmosphere that is the big concern, not cow farts. Cow farts and wood fires release carbon that has been in the atmosphere or biosphere within the last century unless you’re burning thousand year old redwoods or Joshua trees.

Fifth point and last I’m going to address here. I’d love to wait till the fossil fuels run out to make the switch to alternative forms of energy but by the time we burn all the petroleum and coal we’ll have an atmosphere that is so warm that that other greenhouse gas, water vapor, will become the most dangerous one and Earth will take on many of the characteristics of Venus. And the biosphere will be toast.

Ned and Francisco,

I’ll take a tax change over a toasted biosphere any day.

So are we not in fact spinning our wheels regardless of which economic side of the fence we are on?

How does the Austrian model make a difference if it does not purport a systematic change? It seems that most of the articles here are in reaction to what is going on rather than pointing the way to a entirely new system. Is a revolutionary thought needed or do we just argue from whichever side we sit?

The reasons for the existence of the current monetary system are two: Making fractional bankers rich, and taxation.

Leaving people alone to pursue their own interests, bankers would have to maintain full reserves of whatever people choose to trade with, be it gold, silver, cocoa beans, cigarettes or canned mackerel . . .

In our current system does it really matter in which direction we go if in the end we have a forgone conclusion that we will be forever in debt in this global Ponzi scheme of interest that can never be paid back?

So does water vapor.

Both of these processes cause the Earth to warm and this causing massive changes in the environment of the Earth.

What “massive” changes? You mean Earth is like Venus now?

[Sustainable is] an economy which is based on an energy source that does not have a very limited period of use or does not do so much damage to the environment that its use must be curtailed in exchange for a habitable planet.

Why is sustainability important? If the fuel source is limited, why would that matter? In ancient times, olive oil was used to light lamps, now we use petroleum or natural gas, and when these become more expensive to exploit, other alternative energy sources will be more attractive, like nuclear fission energy.

Using fossil fuels as a primary energy source of the economy is not sustainable over any meaningful time period. They are both limited in scope and, as shown above, are the major driver of global warming.

You beg the question on both counts. First, if usage of fossil fuels is not “sustainable”, what do you have to worry about? Fossil fuels will become too scarce to compete with other alternatives. You assume that sustainability is an objective economic outcome, when in fact the concept is a red herring – what’s “sustainability”, what does it mean? Saying that it “damages the environment” becomes nothing more than rhetoric, since you cannot define the damage or the scope (the concept being too general); you just use it as an emotional recourse.

Second, the problem is not Global Warming per se (the globe WILL warm as it WILL cool, and warm, and cool, and so on), but so-called Anthropogenic Global Warming, which is in dispute, so much so that politicians have resorted to shift the focus by calling it “climate change” (another red herring), in order to make people believe that normal climatic phenomena are indicative of a man-made calamity. You beg the question by asserting that fossil fuels must not be used by assuming that usage of fossil fuels leads to Global Warming – you cannot argue that.