Economics & Global Warming
Pretty much everybody knows that carbon dioxide from sources like coal-fired power plants and cars is heating things up. But how many of us are making different choices because of it? Not many.
Economists tell us that if you want something to happen, you just need to align the rules so the right things are rewarded. This idea underlies all those pay-to-pollute and pollution credit proposals out there. So maybe we just need to make it more expensive to do cause global warming. A big new gas tax? Think that’s likely to happen when politicians have to get re-elected?
In his essay for the BBC, Matt Prescot argues that consumer choice is not enough to combat climate change. The world needs strong political leadership, too:
This is especially true when it comes to changing the rules under which individuals and businesses compete, and making the hard choices for the long-term good of society.
So we need some gutsy leadership. I wonder where that is going to come from. If we wanted gutsy leaders, wouldn’t we be electing them? I think electing politicians with the long view, we’d need an electorate with the long view. Then we’re right back to consumer choice.
The use of “instead” creates a false choice. I argue that consumer choice can play a useful role in tackling climate change. However, I also argue that capitalism needs to do a far better job of incorporating social and environmental costs into prices. This will require the rules of the game to be changed and political leadership.
Matt Prescott
30 Oct 06 at 1:58 pm
And right you are. I’ve rewritten the sentence in question to more accurately reflect the sense of your argument. Thanks!
michael
31 Oct 06 at 1:14 pm
At least in my read, the BBC article seems to be arguing that pay-to-pollute policies will work. For example, near the end, the author says we need to “build environmental costs into prices”.
I think he is saying here that the issue is externalities and that polluters don’t pay the full cost of pollution. It is the government’s job to correct those externalities.
This little branch of economic theory is fun stuff. If you haven’t seen it yet, Wikipedia has a nice article on externalities:
http://en.wikipedia.org/wiki/Externality
I also enjoyed this article I read recenty that calculates the full cost of the externalities of a car burning a gallon of gas at about $1.70 (found via Paul Kedrosky):
http://www.rff.org/Documents/RFF-DP-06-26.pdf
Greg Linden
31 Oct 06 at 5:47 pm
Hey Greg. I agree with your read to a degree. (and I’ve rewritten the whole post now that I had time to sit down and really think about it) I’m not sure that aligning the costs with actual costs will be enough, though, because of the whole long term/short term problem. Driving a car doesn’t cause enough harm TODAY to stop me from doing it.
And the biggest problem is, of course, that there’s nobody to set those costs who can’t be sent packing at the next election (or sooner). The people WILL get their way. Or at least Halliburton will.
michael
1 Nov 06 at 11:27 pm