Asymmetrical Information

What's that tax going to do to the financial situation of the likes of google, netscape, micrsoft, etc in the tech sector who will have to pay the extra costs for electricity?

Yup. Crushing carbon taxes have been such a delightful and unexpected success in Europe, after all.

Not.

These taxes will be heavy-handed regulations which will distort the free market and feed government graft and corruption. And never help me, my children or my grandchildren.

Which makes them different from other taxes how?

No different at all.

Taxes are essentially the same: The government conditions the exercise of one or more of our rights on the payment of money.

The Pigovian taxes do not differ in principle; but they are imposed on activities that—at least in theory—we have the choice of avoiding.

I'm not rejecting the idea out of hand, but who decides that an outcome is a market failure? And why is a tax to correct it not "heavy handed regulation"?

That's right. Jane is here to tell us that governments are less likely to err in their degree of coercion from some JaneGaltian ideal of theft "for our own good" by Pigovian taxation than by regulation. Let's take a hyper-regulated energy system that few of us have any real choice in, layer on a veneer of sin tax, praise how much "choice" it provides, call it "just" and giggle about it. Way to go! Not.

Even granting some commons tragedy and some market failure, the coercion error, to this gentle reader, has more to do with the fine details of lobbyists in D.C. than economics, more about implementation than "theory"...Why won't the central thugs, excuse me, regulators use the alleged economic efficiency to just extract an even higher level than is "necessary"? Because they're so shy about taking our money? And so good at managing their overall account/budget? Oh yes, the complete governmental personality overhaul concomitant with any sin tax.

Given the obvious status of CO2 concern as fear mongering rather than any kind of established threat and the absolutely standard use of such tactics to transfer of power to central agencies, this seems like a classic case of big government action people should resist. Is fear of CO2 concentration really so different from fear of wealth concentration through private enterprise? Is the spread of burning control really so different from imperial communism?

<extreme-sarcasm>

Hey, wouldn't fewer people and consumers cause less CO2? Almost all consumption scales with person count, after all. Time for birth rate limits worldwide? But we'll just give them tax breaks/reverse sin taxes for having fewer kids instead...oh waaaaait, that's the reverse of how we do it here in America where not procreating is the sin. Silly forgetful moi. Which way was the sin? So easy to addle my fragile little mind with consistent tax frameworks intended to incentivize me in all the right little and big directions.

I guess we'll really need some whole byzantine network of taxes and sins and exemptions for all the contributions to "global climate change" including my azalea plants. One surely doesn't want to be excruitiatingly careful before concluding there's a real threat and a market failure in metabolism (which we all have great options for controlling...) Luckily, in Jane's future, I can pay a burning tax, an exercise tax, and even a walking tax, too, and be incentivized to stay at home staring at the wall like a mindless zombie, fitting with no income with which to pay any of these taxes anyway...maybe it will be a chilly world where I will shiver myself to death, fading into the cool oblivion of a governmentally installed economic ice age.

</extreme-sarcasm>

What ever happened to advocating freedom? Looks like ALGORE got to Jane as well. Sadness. It's important that the frog be in clear and present danger.

An outcome is a "market failure" if it is not the outcome government believes "would" have happened under "benevolent" regulation; or, that some politician or affected group believes "should" have happened under regulation.

Markets operate to satisfy willing buyers and willing sellers. They tend to ignore the desires of politicians and interest groups who are neither buyers or sellers. Politicians, however, hate to be ignored; they must have the light of public awareness focused on them at all times (except when they are breaking the rules) and the milk of human contributions flowing into their coffers (pockets?). Interfering in markets presents manifold opportunities for both recognition and contribution - opportunities too great to ignore.

When political interference goes awry, we hear a great deal about "market failure", far less about the "Law of Unintended Consequences" and nothing about the predictability of consequences.

"Managing" markets requires that the managers be "smarter" than the markets (that is, smarter than the aggregate of the buyers and sellers). Politicians rarely qualify; most have little hope. However, ego springs eternal!

When a statist says that there has been a market failure, he/she means that it has failed to give him/her the power, influence, or sense of safety that he/she desires.

Well, I see the warm weather brings out the swarms of anarcho-capitalists.

Meanwhile, we've already had a tax & credit scheme on power plants for some time now, covering sulfur dioxide emissions. So far it has worked rather well. I don't see any inherent reason why such a system could not be implemented on CO2 emmissions, thereby providing an incentive to expand investments (both producer- and consumer-side) in energy efficiency and alternative resources, including nuclear.

The practical implementation would have some political problems in the present market; albeit should electricity from conventional sources suddenly become noticeably more expensive, the NIMBY and no-nuke types might finally get a much-needed kick in the pants.

"Well, I see the warm weather brings out the swarms of anarcho-capitalists"

I thought we were an autonomous collective.

"I have a memory like a whaddayacallit."

You meant "colander."

"I have a memory like a whaddayacallit."

You meant "colander."

3 entries found for joke.
joke
n.

1. Something said or done to evoke laughter or amusement, especially an amusing story with a punch line.
2. A mischievous trick; a prank.
3. An amusing or ludicrous incident or situation.
4. Informal.
1. Something not to be taken seriously; a triviality: The accident was no joke.
2. An object of amusement or laughter; a laughingstock: His loud tie was the joke of the office.

v. joked, jok·ing, jokes
v. intr.

1. To tell or play jokes; jest.
2. To speak in fun; be facetious.

v. tr.

To make fun of; tease.

The phrase most commonly in use is "memory like a sieve", which would have led to a joke about sifting through sand and such.

Although I suppose this could be a nested meta-joke of some kind.

Pigovian taxes have some big advantages over regulation. For example, they allow innovation and trading to reduce the taxed externality in the least costly way.

But Pigovian taxes have a big disadvantage that no one here has mentioned. How do you set the level of the tax? Trying to objectively calculate the "true net cost" of a negative externality is a fraught task even for someone acting in good faith. But when most of the people doing such calculations are neck-deep in their own ideological biases, the task becomes downright impossible. (Just compare the various Greens who "calculate" gas should be taxed at $10/gallon to cover the true cost of its use to the Automobile clubs who "calculate" that current gas taxes are already too high.)

The ideal way to solve this problem is to remember what Coase taught us: clear property rights solve externalities. Want to make such the Colorado river is being appropriately maintained and exploited? Find a homeless guy and give him the rights to it. Want to ensure balance between environmental preservation and mineral extraction on public lands in the West? Find an alcoholic bum and give him the rights to those lands. Want to limit CO2 emissions to the minimum required to support our standard of living? Find a bag lady and let her auction off planetary CO2 emission rights.

Trying to objectively calculate the "true net cost" of a negative externality is a fraught task even for someone acting in good faith.

Well...one way to find it, especially when the emission and/or pollutant in question is not a 30-seconds-from-now type of threat, is to start with a very small tax, which then increases annually, and which is published widely in advance of its implementation.

People making new investments begin seeking alternatives as quickly as possible because they know "expensive" is coming eventually, but those who have need of the status quo now are not immediately pinched.

That's how R-12 use was phased out refrigeration devices.

Meanwhile, we've already had a tax & credit scheme on power plants for some time now, covering sulfur dioxide emissions. So far it has worked rather well. I don't see any inherent reason why such a system could not be implemented on CO2 emmissions

I do. If we burn coal, for example, our basic equation is C + O2 -> CO2. If we burn hydrocarbons, just add some water to the right-hand side. Nowhere do I see sulfur in this equation.

But Pigovian taxes have a big disadvantage that no one here has mentioned. How do you set the level of the tax?

That's exactly the point. The value of the negative externality of burning carbon cleanly and producing CO2 is somewhere between 0 (no effect at all) and -∞ (Venusian runaway greenhouse effect, with the oceans vaporizing and all life on Earth ending). Who exactly is determining the value per gallon/barrel/ton/cord? They'll refund our money if it turns out they're wrong, right?

I think Jane should find a Twilight Zone episode called "The Midnight Sun."

"But Pigovian taxes have a big disadvantage that no one here has mentioned. How do you set the level of the tax?" Yes, it's difficult, and what you actually wind up with is an arbitrary level set by political considerations. So, how is this different than regulations written by politicians?

At least with a Pigovian tax, you're creating incentives in the right direction, whether or not they are at the right level. Regulations quite often have the reverse of the intended effect. Power plant emissions level regulations have had the effect of preventing upgrades to old power plants that would have improved efficiency and reduced pollution, since as long as they aren't upgraded they can continue pouring out emissions like it was 1960. CAFE standards have resulted in many people who actually wanted a big car buying a "truck" instead, which burns more fuel and emits more pollutants than the big sedan they would have preferred.

Ahhh! The "Law of Unintended Consequences" rides again.

MarkM did not point out that, in the case of "New Source Review" for powerplants, the regulations did not change in the 1990s, only the interpretation and the enforcement approach taken by the regulators, who determined that the regulations (as previously enforced) were not achieving the results the regulators desired quickly enough to satisfy them. Their new enforcement regime trapped several powerplant operators in major lawsuits over NSPS compliance, but disuaded many others form making upgrades which might have exposed them to lawsuits as well.

Hi Jane, no offence, I found this article confusing; I'm not getting the humor. Are you for or against the taxes, what do you think of this guy? Too tired for irony currently....

Question for the masses about electricity and construction of power plants:

Greens and Environmentalists are always complaining about the burning of fossil fuels. They fight tooth and nail to prevent construction of coal and oil power plants. It has gotten so bad in California that they had roving electricity blackouts in the late 1990s. Americans (power hungry on the grid) are forced to pay tremedous amounts of money to buy electricity from Canada in the free market, simply because we don't have enough power plants. So here is the question. If Greens and Environmentalists are so against Fossil Fuel plants because their fear of Global Warming, why do those same Greens and Environmentalists protest against, vote against, and scream in fear of Nuclear Power plants that produce NO Carbon emmissions?

C02 is the VERY LAST "pollutant" we should be worried about. It's a byproduct of combustion, along with water vapor. Anyone who is worried more about C02 than the other hundreds, thousands of chemicals, gases, etc. being dumped into the environment is seriously confused.

Jane: A French Border Sieve?

Paul: Some of them don't, like the Greenpeace founder who's now pushing nuclear power (and about time, too!).

The others are emotionally invested or deeply ignorant about the actual risks of radiation and nuclear power, are the reasons I've experienced or can imagine. (Not to mention the smaller faction of luddite types who'd prefer less power generation as a good in itself.)

The others are emotionally invested or deeply ignorant about the actual risks of radiation and nuclear power...

Emotionally invested and ignorant? I see. So they are a bunch of stubborn kids?

(Not to mention the smaller faction of luddite types who'd prefer less power generation as a good in itself.)

So they are really in denial of reality?

No wonder people don't take them politically serious. They would rather live in denial than to face the world as it is. I didn't know that GreenPeace was behind Nuclear Power production. I might need a little linkie for me to buy that.

Such taxes will only accomplish more positions, income, and opportunity to bully their fellow citizens for the governing classes. "Pig"-ovian indeed.

Paul,

"I didn't know that GreenPeace was behind Nuclear Power production. I might need a little linkie for me to buy that."

Not Greenpeace - one of the founders, no longer affiliated. Can't remember his name at the moment - I seem to be suffering from Jane's memory thingy as well.

RGT

A Greenpeacer coming out for nuclear power! I wonder if Greenpeace has an impressive excommunication ritual. 8-)

His name is Patrick Moore, one of the founders of Greenpeace, he parted ways from the rest of the organization some time back.

http://washingtontimes.com/national/20060424-104215-7645r.htm

http://www.greenspirit.com/index.cfm

I do. If we burn coal, for example, our basic equation is C + O2 -> CO2. If we burn hydrocarbons, just add some water to the right-hand side. Nowhere do I see sulfur in this equation.

You made two assumptions in stating that, one of which is fatal to this premise, and the other of which is fatal to a more generalized understanding of chemical reactions during combustion. In this particular case, not even anthracite is pure carbon; all coal grades have impurities, and sulphur is one of the most common. It is also common in other hydrocarbons, and increasingly-stringent low-sulphur fuel requirements are a primary reason that the price of diesel has been increasing in the past few years.

In the more general case, air comprises a lot more than just oxygen, and high-temperature combustions can create other reactants from the available gasses (nitrogen primarily). Even amongst the targeted gasses, the reaction is rarely perfectly stoichiometric or perfectly efficient. These factors help explain why internal combustion engines tend to produce peripheral pollutants, such as oxides of nitrogen and ozone.

-- Keeping Venutian Bogeymen At Bay...

The CO2 we're talking about releasing over the next couple hundred years (or at least enough to make Antarctica totally habitable) has been present at some point in the Earth's history -- maybe not 650,000 years ago, but in the Jurassic age when even Antarctica was very habitable to more than an esoteric species or 3.

The atmosphere as a whole has also of course been thinning over the lifetime of the Earth due to a leakage created at the Earth-Moon gravity weak spot [ "high tide", but up in space where atoms are siphoned off into the interplanetary void due to a locally low "a" in Jane's formula ]. So, it might even take a little more CO2 per million than 300 million years ago to generate the same effect. There's some volcanic replenishment, too.

Nevertheless, basic ideas of "same-state yields roughly the same climate" and a former Jurassic garden world make a Venutian runaway scenario or the negative infinity case highly suspect even after another 100 years of escalating CO2 emissions... (and incidentally fit perfectly with the term "greenhouse effect"). There used to be no ice caps. All that carbon or at least a lot of it used to be in dinosaur lungs.

Now, there could be some massive historical dependency, but to have it be so extreme as to get to evaporating oceans seems way beyond anything we could really suspect. Plants can and do grow with greater exponential curves in warmer, more CO2 rich environments...The Venutian runaway scenario seems more a bogeyman story than a real concern.

-- Trusting Long-Term Global Forecasts...

Of course, CO2 may not even be a problem. People argue about the cause of very small up trends in temperature -- CO2 vs. solar radiation.

The smoking gun in the "how much to trust climatologists even when they stamp their feet" is that the same people running their same global climate simulations forward in time to predict minor climate shifts (based on economic CO2 projections) have a very hard time running the simulations in reverse over any time duration to explain ice age sequences. The physics is all time-reversible, of course, but the timescales are far more demanding -- millenia vs. decades. Going backward, though, we have the added advantage of a historical record (of things hard to know about in a forecasting sense).

In any event, the existence of ice ages and in general the historical record makes it uncontentious that there is a huge range of reasonably recoverable positions for global climate.

-- "Irreversibility", biotech-feedback, etc.

What's more reversible than melting and freezing a bucket of water? Sure, there are ecological irreversibilities due to niche loss, perhaps even sad ones, but we've somehow survived many of those already and the major CO2 consumers like phytoplankton, kelps, algaes, grasses, and trees are robust and more so in a CO2 rich and warmer environment.

Biofeedback mechanisms on Earth are not well modeled, esp. on longer time scales when breeds can develop and especially on the temperature upside which hasn't been sampled. Certain plant and animal populations can grow exponentially and adapt their levels at a rate far faster than we can modify CO2 in the atmosphere. Small organisms can even breed and therefore evolve and adapt quickly (witness viruses doing so over mere years) and phytoplankton probably have little to do in order to diffuse to and thrive at higher latitudes. Critical CO2 levels might shift various ecosystems into overdrive, as it were.

Can we count on it? Maybe. Maybe not. Can we actively seed it? Possibly. Can we seed it in a way we're comfortable with given biological understanding by 50..100 years from now (when detailed molecular biology is triple is current maturity?) Maybe even just some kind of faster dividing "turbo plankton/turbo kelp"? My magic 8-ball says "It seems likely if it turns out to be needed". It might be that strategies like that are more dangerous than they are worth...That worth is very ambiguous here is the overall point.

In terms of albedo/reflection/ice reversibility which has strong climate influence, as it gets colder it snows more and you get rapid rebuilding of reflection. Ice falls off land into water. Water evaporates. Things warm up. Extract the CO2 (by whatever reversal means, including natural biofeedback). Things cool off. Snow falls onto land. Cycle complete. Ocean levels may take a while longer (ok...century+) to reverse if all that ice slides off the land and has to refall as snow, but albedo restoration matters much more to irreversible runaway scenarios.

The gulf stream may be temporarily vulnerable due to fresh water mixing, but that's likely not much more temporary than the mixing time. I'm not sure how likely it even is that the local topography of Greenland would make the bulk of the ice/water flow to the south gulf stream rather than the North if/when the time comes...but irreversibile Venutian nightmares should not be painted plausible.

-- Assume the Worst...What's So Magic About the Status Quo?

In short, why is the value not some barely mapped out probability distribution with support on (-infinity, positive huge)?

Environmentalists often have a pathological attachment to the status quo. They'll calculate what the cost is of losing the status quo, but it is quite disingenuous in terms of overall economic impact to ignore the potential benefits which are harder to foresee. A big part of the "fear" and economic risk in the worst case scenarios comes from a form of reverse survivor bias -- you only count all the negative impact of the "change" and see none of the positive. Of course it will seem terrible. This also happens with some anti-evolutionary environmentalist tactics like freaking out when a bird migrates from New Hampshire to Vermont. Under this worst burn-it-all-and- warm-it-up scenario, it may not even be innaccurate to say that "human activity broke the yoke of millions of years of successive ice ages opening up new realms of evolutionary development".

A "Jurassic Noveau" Earth might even support more life, more people, more consumers and more producers. New ecologies and niches could be created. Even without climate change there's constant ecological change. The whole climate is far more varied in its response to CO2 than a common plot on a field is to "overuse".

Yeah, we have some buildings and countries precariously predicated upon a static sea-level and such. We're actually comparing here to a warmer Earth with a lot more energy for plants which could potentially feed a lot more consumers/producers or make a lot more "nicely warm" coastline to more than replace the lost real estate. What's the value of 10..20 billion more supportable people vs. mere relocation of a couple 100 million? If we assume it's harder to get people to stop having kids than to use alternate fuels the population problem may well be worse than the warming problem and the latter could ameliorate the former. More fish in the sea and all that.

If there is a .001% chance that we end up in a limited nuclear exchange with China over coal due to follow-ons to enviro-hysteria, doesn't that cover a lot of risk on the warming side? A friend of mine once told me that wars of large scale no longer happened between modern countries since they aren't self-funding by land winnings...but taking out the burners might appear to be pretty well-funded if people listen to the armageddon rhetoric.

Ok, I'm winging positive numbers for "inaction" around from absolutely nowhere, but that's the whole point...you can do it with positives as well as negatives. It's often hard to imagine the value generated by new circumstances since it's presently unpriced. The negative side just has more fancy calculations behind it which probably obfuscate and surely have gargantuan errors due to their complexity. Really, you also need some kind of magical proper global welfare function to munge it all together. And the distribution of errors? And for the tax do we take the high side or the low side of our error ranges? And so on...Seems like if you err on the low side in terms of the meta-level science analysis, there'd be almost no tax at all.

Even at their best, climate scientists measure/predict temperature or sea-level which might be common, but not "economic value over the many decades of realized social adapation to a gradually changing environment".

-- The upshot...

1. Don't Panic. :-)

2. Doubt your (or anyone else's) ability to really gauge the cost & benefits for everyone else.

Numbers used in practice probably measure something else like how afraid you've been able to make everyone by talking about only downsides of incomplete science with ambiguous probabilities.

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