08 June 2008

Counterpoint on Carbon Taxes

Bob Murphy sent me his paper [PDF] critiquing the case for carbon taxes propounded by William Nordnaus (and many others) [PDF]. He says "Since most economists disagree with me on this, I am curious to see where I'm going wrong."

So, here are my opinions:

First, the big picture: Many people (Nordhaus, Murphy and myself included) approach global warming (GW) and taxes from an ideological POV, i.e., GW is bad or taxes are bad. (I think both, and I try to reconcile them.)

Second, almost everything I see written about GW proposes some sort of penalty (taxes, caps, etc.) to reduce GW and the activities that contribute to GW. I'd love to see some easier steps taken first, e.g., ending subsidies for fuel (e.g., Iran, Venezuela, India, Indonesia) and GW-inducing activities (e.g, driving in the US).

Third, I disagree with a number of statements and assumptions that Murphy claims are "reasonable":
  • "Therefore, even accepting the basic premise of the argument for a carbon tax, mainstream economists should be quite hesitant to clamor for its implementation" [p. 6]. No, they should be hesitant to clamor for irreversible actions; implementation that can be modified and/or reversed (e.g., taxes more than credits) are prudent to anyone worried about GW damages.

  • "As humans pump tons of carbon dioxide into the atmosphere, some of it is absorbed by the oceans. This mitigates the growth in atmospheric GHG concentrations, and hence reduces the projected damages from a given amount of emissions" [p. 6]. This conclusion (oceans mitigate, costlessly) is not true when one considers ocean acidification.

  • "Temperature Increase from a Given GHG Concentration May Be Overstated" [pp. 7-11]. Murphy makes a useful case for considering low as well as high estimates of GW temperature increases, but his critique of Nordhaus's figure (+3C within a range of 2-4.5C offered by scientists) is weakened by his failure to consider the possibility the Nordhaus could be estimating a number that's too high.

    Murphy claims that (projected) negative feedback effects may never materialize -- and may even be positive -- but I am not seeing anything like this optimistic scenario. Recent news about record shrinkage of arctic ice and antarctic glaciers has not been offset by record harvests or benign weather conditions.

  • "the IPCC estimate of climate sensitivity is not akin to measuring the price elasticity of demand for potatoes. Rather, it is more analogous to predicting the impact on long run real GDP from a sudden doubling of the money supply" [p. 11]. I disagree with this analogy. Doubling the money supply has no long term impact (see money illusion). The effects of global warming are more like the impact of crippling 10 percent of the population -- they are no longer productive and need to be taken care of.

  • "Economic Damages from a Given Temperature Increase May Be Overstated" [pp 11-19]. This section relies on a edited book (Mendelsohn and Neumann 1999) that shows GW has almost zero negative impact on the US. (Murphy notes that the US is not the world; he is making a general point using the best data.) The study seems to be fundamentally flawed, e.g., concluding that there will be zero damage from sea level rising, benefits to agriculture from GW, increasing recreational value from GW, etc. when current events and studies contradict that notion.

    In fact, this review [PDF] says that the authors may be "complacent" in estimating damages because they limit total GW to double today's levels, ignore most non-market impacts, and fail to consider discontinuous effects of GW (e.g., reversal of ocean currents). In the past 8 years, nothing has come out to support such optimism, and my reading of current research does not either.

    In this sense, I think that Murphy makes his biggest mistake, multiplying his optimism by others' optimism to get too much optimism.

  • As a sign of this, consider Murphy's skepticism of others' assumption that the earth is now (pre-GW) at an "optimal temperature". While I agree that the earth can probably heat up and cool down (and has) without terrible impacts, I think he fails to consider the negative impacts of additional, human-induced warming. It's like claiming that someone with a rocket on their back will be able to run just fine (with this exception :)

  • "the most serious difficulty with Nordhaus’ damage estimates is how strongly they rely on the impacts from so-called catastrophic outcomes, defined as an indefinitely long loss of at least 25 percent of global GDP" [p. 15]. Nordhaus, unlike MN, is considering these, and I agree with Nordhaus: Recent flood, hurricane and cyclone events in Bangladesh, New Orleans and Burma have given us ample reason to worry about catastrophic events that can ruin areas settled centuries ago. If Murphy lived in the Maldives (maximum elevation: 2.3m above sea level), he would be worried too.

  • "Rather than relying on conjectural models and the good faith of politicians, economists should instead consider the ability of markets to generate wealth to ease the adaptation process" [p. 27]. Julian Simon liked to say that we could get rich fast enough to solve the problems caused by getting rich, but I don't agree as far as GW is concerned. Simon (IMO) ignored ecological damages; and some resources are limited on this earth -- as I told my dad.
Fourth (and on the plus side) Murphy points out that humans are innovative, markets adjust quite well, governments can easily waste carbon taxes and/or implement stupid programs. All of these statements deserve heavy circulation and consideration, and I am sure that Murphy would join me (should a tax be enacted) in insisting that markets be given a dominant role in addressing GW problems and that tax revenues be refunded to citizens (as a block transfer) so that citizens could choose how best to deal with GW.

Fifth, everyone interested in this topic should read the MIT study I posted here. They project a total cost of one percent of GDP if the US made the most-sensible implementation of the most-aggressive carbon tax.

Sixth, I think I should put this bloody long post on my CV as a reviewer. (Bob -- it's 100 degrees in DC [GW!], and you owe me a beer.)

Bottom Line: Murphy's critique does not stand up. He should put his considerable talents into advocating that taxes be easily changed and tax revenues be funneled back to citizens. (See this post for the implications of different global redistributions.)

31 comments:

Bob said...

David,

Thanks for the lengthy analysis. I am about to get in the car for a conference, so this first post will be short and "big picture."

Do you agree with Nordhaus that the net damages from a badly designed policy could swamp the net benefits from the optimal policy? (Nordhaus estimated that Al Gore's policy of 90% emissions reductions by 2050 would cause net damages of $21 trillion in PDV, as opposed to the net gains of $3 trillion in PDV from the theoretically perfect carbon tax.)

I think that is my main point when talking to economists about why we should oppose this in the real world (as opposed to in a general equilibrium model). Under cap and trade, for example, don't you think the politicians will turn on the carbon spigot the next time there is a huge deficit, especially during a recession? The Fred Singers of the world won't disappear just because cap and trade gets passed.

So what will happen (especially if there is a Republican in the White House) is they will spin the temperature record to say this is garbage, why are we killing ourselves on the alter of computer models, and they'll issue a bunch more permits for a few years to raise hundreds of extra billions of dollars. How could you expect Congress to ignore that kind of money?

I think we will get the worst of both worlds if everyone turns to the government to solve climate change. The government will regulate, seize power (telling you what light bulbs you can use etc.), distort industries, hand out billions to politically connected companies, and when all is said and done, global emissions won't be that much different (because of weak enforcement, leakage to non-participating countries, etc.).

So do you get what I'm saying above, and just think the numbers work out such that the above factors are still outweighed by the dangers of government inaction? Basically, at this point I'm trying to see if we disagree on framing or on numbers.

David Zetland said...

Bob,

Good points. We agree on framing and disagree on numbers (if that).

I don't think the -$21 trillion scenario is crazy or farfetched. (Try ethanol times 1,000.) So we must be cautious.

I think that C&T is far more dangerous than tax b/c it can be gamed (issuing new permits/who gets permits), whereas a tax just raises prices across the board. Command and control regulations on technologies (light bulbs, etc) will not be necessary with either C&T or taxes, but that doesn't mean that some people will want to use them to flog their favorite technologies -- just as they want to tell people the RIGHT way to save water instead of raising prices and letting people figure things out.

I think that people want gov't action and that the gov't will act. I interpreted your piece to imply that the gov't should not act and that the market will solve things. If that's what you think, then we do disagree on a fundamental level. I *do* think that gov't action is necessary (standard arguments on negative externalities, coordination and free riding problems).

My tool of choice (and that of many economists) is that the gov't impose taxes (see the MIT paper) and then let the market figure out how best to minimize their cost.

I look forward to your other comments.

Anonymous said...

David,
As always you find the truth.
Luke.

Bob said...

David,

I think that people want gov't action and that the gov't will act. I interpreted your piece to imply that the gov't should not act and that the market will solve things. If that's what you think, then we do disagree on a fundamental level. I *do* think that gov't action is necessary (standard arguments on negative externalities, coordination and free riding problems).

OK I'm not here arguing that the market outcome is Pareto efficient. I think what you are doing is spotting a flaw in the decentralized outcome, and then jumping to the conclusion that therefore government action is a good idea.

So I'm saying that no, not necessarily. If the potential harm from botched government intervention is 40 times higher than the potential gain from textbook intervention--and given participation, politics, etc. I think that magnitude of 40x is reasonable--then you obviously only want to do the intervention if you really trust the politicians to exercise care.

If someone has a tumor, it doesn't follow that he should get surgery. You have to look at the likelihood of the surgery making a difference, the risks of infection, etc.

Do we agree on this, and (again) it's just a matter of numbers? My concern is that you seem to think that we can arrive at the "we can't rely on the market" answer, without first running the numbers.

David Zetland said...

Bob,

Yes, I've taken that argument into consideration (see this post for my opinion of when gov't action is NOT required.)

On GW, I cannot see any way that the market can really solve the problems. If you want an example of how the gov't DID make a difference in a similar case, see SO2 C&T.

That said, I am NOT in favor of gov't carrying out actions or choosing technologies to address GW. I think that should be left to the market.

So: Gov't establishes tax and then market find the way to minimize it.

Bob said...

David,

Again, I'm going slowly at first here to make sure we agree on our premises.

So I take it that you must think Nordhaus' numbers aren't even in the ballpark, right? To repeat, he is saying that the net benefits of a textbook policy are only $3 trillion, whereas a botched policy could cost net $21 trillion, and far far more than that if you assume China doesn't opt in, etc.

So do you think Nordhaus is grossly underestimating the PDV of the harms of business as usual?

David Zetland said...

Bob,

I haven't thought of the different numbers. They are all CGE mumbo-jumbo anyway. ("What number do you want? Here it is...")

My opinion is based on sound policies, and carbon taxes are sound.

Bob said...

David wrote:

I haven't thought of the different numbers. They are all CGE mumbo-jumbo anyway. ("What number do you want? Here it is...")

My opinion is based on sound policies, and carbon taxes are sound.


Wait a minute, that's what we're arguing about! :)

I'm not merely arguing that if the true tax is supposed to be $35, and they instead set $20 because of politics, that this will reduce the benefits of the policy.

On the contrary, I'm arguing (backed up with Nordhaus' results) that it would be worse to do the wrong thing than to do nothing.

And so if we think that there is a decent probability that the gov't won't do the optimal mitigation strategy, then it's not clear that it is overall a "sound policy."

Let me add one final point to this post: I suppose a reasonable criticism of my position is to say, "Look, no matter what I do personally, the climate change policy is going to go through. So I am offering my expert opinion as to what the ideal policy would be; then we'll have to see what the political process does with my honest opinion."

Is that what you're saying, sort of? That the ideal carbon tax is ideal, and so what else can you as an economist do but endorse the ideal policy?

Person a.k.a. Silas said...

david_zetland: I've also critiqued bob's work on global warming. See this debunking and this debunking where I post under the handle "Person".

What bob's position seems to be is that he prefers to leave the atmosphere in a tragedy of the commons with no clear owner to negotiate with, nor any clear specification of about what kinds of emissions are or are not acceptable and at what price. This is because the harms that would result are not as bad as when government gets involved.

While possibly consistent, it's like a libertarian arging that the government should immediately stop enforcing any existing property titles on the grounds that "hey, government is inefficient, there's favoritism, etc."

I summed up the tangled web he wove as:

"1) You don't like solutions that use non-property-rights methods.
2) You realize that a scarce resource in question never had private property rights allocated to it.
3) You don't like attempts to make these property rights if government is involved in them at any stage, even if that means leaving the atmosphere in a tragedy of the commons for the hundreds of years until governments are abolished.
4) You want me to believe you have a coherent point."

****

Your dispute with bob here, david_zetland, is also about that: whether the costs of climate change are worse than the costs of government corruption and meddling. Now, keep in mind that in the paper the paper, bob spend, oh, about 90% discussing how uncertain the estimates are. Now, this is rather unhelpful. Uncertainty means we could be overreacting, but just the same, underreacting.

Now, what brilliant flash of analysis does Bob have to salvage 90% of his paper from this devastating attack?

Ah, here we go on page 20(!) "Naturally, the proponent of
strict measures could argue that Nordhaus may be underestimating the risks of inaction.
Although certainly possible, we believe the balance of evidence lies in the favor of conservatism,
since we have identified several key areas in which Nordhaus relies on speculative estimates that
depart from historical trends in a direction that yields higher carbon taxes."

Oh, okay, you think you're unconvinced by some of the reasons for the "underestimating" side. Guess that settles it!

Ultimately, in all the blog discussion and in private emails, bob refuses to deal with the fundamental problem of what we should do if in fact the danger is as severe as predicted. bob's response is, ultimately, to wish REALLY REALLY HARD that he can come up with clever reason why the harm isn't as bad as government involvement in -- of all things -- establishing property rights.

You'll have to pardon me if I don't find such an approach to be helpful.

David Zetland said...

@Bob, I don't understand how doing the wrong thing and setting a tax that's too low are related. Since you say that you are not worried about a tax that's too low, what ARE you worried about? A tax that's too high? That may be legitimate, but it's easier to fix than, say, C&T or -- worse -- nothing at all...

"Is that what you're saying, sort of? That the ideal carbon tax is ideal, and so what else can you as an economist do but endorse the ideal policy?"

I guess so. I mean it's pretty wishful thinking to hope that politicians will actually implement something that economists advocate without screwing it up to fir their campaign contribution (corruption) schedules. Look at free trade. Look at health care. Look at the war on terror. There are many academics who have pointed out the fallacies in the manner that the government has pursued these activities and many politicians who have ignored those admonitions to gather upton themselves more $$ (or, worse, they are just plain dumb. I can't decide if Bush is an idiot or hoping for a fat salary at Carlyle.)

So, yes, I figure it's my job to point out the "best" policy and then hope that it survives the sausage making process in some form that will still (on net) benefit the American people -- and some lucky foreigners...

@Silas, I agree that some libertarians (and perhaps Bob) see ALL government as evil. I am a libertarian, but not so idealistic as to think that no government is necessary. As Mr Madison said: "If men were angels, no government
would be necessary"

I think that this question (global warming) requires government action because it concerns the international commons.

Bob said...

David wrote:

@Bob, I don't understand how doing the wrong thing and setting a tax that's too low are related.

Sorry, that was confusing on my part. The low-tax was just an example of a wrong policy; so my point was, "I'm not merely saying that if the gov't does X instead of optimal Y, then the net benefits will be reduced. Rather, I'm saying for some X, there will be net harms, relative to the status quo."

I guess so. I mean it's pretty wishful thinking to hope that politicians will actually implement something that economists advocate without screwing it up to fir their campaign contribution (corruption) schedules.

So then why are you doing just that? :) I can understand a big government economist doing it, but how can a libertarian get all fired up about cap and trade? For an analogy, if I agreed that my mother needed surgery, and then found out Nancy Pelosi were going to do it, I would be terrified. This wouldn't be because I was a "sickness denier."

Look at free trade. Look at health care. Look at the war on terror.

Right! And so what do you think of all the neocon op ed writers who cheerleaded the invasion, and now are saying, "Well gee whiz, they didn't listen to our advice! If they had conducted the war like we said, things would be much better."

Isn't that the position you will be in, once Obama or McCain implements cap and trade and global emissions barely move (because of leakage, exemptions, phase-ins, etc.)?

Bob said...

Silas,

If the government wanted to auction off property rights to the atmosphere, the way they auction off spectrum, I would be more sympathetic to calling it a market solution. Then the actual owners could decide what price to charge for a ton of CO2 being pumped into their property etc.

I've said this to you on the other forums, so I'll repeat it here for the benefit of new onlookers. What the government is actually going to do is not anywhere near a Coasian outcome. I take you to be saying, "We can't get your ideal outcome, Murphy, so the government should go for a second-best approach."

And I'm saying that no, in my opinion (relying on Nordhaus and public choice school) I think the results of this "second-best" approach in the real world will be worse than if the government does nothing.

Environmental groups, Al Gore, James Hansen, and RealClimate people can still bombard the public with warnings, and consumers can boycott companies that don't reduce emissions etc. You can start the Silas Carbon Rating agency to give consumers information about where to spend their money.

You can say, "Oh those measures won't work because not everyone will participate." Well, China isn't going to go along with cap and trade either.

Just to clarify, do you actually not mind cap and trade legislation, or is it just that you are mad that I am being vague and evasive in my writing on the topic?

Silas said...

david_zetland: Was that a response to anything I said?

bob: If the government wanted to auction off property rights to the atmosphere, the way they auction off spectrum, I would be more sympathetic to calling it a market solution. Then the actual owners could decide what price to charge for a ton of CO2 being pumped into their property etc.

Except that, with the nature of this global public good, there simply is no such thing as "a ton of CO2 being pumped into their property". CO2 emissions diffuse to the entire atmosphere, and it is in that dispersal that it causes its harms. No one can "cage up" the CO2 in just one part of the atmosphere.

It's contradictory to talk of the spectrum auction as a market-like solution (or whatever vague, wishy-washy thing you meant by that) and then talk of a owner charging for the thing in question entering his property. With a spectrum auction, one's ownership is defined with respect to one frequency over multiple real estate units, NOT "all frequencies" over a single person's unit. Similarly, CO2 emission rights can be viewed as the right to a frequency that invariably broadcasts over the entire earth, except of course, that no two frequencies are distinguishable. If you accept that private agencies could have worked out spectrum rights without government, you must accept that they could have worked out emission rights without government. And thus, your criticism is no different than criticism of any government takeover of private sector: it's inefficient, but the activity itself is not immoral.

As for your general pessimism about government, you're really just using a general cop-out to anything. One can accept that some ideal scheme, or something close to it, is good, while saying that the final plan voted on is a bad idea. Your response is just to dismiss everything on the grounds that it will get watered down in committee. What if there were a proposal to abolish all government? Would I be right to argue that this is a bad idea because "it will get watered down in committee"? That it will involve a compromise that increases the intrusiveness of government?

There's quite a bit more I'd like to say, but there's something more fundamental we need to get out of the way: the fact that you don't understand scarcity. As I made very clear in my first response to you, there is a genuine conflict between one person's emission of carbon, and another's livelihood. If too much carbon is emitted (again, assuming the science is all in order), some people get displaced or otherwise sacrifice their own means and ends. Yet you trivialized this conflict by saying that government's attempt to adjudicate between the two is a case of introduction of a fake, non-economic scarcity.

This proves to me that you either don't understand the concept of scarcity, or are willing to pretend you don't, in order to accomplish your objectives. Forget, for the moment, my criticisms of you. Forget your petty disputes with others. Think, for once, about your own standards for yourself. You should feel very much ashamed that you can't recognize an instance of scarcity, and I strongly advise you quit all work as an economist until you can publicly admit your error. Not for me: for your own conscience.

David Zetland said...

Silas and Bob -- I won't get into your debate, which is progressing nicely without help.

@Silas: My response to you was that I am not 100% libertarian (rather, anarchist). I *do* think there is a role for government and particularly in the area of GW. I basically agree with you on this.

@Bob: "I'm saying for some X, there will be net harms, relative to the status quo."

and for other Y, there will be an improvement relative to the SQ. I think that Y-space is much bigger than X-space wrt gov't intervention on GW. (I would say the opposite wrt restaurant regulations...)

"I can understand a big government economist doing it, but how can a libertarian get all fired up about cap and trade? "

First of all, I prefer a carbon tax because it's less likely to get screwed up. Second, I think that gov't action is justified in some areas, e.g., GW. (I am actually in favor of publicly-funded -- not provided -- education and health. Shhhh, don't tell.)

"Isn't that the position you will be in, once Obama or McCain implements cap and trade and global emissions barely move (because of leakage, exemptions, phase-ins, etc.)?"

Nope -- I stand by my mistakes, e.g., I voted for Bush in 2000. Pretty big one (even if my voted was "wasted" in CA.)

Bob said...

David said: Nope -- I stand by my mistakes, e.g., I voted for Bush in 2000. Pretty big one (even if my voted was "wasted" in CA.)

OK why don't we try this... Can you describe what types of things would have to happen for you to admit, after the fact, that you were mistaken for endorsing federal climate change policies? I.e. is there any possible future in which you would say, "Huh, that Murphy guy was right after all!"

I'll go first: If there is no meaningful action by gov't, and mean global temperatures rise another 1C by 2020, then obviously my arguments about climate sensitivity were totally wrong.

Or, if US goes on cap and trade next year, and faithfully abides by the original (or more stringent) targets even through the next recession, then I will also admit I was too cynical.

OK now your turn.

Bob said...

Silas,

I don't want to argue here about my op ed on cap and trade. We're talking here about the Nordhaus paper. Yes, I'm asking David if he supports cap and trade, but only to understand where he's coming from before we delve into the specifics of the Nordhaus critique.

David Zetland said...

Bob:

I'll go first: If there is no meaningful action by gov't, and mean global temperatures rise another 1C by 2020, then obviously my arguments about climate sensitivity were totally wrong.

So you don't believe the scientists? Why not? I do.

Or, if US goes on cap and trade next year, and faithfully abides by the original (or more stringent) targets even through the next recession, then I will also admit I was too cynical.

C&T, next year and meeting targets are all questionable. I hope they go for a tax, perhaps next year.

Let me ask you this: Did the US stick with C&T wrt SO2? (I think it did.) If so, what's your opinion based on?

Silas said...

Yes, bob, I understand that you don't want to talk about inconsistencies in your position. That was clear all along; you didn't need to reiterate. What I was trying to establish was, that's just not going to cut it. here. If you still believe that a conflict between a carbon emitter and a victim of global warming is not a case of scarcity (or some belief equivalent to that), that compromises your ability to intelligently form arguments on the topic. here. So I would I appreciate an answer. here.

If you can't be bothered to redeem yourself on that issue, you can just stick with the critiques that I did make of your paper: that you've offered only your opinion as a defense to a powerful critique of 90% of your paper, and that you've "proven" that all policies, including ones you support, are bad.

But my guess is, you only "have time" go promote your novel definition of scarcity on behalf of whoever's currently paying you.

Bob said...

David,

You have conveniently ignored my challenge. :) Is it possible for future events to unfold in such a way that you would admit, "OK, I regret having supported federal efforts to regulated CO2"? I'm not trying to trap you, btw, I'm just trying to understand if it's even possible for me to convince you of my position.

As to your specific responses:

So you don't believe the scientists? Why not? I do.

I don't have my IPCC report in front of me, but are you sure they are claiming that temperatures will rise an additional 1C by 2020 under business as usual?

In any event, in the paper I went over a few reasons for why the current best guess of 3C for a 2xCO2 could be overstated. For me, the most compelling argument is that the observed temperature response to CO2 increases thus far is nowhere near 3C for a doubling. (And remember, in my paper I acknowledge all of the counterresponses one could make to this point. I'm not saying the models are demonstrably wrong, just that they rely on a few conjectural mechanisms that gets temperatures to deviate from their observed relationship to CO2.)

Let me ask you this: Did the US stick with C&T wrt SO2? (I think it did.) If so, what's your opinion based on?

I am not sure; I definitely need to do more research on that historical episode.

However, I am quite sure that there weren't tens of billions of dollars at stake from issuing more SO2 permits, or that the number of permits could be the difference between recession and expansion.

I think the federal government will use concern over global warming in order to extract trillions (yes with a T) more out of the economy over the next few decades, and the actual program as it unfolds will do very little to restrain the growth in global emissions. Do you disagree with those predictions?

David Zetland said...

"You have conveniently ignored my challenge. :) Is it possible for future events to unfold in such a way ..."

Everything's possible and a function of risk and uncertainty. Given that uncertainty is playing a big role, I'd prefer to act and regret it than not act at all -- ie, the precautionary principle.

So, "what's your bet" is basically cheap talk/useless....

"I went over a few reasons for why the current best guess of 3C for a 2xCO2 could be overstated."

To be frank, your opinion on this -- as an economist -- doesn't matter. I side with the scientists.

"However, I am quite sure that there weren't tens of billions of dollars at stake from issuing more SO2 permits, or that the number of permits could be the difference between recession and expansion."

You'd be surprised that the rhetoric on SO2 was precisely in this direction AND the lobbying concentration (vs public interest) was also strong... exact parallel.

"I think the federal government will use concern over global warming in order to extract trillions (yes with a T) more out of the economy over the next few decades, and the actual program as it unfolds will do very little to restrain the growth in global emissions. Do you disagree with those predictions?"

No -- but it's possible to mismanage this like anything (Iraq war). I am in favor of tax and rebate.

TokyoTom said...

David, I note that Bob Murphy referred to your response when he posted a link to his paper at the Mises blog, but failed to actually link to your comments AND misspelled your name.

Like Silas, I also commented at Mises, and further on my own blog there: http://mises.org/Community/blogs/tokyotom/archive/2008/06/09/bob-murphy-plays-with-dice-calls-nordhaus-reluctant-advocacy-for-a-gradualist-carbon-tax-over-eager.aspx.

Murphy totally misses Weitzman and Tol's "fat tail" analysis, and makes no reference to Sterner & Persson's paer at RFF.

David Zetland said...

TT,

Thanks for the head's up.

working link to your post...

Silas said...

I know, I'm being effectively ignored here, but I thought I'd point out something that might be of interest: david_zetland mentioned that bob inappropriately spoke outside of his area of expertise. But even worse, bob didn't even get the very core of his own area of expertise right either! Here's the part I excerpted on the Mises blog:

The number of permits is an arbitrary scarcity imposed by government fiat. In the real market, resource prices indicate genuine scarcity. If an oil pipeline is attacked, the price of oil goes up, causing industry and consumers to economize on the commodity. This response is rational, because the available supply truly has gone down. But if the prices of oil, coal, and other fossil fuels explode because of a cap and trade program, this won’t reflect genuine economic scarcity.

So, bob is claiming here that, if prices rise as a result of restricting global CO2 emission, that price increase does not reflect genuine economic scarcity.

This would be a defensible point if one were rejecting the climate science. However, bob makes very clear that he is accepting the claims about greenhouse gases at least for purposes of argument. So, he is accepting that if total CO2 emissions reach a certain level, certain debilitating disasters will happen. And, with those facts in mind, he still wants to claim that prices RESULTING from attempts to prevent people from being victimized by CO2 emissions "don't reflect genuine economic scarcity".

For an economist, this is a truly jaw-dropping statement, and should give you some perspecting on how incapable bob is of analyzing this issue.

Bob said...

Tokyo Tom wrote:

David, I note that Bob Murphy referred to your response when he posted a link to his paper at the Mises blog, but failed to actually link to your comments AND misspelled your name.

OK I fixed them. The name misspelling was intentional (i.e. I thought that's how he spelled it when I wrote that) but the lack of a link was due to an omission of the f and equals sign in my hypertext. I.e. I posted that comment and didn't check to see that the link actually showed up; I had typed out all but two of the necessary letters for the link.

I also note that you are quite indignant about my misspelling for someone who praises me for "heriocally" taking on Nordhaus. :)

Bob said...

Bob said: "You have conveniently ignored my challenge. :) Is it possible for future events to unfold in such a way ..."

David answered: Everything's possible and a function of risk and uncertainty. Given that uncertainty is playing a big role, I'd prefer to act and regret it than not act at all -- ie, the precautionary principle.

Well, then really what you're saying is no, you will never regret your current support for climate legislation, regardless of how the future unfolds.

Given that your current position is literally non-falsifiable, I don't think there's much point in us continuing this discussion.

(BTW I am not trying to be overly dramatic or pulling a "gotcha," I am simply saying that if you truly can't come up with any scenario that would make you second-guess your current position, then I doubt I am going to move you. Your mind is made up.)

For clarity, I want everyone to realize that I am *not* merely saying, "If temperatures don't rise as much as IPCC says, you guys will all have egg on your face." I recognize there are uncertainties etc.

Bob said...

I think I need to say a bit more in reference to my last post. If we're at a casino and you have an 11 against the dealer 6, a mathematician could tell you to double down. Yes, he's not sure it will work, but the odds are with you. If you end up losing twice your money, then, you might "regret" your play but not really; you forgive yourself because it was the right move, given the information you had at the time.

So I am interpreting David to be saying that no matter what happens in the future, he will always forgive himself for his current support for federal intervention because of the information he currently has.

Given that position (if it is indeed his position), there's no point in me trying to convince him otherwise.

Last, I note that I have given two separate measures by which I will admit that right now I am totally wrong on this issue.

Bob said...

Bob said: "I think the federal government will use concern over global warming in order to extract trillions (yes with a T) more out of the economy over the next few decades, and the actual program as it unfolds will do very little to restrain the growth in global emissions. Do you disagree with those predictions?"

David answered: No -- but it's possible to mismanage this like anything (Iraq war). I am in favor of tax and rebate.

OK, so then are you doing everything in your power to derail cap and trade efforts? Are you writing op eds, posting on your blog, etc. in order to tell everyone that the politicians and business lobbyists are literally putting the planet in jeopardy for their own power and profit?

Forgive me if you have been doing these things; I realize I may be lumping people into the same category. But it seems that you and I are agreed that if the IPCC is right, then what is happening in DC won't do anything except give a false sense of security to Joe Sixpack while raising taxes tremendously.

Am I summing things up correctly?

Bob said...

Silas,

I'll answer your cap and trade issues at Crash Landing. I'll post the link here when it's up. But right now I have to work on some other stuff for my masters. I hope they don't want me to hide bodies again!

Bob said...

As promised, here is my response to Silas' concerns about my cap & trade op ed, so if anyone is interested feel free to hop over to Crash Landing. But on the current thread, I would like to stay on the topic of my critique of Nordhaus. Yes cap & trade is relevant to this discussion too, but Silas was specifically critiquing the op ed on items not critical for the present thread.

TokyoTom said...

Bob, thanks for pointing out my typo.

I would note that I have made any number of points regarding your that you have not yet responded to.

One of them is that there are any number of "no regrets" policies that probably both you and David would agree on are desirable, and for which climate change represents the perfect vehicle to push for. Where are you or others calling for such changes?

A further point (new) is that it is very clear that it is the global aspect of climate change that has stymied policy discussions, and that the US is extremely unlikely to unilaterally (or unconditionally) commit to costly domestic policies unless other significant players like China share the pain.

In fact, it is this multiplayer aspect that makes it extremely unlikely that overly expensive mitigation measures will be agreed to and that rent-seekers will be able to control the outcome - other than in delaying the international discussions. The global discussion on climate change is very much like a bunch of ranchers deciding that it's high time that they sat down and figured out how to manage what had previously been an open range.

TokyoTom said...

David, have you seen the GAO summary of expert opinion on climate change policy?

I summarize it here:

http://mises.org/Community/blogs/tokyotom/pages/gao-releases-report-summarizing-views-of-leading-economists-on-climate-change-policy.aspx