12 May 2009

Do Something!

In this post, Tim Habb complains of the time we are wasting in the debate between cap and trade and carbon taxes. He says:
The academic debate over the minutae of CNT or CT misses the bigger point: Both price carbon. Sure they go about it in different ways and have different distributional properties and one may be more politically or socially or morally or religiously palatable than the other, but in the end they both do the same thing--put a price on the external costs of carbon-based consumption.... and get moving!
I agree with that sentiment, and I have a story to tell...

My "discussion" at the workshop on economic games and mechanisms to address climate change was described as "climate change dynamics in theory, experiments, and reality." Rather than present a paper (I didn't have), or convene a panel (jaw jaw...), I ran a "simple" experiment (inspired by this post):
  1. Divide into four groups: (A)merica, (B)ureaucrats, (C)hina, and (D) other people.
  2. Task: Teams A and C have to negotiate a climate change treaty ("Kyoto II"), B provides information and D observes/heckles, etc.
  3. After A and C made their offers (A will give technology if C opens up free trade; C will cut coal if A pays, etc.), I changed the rules (endogenous rules!) so that -- if A and C did not reach agreement -- B and D would vote to accept either A or C's plan.
  4. The winning team would get to go the cocktail hour first, the losing team would go last.
What happened next? In a room full of the world's top game theorists, mathematicians and climate change policy experts?

Team A offered "30% of your GDP" to B and D if they would accept A's plan. Although I forget the exact details, the offer was worth about $10 trillion, or 2/3rds of America's GDP. I have no idea of the estimated efficiency losses of C&T vs. carbon taxes, but I'd guess that they are less than that much money! Team America won.

I'll post a video of the entire "event" when it goes up :)

Bottom Line: Forget theory. When it comes to climate change, money talks!

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