Hubris and Carbon Taxes

Greg Mankiw at Harvard takes great pleasure in the fact that surveys around the world show strong support for higher taxes to reduce carbon emissions inorder to control global warming. In some theoretical sense there is justification for this satisfaction, but the real world is a long way from what might work in theory. The basic problem is one of hubris (see my book Freedomnomics for a more complete discussion).

1) It is hard enough to get the direction of effects correct. There is a debate right now over global warming and what share might be attributable to man. Only a tiny fraction of greenhouse gases (may be a percentage point or so) is due to mankind. Of course, there are other causes such as energy output from the sun that we don't control at all. Even if we agree on manmade global warming being significant, there is still the next question of whether there is a net cost from it. Sea levels might possibly go up by a foot or so over the next hundred years, but human disease will decline and there will be more food. Probably even in the worst case scenario, a small effect on global warming has a small effect on net costs.

2) Even if we get the point estimate of the size of the externality correct, there is the problem of assuming that the government will impose the right tax. Having too high of a tax is just as bad as having too small of a tax. Why do we believe that the government will actually pass legislation that has the right tax?

3) We already have high gasoline taxes. How do we know that the level of taxes are not already too high? Possibly we should be lowering the gas tax, not raising it. Taxes on gasoline are very high as it is.

4) What is the cost of getting this wrong? The cost is that we will be poorer, and there are lots of coststo being poorer, included a lower life expectancy.

Mankiw is an advisor to Romney, which makes me worry about him some. Today is a reminder about the Democrats in the Washington Post today.

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Anonymous Scott Davis said...

Politicians are experts in nothing. They sell what people will believe, right or wrong. People who don't think for themselves usually put too much trust in these 'King Nothings", without consideration of the cost later on. The carbon tax is just another way to suck cash out of the population for a very imperfect science. Just ask yourself one question: When was the last time the government spent YOUR money wisely? This is no different. It's a guilt tax. If people feel guilty and want eternal pollution salvation by flushing money down the toilet known as Washington, DC, then leave me out of it.

-Scott Davis

11/06/2007 1:05 PM  
Anonymous Steve B said...

I agree with Scott that nearly all politicians know little about the science behind global warming. That's why I listen to see who they cite as their sources and the validity of those citations.

Senator Inhofe delivered a blockbuster speech on the global warming hoax on the Senate floor a couple of weeks ago that lasted about three hours. You can get the text online. In it, he cites numerous highly credible scientists debunking global warming. He did a fine job of debunking the alarmists. I recommend reading it. It's a real page-turner!

Last October 29th, Sen. Inhofe gave another great talk on the Senate floor while debating Sen. Boxer. The text is also online.

Sen. Inhofe qoutes extensively from experts with clarity to expose the fallacy of proposed regulatory policies. He points out that all the current Senate proposals "...will harm the economy, yet none will put a dent in global warming, even if the worst fears were well-founded."

He points out that the EPA last month "...concluded that over the long run, each bill before Congress -- including those that would reduce U.S. emissions by 70 percent -- will only reduce global concentrations of greenhouse gases by about 4 percent."

Inhofe also points out the futility of passing legislation that will put the USA at a competitive disadvantage globally. He points out that "...emerging economies don't want to limit carbon emissions, and the developed world has only paid lip service to efforts to cap them..."

Sen. Inhofe cites many experts in his talk and they are all very convincing. I especially liked what Alan Greenspan stated in his recently published book. "There is no effective way to meaningfully reduce emissions without negatively impacting a large part of an economy." "Net, it is a tax. If the cap is low enough to make a meanigful inroad into CO2 emissions, permits will become expensive and large numbers of companies will experience cost increases that make them less competitive. Jobs will be lost and real incomes of workers contrained." Mr. Greenspace also stated, "Cap-and-trade systems or carbon taxes are likely to be popular ony until real people lose real jobs as their consequence."

On October 2, 2007, the renowned economists, Arthur Laffer and Wayne Winegarden wrote an op-ed piece in the Financial Post saying, "The costs of reducing (greenhouse gases) through cap-and-trade policies would add dignificant costs to production and would likely have a severe negative impact on long-term U.S. growth, an amount we estimate at US $10,800.00 per family."

According to Sen. Inhofe, "The Congressional Budget Office found that greenhouse gas cap and trade schemes are highly regressive and put the highest burden on the poor."

In my opinion, we are witnessing the largest hoax ever played out. The reasons as I see them are varied and have to do with money and political manuevering. But according to Sen. Inhofe, "This is about energy policy, and whether our nation should grow and prosper or whether America's time has passed and we should step aside for the emerging nations."

11/10/2007 10:46 PM  

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