« How bad are average incomes? | Main | Does compulsory education pay? »

February 04, 2008

Comments

Luis Enrique

Isn't there quite a strong argument that liberty needs to take a back seat in matters environmental? Externalities, bounded rationality and all that, individually rational decisions being sub-optimal etc.

Actually, this reminds me to ask about something I don't understand about Pigouvian taxes ... I have read some people say (sorry no link) that fuel taxes are already Pigouvian - even if that's not true, I get the impression a Pigouvian tax wouldn't be that astronomical. Under such a tax, the full social cost of carbon emission would be 'priced in'.

What confuses me, is that if you put the question "would the effect of such tax be sufficient to bring carbon emissions down to a safe level" the answer is, if I'm right that the tax would be modest, probably 'no'. This is why environmentalists generally seem to be unimpressed with Pigouvian taxation - it doesn't seem to be effective enough.

This makes me think that "is this tax going to 'deal with' global warming?" is not the same question as "does this tax reflect the social cost of global warming?" - is that right? are they separate concepts? I half think not, that they ought to be the same thing - if the tax is right, it ought to be effective enough by definition. Can you clear my muddled thinking?

Tristan Mills

It does seem to be a mistake which some make - business is no friend of freedom, at least not in the long run.
Perhaps in the short run some businesses may be pro-freedom but only when it suits them.

As for the environment being a reason to put freedom aside - wasn't it poverty 70 or so years ago which was the excuse?
Perhaps there is cause for some intervention on the environment, but it so easily becomes an excuse for rent seeking or ideological reductions in freedom. That is reason to be skeptical...

Tim Worstall

Taking the cost of CO2 from the Stern Review ($85 a tonne) give us 10 p a litre as the appropriate Pigou tax for petrol. As we pay 50 pence already it's probably covered, but even if it isn't, paying 60 p in tax would do so.

Would that "deal" with global warming in the sense of stopping emissions and thus stopping GW? No, clearly not.

However, there is a value to me or you in being able to drive somewhere. Just as there is a value to the Bangladeshi farmer in not seeing his fields disappear below the waves by 2100. What we're attempting to do is balance of those values: which is exactly what gets us to that $85 a tonne figure.

One way of thinking about it is that the $85 is the cost of all of the bad things that might happen. But if we have an activity which is more valuable than those bad things then we want to do that activity, even at that cost. Total social benefit (over time and the globe) is maximised.

Thus, Pigou taxes don't try to be high enough to stop an activity. They try to make sure that it is paying the full costs of it. We can then rely upon markets to arrive at the optimal social outcome.

Yup, it'll be a bugger when that field floods, but so would restricting transport be. We want to find the best balance between the two.

Luis Enrique

Thank you Tim. So, if the question is approached from the direction of 'what do we want to see happen to omissions, and what tax would achieve that' then, providing the valuations of the costs and benefits involved are the same as those behind Pigouvian calculations, the two approaches should yield the same result. I think.

Given that few people, myself included, would regard global warming 'solved' by the tax level you mention, I wonder where the source of disagreement is? OK, you can say it just reveals irrationality, or a failure to price benefits not just costs, but otherwise it's down to those valuations. If benefits are valued using market prices, then is the calculation skewed by the fact the carbon emitters are rich and the cost-bearers poor? But of course, if I want to know things like that, I need to read the damn Stern report.

dearieme

It may be unwise to allude to the Clean Air Act as evidence of successful environmental legislation. Lomberg says that air pollution was decreasing before the Act was passed, and carried on decreasing afterwards with no change of slope. Perhaps we've all been indoctrinated into a false belief on this one?

Phil Beesley

@Tim Worstall
"However, there is a value to me or you in being able to drive somewhere."

Agreed.

"But if we have an activity which is more valuable than those bad things then we want to do that activity, even at that cost."

Again agreed. But when individuals do bad things, which are consciously performed more badly than necessary (ie driving an inefficient vehicle), that argument fails. One can drive from Birmingham to Manchester in the same time using a Ferrari or a Jaguar or any cheap saloon/hatchback. The only differences are the energy consumed and the driver's smugness. Fast cars are for fun, not commuting.

Fuel consumption is a poor measure of environmental impact. The "Environment" is not just carbon emissions; axle weight is a significant factor, as are vehicle length and width in urban areas. But fuel taxing is a crude tax, so per gallon a sports car owner pays more than a 4x4 driver for the environmental cost.

Pseudonymous

"bosses, as well as government, can be enemies of liberty."

Practically anyone with a cause can be an enemy of liberty. They all want to get people to act in accordance with the cause, and the easiest way to do that is usually to have the government force them.

JohnM

Just to reassure Luis and others, we may not need to 'solve' GW with any form of taxation because, happily, the latest figures show that there has been no increase in global temperatures for ten years now, during a period when atmospheric CO2 has increased massively. Now, we all know that ten years is a short term in matters geological, but still, it is starting to look like a trend. Maybe we should hang fuire for another ten just to see if there is a problem or not?

dearieme

JohnM - glad you've joined those of us who suspect that Global Tepiding is under way.

Steve

No increase in global temperatures for ten years?

What 'latest figures' would those be then?

reason

Tim Worstall,
as Luis Enrique rather quietly pointed out, for us utilitarians, your example is particularly well chosen to undermine your case. You just illustrated very well why currency based cost/benefit analysis is often very misleading in environmental cases.

JohnM

"What 'latest figures' would those be then?"

The figures produced by (amongst others)those neocon, imperialist stooges of the oil industry at the UK Met office:

http://www.metoffice.gov.uk/research/hadleycentre/obsdata/HadCRUT3.html

reason

And Tim,
yes I know, I know, if the tax is used to subsidise the Bangladeshies (including their retraining and moving costs and ensuring they don't move in with our hyperthetical fun riders) everybody can be better off. But what are the chances of this actually happening? (Not to mention the lack of consideration of secondary effects.)

reason

JohnM
And if we treat 1998 as an outlier? Pretty thin evidence you have there.

John M

"And if we treat 1998 as an outlier? Pretty thin evidence you have there."

One way or the other, the data shows no warming during the last ten years. I agree that it is thin evidence, ten years is not long enought to be conclusive of anything (are you listening Al Gore?), but it is noteworthy and should make us a bit less certain about the case for AGW, I think.

Surely the sensible thing to do would be to wait for another ten years and see what trend develops? If there is no further warming or a slight cooling in that period I think we would have good reason to believe that the link between CO2 emissions and GW is not what is currently claimed (assuming (safely, I think) that CO2 emissions will increase markedly for the next ten years as they have over the preceding ten).

reason

JohnM
But there is so much OTHER evidence, and the evidence you quoted if you divide in 5 year periods still shows strong warming. Idiot!

reason

Not to mention that most of the actions we should take are worth doing for other reasons (Peak Oil for instance).

reason

"Practically anyone with a cause can be an enemy of liberty."

This simple statement contains two truths
1. My liberty often has hidden costs to others
2. Liberty needs its advocates.

JohnM

"But there is so much OTHER evidence, and the evidence you quoted if you divide in 5 year periods still shows strong warming. Idiot!"

I don't know what to make of this. There is evidence that the global temperatures have risen, that's true, but none that they have risen in the last ten years. We don't currently know if the trend is up or down. If we only had the tempertaure record of the last ten years, we would not conclude that we were in a period of global warming.

Mark Wadsworth

John M, nice link! I never knew that the Met Office were such oil-imperialist lackeys, tee hee. I might just add that to my statistics section.

reason

Um ice sheets melting, glaciers receding, five (yes five) record monthly averages in a row last year in Germany for instance. And if you ignore the clear outlier in 1998 then the evidence for a continuing trend increase in global temporatures remains as strong as ever. Of course if you take any cherry picked statistics (start in 1999 and see how the evidence looks) and interpret them how you will if the data has a significant random component. But given that there is no particular theoretical reason to suspect that trend tempatures have stopped rising and other worrying features of global warming (particularly at poles) continue to worsen, I would have thought that the onus was on you to prove that the risks are lower.

reason

JohnM ...
Lets put it this way: imagine you are an actuary calculating insurance premiums for hurricane damage. Well since 2005 we have had two quiet years in a row. Is it time to assume that the danger has past? Your job is on the line now!

Steve

Nice one 'Reason'. You put it so much better than I could have.

JohnM's graph seems to me to show a rising trend. I think he'd better avoid working in insurance or pensions. ;-)

Geoffrey

Average global temperatures will be roughly stable until 2011 according to the Met Office. However, there is a North/South divide.

Let's make an assumption: There is no such thing as (Man-Induced) Global Warming.
The question I ask is: Is there any danger for acting now as if this is man-induced Global Warming and taking precautionary steps?

Let's make a second assumption: There is such as thing as Man-induced Global Warming.
The question is still the same.

Surely, if you are right that there is no such thing, the time to gloat is when scientific evidence leans towards you being right? Becuase if you are wrong...

I can see many social benefits to having 35mpg as a standard:
Safer roads (4x4s are dangerous)
Cleaner air

Theren there's the economic benefit: UK is a net importer of oil. This reduces any trade deficit. Yes less tax may be riased per litre sold, but if we need to equalise taxes, the Gvt can levy more tax on petrol.

The comments to this entry are closed.

blogs I like

Why S&M?

Blog powered by Typepad