Institutions and Experience (plus some Carbon Tax thoughts)

Magna Carta

I always enjoy John Cochrane’s writings, and the notes from his speech recently at the Hoover Institute are remarkable for bringing to light the importance of venerating our institutions that uphold individual liberties, ideals, and the rule of law. It is well worth the read and includes a lot of concepts that are not talked about or defended enough, especially by our presidential candidates.

As Cochrane is an economist that is considered quite libertarian, I appreciated his discourse on implementing a carbon tax:

I see hope on climate. There is a small but increasing alliance between environmentalists and free-marketers. The environmentalists think carbon is such a big problem, that they want policies that will actually do something about it. Free marketers are aghast at the waste and cronyism of energy policy. They are coming together on a deal: A simple straightforward carbon tax in place of wasting money and economic capacity on tax dodges, crony subsidies and ineffective regulations. Sure, there will be a big discussion on the rate, but any conceivable rate will be a big improvement for both environment and economy.

This may be anathema to many libertarians and conservatives, but I hope to see the discussion on the carbon tax grow. I wonder if that day will ever come. I think there are many climate change skeptics that will balk at the carbon tax simply on principle. I consider myself not so much as a climate change skeptic as much as I consider myself a skeptic that the throngs of self-appointed science doyens that have seemingly descended into a colossal mob mentality group-think aligned with cynical politicians happy to use the fear-mongering to shower subsidies on their pet projects will have any discernable impact while wasting trillions of dollars along the way. Far better that if we agree that there is some risk of manmade climate change, no matter how far into to “black swan” tail end of the probability curve it is, it would be far better to implement the carbon tax and offset other forms of taxation to make it politically palatable. Then the market will adjust to the activities in innovative and efficient ways. The cronyist ways in which we allow the government to pick and choose winners and to create arbitrary and unaccountable legislation through the EPA is the current alternative – and this undermines liberty and the rule of law far more than a simple and understandable and navigable carbon tax.

 

 

 

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3 thoughts on “Institutions and Experience (plus some Carbon Tax thoughts)

  1. Add Infrastructure Bonds to finance alternative projects and allow decentralized energy installation. Those are promising market mechanisms most people can find appealing. And how can it be wrong for a nation to invest in its future. Large bets by their nature are risky but the US also has a great history of success and a future to lead.

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    1. I don’t disagree that the government should have a role in infrastructure and should invest in modernising the grid and that municipalities should work to decentralize and demonopolize utilities and local energy markets.

      I do think it is challenge for governments to invest directly in industries. Sure, some successes can purportedly be pointed to by law of averages (if any entity throws billions of dollars out, surely some of that will be marginally successful) but that ignores the investment and food that dollar amount could have achieved if it had not been taken from the private market. It ignores the opportunity cost of what those dollars could have accomplished. Gas fracking, the most remarkable energy innovation in decades, owes little to government meddling. I believe strongly that the energy innovation required to alter climate change is better suited in private industry that responds to incentives. Putting a price on carbon is that incentive.

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      1. Matthew:
        Thank you for the reply. I guess I spent too much time in the corporate world to believe private enterprise is the ideological panacea imagined by many. We are talking about the single most massive project humanly imagined to stabilize climate. (Just the most dominant global crisis). Hydraulic gas fracturing is an excellent example of markets temporarily solving the decades old fossil fuel cartel problem and locking in to decades more of conveniently burning yet more fossil fuel – along with a host of new environmental and societal ills.
        As things stand, the well-being of our society is of tertiary interest to global corporations and profits. More rigorous punitive enforcement and severely curtailing corporate charters for malfeasance is desperately called for. I don’t want to go completely into my big government ideological corner though and very much appreciate the dialogue of your experience and well reasoned ideas.
        Steve

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