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Taylor and Van Doren on Intergenerational Equity:

Responding to the Stern Review, Jerry Taylor and Peter Van Doren of the Cato Institute argue that adopting measures to stabilize greenhouse gas emissions is not (yet) a good deal for us or future generations.

Not to be flip about it, but why should the relatively poor (us) sacrifice for the relatively rich (our children and grandchildren)? The Stern Report argues that the emissions cuts necessary to stave off disaster will likely cost about 1 percent of global GDP every single year, or about $1,154 in current dollars per household in the United States. A small price to pay, we're told, when GDP losses will likely total 5-10 percent of global GDP every year if we do absolutely nothing.

But even with a 10% reduction in GDP relative to what it would have been, 100 years from now, people will still be extraordinarily well off by current standards. For example, since 1950 real U.S. GDP per capita has increased by about 2% a year. Given that growth rate, real GDP per capita one hundred years hence would be $321,684, or more than 7 times higher than it is at present ($44,403). If global warming cuts GDP by 10% a year beginning about 50 years from now, then GDP per capita will be $289,515 in 2106 rather than $321,684.

Would anyone, let alone liberals, ever propose a 1% tax on those who make $44,000 to create benefits for those who make $289,000? In short, paying now to head off warming is a regressive intergenerational tax that takes from the poor and gives to the rich.

Nobel laureate economist Thomas Schelling has often made a similar point, arguing that intergenerational equity need to account for the likelihood that future generations (particularly in the developing world) are likely to be significantly wealthier than current generations.

Meanwhile, the European Union's industry commissioner, Günter Verheugen, is warning his colleagues that the EU's "environmental leadership could significantly undermine the international competitiveness of part of Europe’s energy-intensive industries and worsen global environmental performance by redirecting production to parts of the world with lower environmental standards."

J. F. Thomas (mail):
Well gee, that's based on all kinds of suspect assumptions. just the flooding of the two major economic centers of the world--London and New York--from the sudden and catastrophic melting of the Greenland ice sheet, which is not all that far-fetched a scenario, would be enough to to make the Stern Report's doom and gloom seem outright cheery. And to use the last 50 years' economic performance, certainly the prosperous in the history of mankind, to predict future trends, is absolutely outrageous. No wonder the "don't worry, be happy" crowd are derisively called global warming "denialists".
11.24.2006 12:21pm
Jack S. (mail) (www):
Doesn't this argument found itself in the "If no one else is doing it then why should we?" Or otherwise put, a lowest common denominator approach.

Whatever happened to the United States being a leader by example?

Call me an environmentalist, but I'm self interested. I don't want to breath or be exposed to the crap that comes out of {insert favorite polluter here}.
11.24.2006 12:35pm
grackel (mail):
this view seems to imply a virtual pyramid scheme of the economic future. Might not one be prudent enough to allow that earthly resources have at least some limit?
11.24.2006 12:48pm
Mark Field (mail):
I always knew procrastination was the best strategy. My parents were fools to build that interstate highway system; they should have just let us do it. Same with my grandparents and WWII -- it would have been much cheaper to let us fight Hitler (plus, him being so old by now and all). That New York subway is crap compared to what we could do today if we could start from scratch. In fact, I'm wondering why some idiot invented the wheel. Surely we could make a better, cheaper one with all the money we have compared to him.
11.24.2006 12:56pm
Speaking The Obvious:
I think the point Mr. Field (and others) are missing is that past improvements and innovations (and granted an argument can be made that the intersate highway system, which was a "defense" project to allow American tanks to move rapidly from East to West coasts, and so likely wasn't the most economically efficient of projects), while benefitting subsequent generations, also directly benefit those involved. They who invented the wheel didn't have to wait generations for some benefit to accrue. Meanwhile, global warming advocates seem to be, as these economists noted, calling for the current generation to sacrifice (by regulatory edict, not by voluntary choice) for the pure benefit of later generations.

Would Mr. Field really choose to give up a few thousand dollars every year for the rest of his life with NO noticeable improvement in his environment solely because experts have assured him that 100 years from now people, including perhaps some of his descendents, will be better off for it?
11.24.2006 1:19pm
AppSocRes (mail):
Any further posters should be required to demonstrate an understanding of opportunity costs!
11.24.2006 1:28pm
MnZ (mail):
Well gee, that's based on all kinds of suspect assumptions. just the flooding of the two major economic centers of the world--London and New York--from the sudden and catastrophic melting of the Greenland ice sheet, which is not all that far-fetched a scenario, would be enough to to make the Stern Report's doom and gloom seem outright cheery.


Whew...and denialists are unscientific.
11.24.2006 1:39pm
J. F. Thomas (mail):
Whew...and denialists are unscientific.

What is unscientific about contemplating the sudden melting of the Greenland ice sheet--or at least a sudden catastrophic shift of much of it into the North Atlantic over the course of a very shot period of time. Say on the order of a decade or so. And once it started it would be much too late to do anything but evacuate and abandon coastal areas of Europe and North America (look at the slow motion drowning of New Orleans, entirely manmade, which has been occurring for 80 years and will take tens of billions of dollars and dozens of years to fix). I could give you a scenario and a mechanism. I am not saying that such a scenario is likely, but if global warming is just ignored, or is considered a problem that can be easily dealt with, such scenarios must be dismissed out of hand. And they can not and should not.
11.24.2006 1:52pm
Bob Van Burkleo (mail):

Would Mr. Field really choose to give up a few thousand dollars every year for the rest of his life with NO noticeable improvement in his environment solely because experts have assured him that 100 years from now people, including perhaps some of his descendents, will be better off for it?
Isn't thinking like this just illustrating the flaw in the remunerative paradigm identified by sociologist Amitai Etzion:that it can be used to get people to do things that are not in their long-term best interests? If you read 'their' as the welfare of humanity's progeny we are talking of avoiding a little bit of money spent now that potentially needs to be spent to avoid a catastrophic result later.

Of course the illustration our sociology teacher used was by paying lawyers we just feed a system that has no motivation to make laws that don't need a lawyer to administrate until we reach the level of the Monty Python/Hollow Men ballad of 'Everyone's a Lawyer' so i don't know how much weight this view would have with this crowd. ;)
11.24.2006 2:21pm
Byomtov (mail):
Interesting how they talk about global GDP and then switch to US growth rates. Global GDP per capita has been growing at about 1.2% per year, not 2%, since 1975, so it goes up 3.3 times, not 7.24, over 100 years.

Maybe they still want to make the case, though, given this sort of thing, it's hard to consider them to be careful analysts. What else lurks in their numbers?
11.24.2006 2:36pm
Speaking The Obvious:
JTT queries:

"What is unscientific about contemplating the sudden melting of the Greenland ice sheet--or at least a sudden catastrophic shift of much of it into the North Atlantic over the course of a very shot period of time."

Yes, of course, what indeed...

"And once it started it would be much too late to do anything but evacuate and abandon coastal areas of Europe and North America (look at the slow motion drowning of New Orleans, entirely manmade, which has been occurring for 80 years and will take tens of billions of dollars and dozens of years to fix)."

But the fixes suggested are orders of magnitude more expensive than that. And as has been pointed out by economically-oriented environmentalists, this is not just about dollars, it is about lives. The money that would otherwise be spent to slightly decrease global warming at great cost could altenatively be spent to cure many diseases that plague the world and kill hundreds of thousands each year. As was mentioned above, the concept of "opportunity cost" is highly relevant and yet seemingly ignored by many writers on this subject.
11.24.2006 2:43pm
Mary Katherine Day-Petrano (mail):
"Well gee, that's based on all kinds of suspect assumptions. just the flooding of the two major economic centers of the world--London and New York--from the sudden and catastrophic melting of the Greenland ice sheet, which is not all that far-fetched a scenario, would be enough to to make the Stern Report's doom and gloom seem outright cheery."

"Any further posters should be required to demonstrate an understanding of opportunity costs!"

Thank you for the advice. Of course, having achieved a joint JD./M.B.A. degree, with an undergrad B.S. degree in International Business, counting, oh, about six heavy duty economic classes, and receiving an invite to apply for my university's graduate economics program (which I declined to go to law school), I figure I am quite well qualified to speak on this topic.

It really never ceased to amaze me at the very different perscpectives I encountered every time I crossed the street between the law school and the college of business. At the law school, we learned to pay attention to the actual evidence and the details. At the business school we made up all sorts of completely unsupported psuedoscience assumtions, and then calculated some contrived predicted outcome based on the speculative foundation we made up.

Economists are the most myopically short-sighted people of all, in my firsthand experience, which I observed on the college of business side of the street, not much different than a horse traveling in a straight line with blinkers covering the external view from both eyes. Alls a lawyer has to do to take down the opinion of an economist that is based on made up assumptions is start an inquiry using the actual circumstances that really exist and the details.

This pie-in-the-sky economist scenario of Taylor and Van Doren is completely divorced from reality -- the reality global warming climate changes will bring, draught, famine,
insect borne diseases, water shortages, the mass migration of people (who are losing billions of dollars in real estate investments) from the cities going under water -- to where? In sum, a kind of chaos our overly-coddled American population is not prepared to deal with successfully.

As an avid reader on this subject, I have to express extreme doubt our children and grandchildren or any future generation existing more than one decade from now, is going to benefit from rising GDP. In fact, GDP may not even be a valid measure of the chaos to come. Thus, comparing GDP of our overcoddled environment now to a changed future chaotic environment, is more like trying to compare apples to oranges or zebras to snails.

"Would Mr. Field really choose to give up a few thousand dollars every year for the rest of his life with NO noticeable improvement in his environment solely because experts have assured him that 100 years from now people, including perhaps some of his descendents, will be better off for it?"

And, what??!!? Is this justification to sit idly by when there is a need for action, while pocketing $$$ personal greed for real? What bar examiners let this commenter pass the "good moral character" eval? Is this what we have come to as a Nation, that we just pop out babies, and then have no moral responsibility to them for our time on this Earth? The last I recall, our obligation on this planet as a parent is to make the world we leave to our children and grandchildren the best we can make it -- not deliver them to the decay of places we already can see like the Yellow River of China, an environmenal cess pool of poisoned drinking water, what there is left of it until global warming simply eviscerates the water source.

Unbelievable how greedy for themselves only educated professionals can feed the gullible masses a "happpy hour" story so they don't object to the disastrous course we have put this entire planet on.

No wonder all these standardized teach-to-the-test fads seek to dumb down and eliminate the critical thinkers.
11.24.2006 2:55pm
Mary Katherine Day-Petrano (mail):
"But the fixes suggested are orders of magnitude more expensive than that. And as has been pointed out by economically-oriented environmentalists, this is not just about dollars, it is about lives. The money that would otherwise be spent to slightly decrease global warming at great cost could altenatively be spent to cure many diseases that plague the world and kill hundreds of thousands each year. As was mentioned above, the concept of "opportunity cost" is highly relevant and yet seemingly ignored by many writers on this subject."

And, there's another thing -- this economist idea that resources should be allocated to one problem in priority to another is going to collapse in the future climate change chaos when the problems overwhelm us and we can't pay for any of them.

Ultimately, we are not going to be able to patch and try to rebuild the cities that will go underwater or the devastated ares of destruction. The resources we have left will need to be put to use building new cities and agricultural areas on higher ground, where large parts of the population will be forced to migrate for survival.
11.24.2006 3:00pm
J. F. Thomas (mail):
But the fixes suggested are orders of magnitude more expensive than that.

Every time the costs of doing something that benefits the environment are contemplated, they are going to be prohibitive and devastate the economy. The cost of vaccinating against smallpox and wastewater treatment late in the 19th century was prohibitive. So was regulating hazardous waste and the clean air act.

In the early and mid-seventies, the twin scourges of eliminating lead from gas and CAFE standards presented absolutely unobtainable goals to the auto industry. There simply wasn't enough platinum in the world for all those catalytic converters and they were way too expensive to manufacture. And unleaded gas would simply destroy the engines of older cars, forcing owners to replace them. And you simply couldn't produce high mileage cars that Americans would buy. We were all doomed because of a bunch of no-nothing luddite environmental wackos and politicians who hated cars. Today, even the biggest SUVs get better mileage than most of the cars produced in the sixties.

I think about my 2001 Mitsubishi Eclipse and compare it to my friends '71 AAR Barracuda. That "muscle car" has about ten percent more horsepower (240 to my 220), is undoubtedly faster off the line due to its gearing and lower curb weight but certainly has a lower top end (and it shakes like hell above 100 mph). It also handles like crap, and with it's 340 ci 6 bbl carb gets 8--12 mpg (and has a ridiculous small 12 gallon gas tank), while I get about 24 mpg.

So forgive me if I don't buy all the doom and gloom from the denialists who insist curbing the consumption of fossil fuels is an unattainable goal that will devastate the world economy. Your track record on such predictions is so horribly wrong, why should we continue to believe you. It is the environmental alarmists, not the do-nothing industry "doing something will bankrupt us" alarmists, who are right more often.
11.24.2006 3:14pm
magoo (mail):
Why should we care about posterity? What's posterity ever done for us?



(sarcasm off, apologies to Groucho)
11.24.2006 3:23pm
Mark Field (mail):

I think the point Mr. Field (and others) are missing is that past improvements and innovations ... while benefitting subsequent generations, also directly benefit those involved.


So would most of the changes recommended for reducing global warming.


Would Mr. Field really choose to give up a few thousand dollars every year for the rest of his life with NO noticeable improvement in his environment solely because experts have assured him that 100 years from now people, including perhaps some of his descendents, will be better off for it?


False dichotomy much?

But even assuming you posed a real hypothetical, my answer might very well be "yes". Believe it or not, I choose to shower every day although the marginal benefit to me of each such event is trivial. I also wash my hands and shed no tears of regret for the lost oppportunity costs.
11.24.2006 3:43pm
Fearmonger (mail):
J.F. Thomas wrote:

just the flooding of the two major economic centers of the world--London and New York--from the sudden and catastrophic melting of the Greenland ice sheet, which is not all that far-fetched a scenario, would be enough to to make the Stern Report's doom and gloom seem outright cheery

I can just see the headline now: "Panic as global warming unexpectedly hits Manhattan: Millions dead."

Come on now, leave the fearmongering to the fearmonger.

We were all doomed because of a bunch of no-nothing luddite environmental wackos and politicians who hated cars. Today, even the biggest SUVs get better mileage than most of the cars produced in the sixties.

So you're saying that as technology improves it will be cheaper and more efficient to care for the environmnet? Interesting...
11.24.2006 4:12pm
Speaking The Obvious:
I'm not sure what to make of a person who feels that showering and washing his hands has only marginal personal benefit to him but that he does so nonetheless out of altruism to others...
11.24.2006 4:14pm
Fearmonger (mail):
Believe it or not, I choose to shower every day although the marginal benefit to me of each such event is trivial. I also wash my hands and shed no tears of regret for the lost oppportunity costs.

You're statement is patently false. Even if the marginal benefit of showering every day was trivial (which I think is unlikely if you are gainfully employed, have any semblance of a social life, or if you personally enjoy a hot shower because it relaxes you, etc.), the marginal cost of taking a shower is even more trivial. If this was not true, then you would not take a shower every day. It is that simple.

As for washing your hands, I imagine the great health benefits of avoiding illness or infection, coupled with the aesthetic benefits of having clean and fresh smelling hands, far, far outweigh the burden of such a minor inconvienience. Cleaning yourself is almost always a very rational choice (unless you are OCD or something). Need I elaborate? I highly antcipate your response.
11.24.2006 4:28pm
Fearmonger (mail):
damn, speaking the obvious beat me to the punch
11.24.2006 4:29pm
Mark Field (mail):
It's interesting that Fearmonger and StO think that it's perfectly legitimate simply to invent plausible arguments for behavior rather than provide any factual basis in support. "Just so" stories are nice and all, but not very convincing.
11.24.2006 4:44pm
Fearmonger (mail):
Ok Mark, you're right, I have no idea why you wash yourself. So please, convince me. why do you take showers? altruism for others? altruism for future generations? the evil monster under you're bed is forcing you to?
11.24.2006 5:09pm
srp (mail):
Anti-econ flat earthers crack me up. If technology is going to improve over time--as J.F. Thomas posits in the case of automobiles--and the accumulation of productive capital is going to raise labor productivity over time--as it has over the last few centuries--then a unit reduction of CO2 in the future will be accomplished much more cheaply than it will now.

Since the harm is postulated by the alarmists to be proportional to the CO2 level, it follows that the optimal path for reductions, even if you completely drink the global-warming/emissions-reduction Kool-Aid, is to do very little now (although R&D might be good) and a lot later. This isn't rocket science, it's common sense. Every sensible economic model that incorporates the "mainstream" climate forecasts comes to this conclusion because it is a simple and robust result of the basic math. BTW, even if economic growth is slower than we expect, that also reduces the predicted levels of CO2 emissions, so the optimal control strategy is not qualitatively affected. It still makes sense to wait before cutting back heavily.

Personally, I think the idea of trying to set the earth's temperature through an international political process is insane, even if we had the technical knowledge to do it efficiently. And I'd be willing to bet a fair amount of money that the efficient way (an order of magnitude cheaper than cutting CO2 emissions) to combat global warming is by dumping more sulfur and particulates into the air to reflect the sun (directly and through cloud formation). But those aren't economic arguments per se.
11.24.2006 6:18pm
Craig Oren (mail):
Srh's "efficient way" would result in much death and suffering from the health effects of sulfur dioxide and fine particulate matter. There's a reason why the U.S. and (to a lesser extent) other nations have been bringing down their emissions of these substances. For one thing, there is a clearly established link between airborne concentrations of particles (which are formed, in part,by emissions of sulfur dioxide) and mortality. The only question about particulate matter is how far to regulate, not whether to regulate.
11.24.2006 6:54pm
Speaking the Obvious:
Mark Fields: I choose to shower every day although the marginal benefit to me of each such event is trivial. I also wash my hands and shed no tears of regret for the lost oppportunity costs.

Me: I'm not sure what to make of a person who feels that showering and washing his hands has only marginal personal benefit to him but that he does so nonetheless out of altruism to others...

Mark Fields: It's interesting that ... StO think[s] that it's perfectly legitimate simply to invent plausible arguments for behavior rather than provide any factual basis in support.

---

Gee, Mark, I don't think I was "inventing plausible arguments for [your] behavior" beyond positing altruism, which is kinda definitional if you begin by saying that you believe the marginal cost exceeds the marginal benefit but do it nonetheless. Or were you merely commenting that the benefit is trivial, despite the fact it is still higher than the marginal cost. If THAT's what you meant, why share that rather unimpressive idiosyncratic fact about yourself? It has nothing to do with the preceding argument.

You don't do this sort of economic reasoning for a living, do you?
11.24.2006 6:55pm
Mark Field (mail):
Fearmonger and StO, your arguments aren't even wrong.
11.24.2006 7:03pm
Dick King:
Remember this proposal? It's not a joke. The SO2 injection rate is inversely proportional to the settling rate so it's quite modest for injection into the stratosphere.

-dk
11.24.2006 7:14pm
Dick King:
Uncertainty about the future is one component of the discount rate. I would like anyone who feels that the discount rate should be less than 1% to produce a set of say a dozen predictions, made in the 1930, more than half of which are even qualitatively correct.

-dk
11.24.2006 7:15pm
Speaking the Obvious:
Mark,

You just don't get it. I didn't make any "arguments". I simply made an observation about your exceedingly strange comments and, if taken seriously, preferences.
11.24.2006 10:01pm
Eli Rabett (www):
The discount rate in Stern is not that of the Fed or the British Treasury.

1. Future climate policy may involve action on such a large scale as to shift our economic path in a non-marginal fashion. Under such circumstances, conventional discounted cost-benefit analysis is inapplicable. Instead, analysis should proceed using a utility discount rate to compare the stream of social welfare with and without the climate policy.

2. The utility discount rate, δ, used for social decision-making should not be estimated based upon revealed individual impatience, but should reflect the risk of societal collapse. On this basis, the appropriate utility discount rate is smaller than the current HM Treasury rate of 1.5%, and although it is positive, δ is probably below 0.5% and possibly 0% to a first approximation.
11.24.2006 11:31pm
Bottomfish (mail):
The spectre of New York under water seems to be a real gut issue that drowns out all consideration of marginal costs. Perhaps the reason is that that's where the financial industry is concentrated. In fact a lot of financial New York has already moved to New Jersey or Connecticut and most financial processing has moved even further away. Would it be all that difficult for the remainder to follow suit?

Of course the cultural class would be outraged at having to move to Ramapo or Danbury, but such people are already so outraged that the marginal cost of this last increment would be slight. Of course they would have to give up their rent-controlled apartments, but this would yield a net benefit to society.
11.25.2006 8:01am
AppSocRes (mail):
Eli Rabett: A brilliant analysis: Please give me all your money and I will promise you a return of something above 0.5%: You'll be making out like a bandit according to your reasoning.

All those hysterics worried about the rent-controlled apts. in NYC being inundated as the Greenland ice cover melts: Prior to the Little Ice Age, say around 1000 AD(see note below), average world temperatures seem to have been considerably higher than those projected by any climate modeler into the next century or two. Greenland's ice sheet was so diminished and its climate so much warmer than today, that it was possible to maintain medieval 3-crop rotation systems of agriculture--something that is impossible in today's much colder. Despite this there is no evidence that, just preceding the Little Ice Age, either Manhattan or the area of any other current major metreopolis was inundated. In other words, you sound like hysterical, looney-tune, algorephilic, wingnuts.


Note: Many students of climate history believe that the Little Ice Age relates to reduced solar output during the Maunder Minimum, but many of the currently fashionable climatologists may disagree, since their models seem to be assuming either that solar output has no effect on the earth's climate or that solar output does not vary. For me, this is just one more reason to argue that their models are nonsense.
11.25.2006 1:06pm
Charlie (Colorado) (mail):

What is unscientific about contemplating the sudden melting of the Greenland ice sheet--or at least a sudden catastrophic shift of much of it into the North Atlantic over the course of a very shot period of time. Say on the order of a decade or so.


The utter lack of any understanding of thermodynamics. (Hint: what is the energy of phase change for that much ice?)
11.25.2006 5:04pm
Charlie (Colorado) (mail):

Interesting how they talk about global GDP and then switch to US growth rates. Global GDP per capita has been growing at about 1.2% per year, not 2%, since 1975, so it goes up 3.3 times, not 7.24, over 100 years.


So pick numbers you like better. So long as the growth rate of global economic product ("GDP" is "domestic" product, so "global GDP" is an oxymoron) is greater than the discount rate, the basic argument holds.
11.25.2006 5:06pm
Charlie (Colorado) (mail):
Jonathan, any chace of a link to the Taylor and van Doren piece?
11.25.2006 5:15pm
Mary Katherine Day-Petrano (mail):
There are some pluses to global warming, should the polar ice caps melt it will be a lot easier to access all that oil at the poles without having to deal with drilling thru all that glacial ice.

On the other hand, I would think the surefire way to know if global warming is really coming upon use, raising the sea levels some 21 feet or more, and to pinpoint its time of arrival, is to keep a good eye on the real property records in all low lying areas.

If there is a mass exodus sell-off of the soon-to-be-underwater land by centuries-old landowners or Lloyds of London refuses to issue any more insurance policies covering such low lying land or buildings upon such land, then we will know it is time to expedite our move to higher ground.
11.25.2006 8:00pm
Mary Katherine Day-Petrano (mail):
For instance, when the Royal family begins to divest itself of its real property futures interest in London, we will know the time is upon us.
11.25.2006 8:02pm
Mary Katherine Day-Petrano (mail):
"use"=us

"futures interest"=future interests
11.25.2006 8:04pm
Milhouse (www):
"Men have no right to put the well-being of the present generation wholly out of the question. Perhaps the only moral trust with any certainty in our hands, is the care of our own time. With regard to futurity, we are to treat it like a ward. We are not so to attempt an improvement of his fortune, as to put the capital of his estate to any hazard."

Edmund Burke
11.25.2006 10:31pm
Byomtov (mail):
So long as the growth rate of global economic product ("GDP" is "domestic" product, so "global GDP" is an oxymoron) is greater than the discount rate, the basic argument holds.

What argument?

That we have absolutely no obligation to future generations because they will be wealthier than we are?

That the costs and benefits will be distributed proportionately, so there are no distributional or insurance issues?

That income growth rates will be uniform and track GDP per capita? (Median household income in the US has grown by only .7% a year since 1975.)

That even thought the effects will show up starting in 50 years we ought to compare today to the 100th year, because that makes the numbers more impressive sounding?

You call that an argument?

On the use of the term "global GDP" you do have a point. It was careless of me to simply pick up the phrase used by Taylor and Van Doren without giving it some thought. Apparently you can't let anything they say slip by.
11.26.2006 11:29am
TokyoTom (mail):
Jonathan, the argument by Taylor and Van Doren IS flip sophistry, and has the perverse implication that it is always the best approach to the managment of open-access commons to encourage their unfettered destructive over-exploitation for the benerfit of private interests today, and let later and supposedly wealthier generations deal with the mess. And should future generations should also act similarly for the benefit of those who destroy public goods? Just when are responsible adults supposed to take action to solve problems relating to open-access resources? Encouraging and whitewashing the destruction of common resources is clearly not the epitome of wisdom.

The real question is when it makes sense to develop institutions to control the exploitation of common resource either through regulated common or private property rules. As Yandle notes, man makes tremendous progress in improving his collective wealth by figuiring out how to efficiently manage open-access resource. The basic question facing us today is whether the costs of creating a regime that prices GHG emission activities exceeds the costs of unfettered exploitation.

Failing to impose any pricing mechanism on GHG emissions means that private economic actors will never have incentives to make investments in the technology that will be needed in the future. The lesson to be drawn is to start NOW.

Nordhaus has been writing on this for thirty years now, and showed back then that the pricing curve for carbon would start off small and then climb after a few decades. We have been stymied in moving forward not by costs, but by both the prisoners' dilemma internationally and by obvious rent-seeking at home (that has paid off for those who dump GHGs free of charge). Cato has consistently backed the resouirce abusers, rather than the development of rules that would encourage responsibility. Do they also oppose ITQs and support the continued destructive exploitation of the world's fisheries?

An ancillary problem has been that the short time horizons of politicans means that incentives are skewed to procrastination and to short-term gains, rather than to building consensus and meaningful rules.
11.29.2006 3:37am