Equivalent In Your Dreams

I understand the theoretical argument for the equivalence of cap and trade and the carbon tax in conditions of full information and perfect compliance, but I think it's sort of crazy to think they're equivalent in any meaningful empirical way. Tyler Cowen helpfully explains why.
Meanwhile, Reason Foundation economist Shikha Dalmia has a good op-ed in the NY Post that I think more or less correctly captures the fiscal politics of the proposed cap-and-trade bill.
My policy preferences in this area are (1) Wait until we have much better estimates of the externalities of carbon use, which requires better climates models that do not rely on rapidly empirically crumbling assumptions about ocean warming and water vapor. Which is to say, do nothing, for now. (2) Straightforward carbon tax with offsetting reductions in other taxes. (3) Cap and trade plus tax cuts.
I understand the appeal of trying to gin up a market in carbon permits by politically inventing scarcity, but I think it's sort of insane to think that route isn't a lot more prone to system-gaming, rent-seeking, and non-compliance from the start compared to a carbon tax. Which is not to say that a carbon tax wouldn't be gamed and lobbied, too. It would be, just not so badly. We already know how to collect taxes, more or less. Cap and trade, on the other hand, basically requires creating an entire new set of institutions, on dubious scientific grounds, in a context of insufficient information about their optimal design. Which doesn't seem promising. The real-world political economics of it seems to me less like implementing an excise tax and more like the process of creating a stock exchange in a developing country.

4 Replies to “Equivalent In Your Dreams”

  1. The property we rightfully own comes from time we (or those who gave it to us) spend acquiring it.
    When you steal or damage that property you are taking that part of a persons life.

  2. Libertarian theory is simple.
    People come to the table with property, which is just another name for bundles of rights. Rights may be transferred from one to another through a consensual exchange. To exercise the rights of another without their consent is a violation of their rights
    whether through force (not even seeking consent for an exchange) or fraud (not fulfilling the agreed upon terms of the exchange). It is ok to retaliate with force against those who have deprived you of some of your rights without your consent.
    Aggression or Coercion are mainly just mean sounding evocative terms and not primary to the theory. The key terms are rights and consent. Caplan objects to Rothbard’s attempt to justify rights based on “naturalness”, (an objection I share), and instead substitutes an intuitionist justification (which I do not share).
    Do you have another category of violating someone’s rights that libertarians would not be able to stuff into either force or fraud? I doubt it. I think the theory is fairly tidy on this score. The problems for the theory lie in mainly in the initial distribution of rights and the allowed means of defending your rights.
    The lover withholding affection is not considered coercive (i.e., violating your rights) because his affection is presumed to be his property to to give or withhold at this discretion. This is not to say that you wouldn’t prefer to have his love, or wouldn’t feel worse off without it, or wouldn’t knuckle under to all sorts of things you otherwise would not when under threat of having that love withheld.
    But it is to say that he does not violate your rights by withholding his affection. You are offered an exchange – his love in exchange for the concessions he is asking for. Take it or leave it, but don’t whine about being coerced.
    For the grownups in the crowd, we find such “exchanges” distasteful because they are usually a category of “consensual frauds” – the “lover” manifestly doesn’t have any love to offer (fraud), but the person desperate to hold on to him prefers the lie rather than facing the truth. “Lie to me, I’ll believe.” Neither party to the “exchange” seems particularly admirable.

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