With Copenhagen on our minds, some remarkably incisive commentary coming from — of all places — the IMF. Here’s Carlo Cottarelli, the Director of the Fund’s Fiscal Affairs Department:
The science of the issue can get pretty incomprehensible pretty quickly. And the politics are clearly very ugly. Let’s not forget, however, that much of the economics is simple.
It’s an externality, stupid — so price it.
An informed citizen trying to follow the debate may easily become overwhelmed. But Cottarelli is right: the economics principles here are pretty straightforward.
(Hat tip: Peter Martin)
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Indeed. But how to price the uncertain when no-one can agree on probabilities?
The decision of pricing it may be relatively easy. Accurately pricing its external costs is not.
God, it’s so simple. Why don’t we scrap these silly negotiations and simply implement this patently obvious simple solution?
Maybe because the reality is that the economics are NOT simple. There are short-term and long-term costs and benefits, coupled with massive uncertainty, inter-generational wealth transfers, and staggering distributional issues.
Of course, there’s also no way to separate the economics from the politics or the science, so it’s not entirely clear how this snarky observation contributes in any meaningful way to the debate.
Is the suggestion that polluters get to pay for polluting?
Who do they pay? How do the pay? Let me guess – they buy some paper and resell it on some exchange?
The environment is not about the economy or economics.
To most people who are affected by polluters, it’s about survival.
The suggestion to “price it” is not just naive, but insensitive and vulgar.
Leave the economics and other freaks out of this. Give the environment a chance, please.
This is the most (and perhaps the only) clear and honest statement emerging on the climate change debate. It is obvious that it is an externality. But coming up with the best price may be bit harder.
Carbon taxes are much cleaner and have low transaction costs, but the benefit of having some kind of auction mechanism allows the market to price it. Cap and trade will be a failure because there has been too much politics introduced. Special interests win again.
The problem is who sets the price and what is the process used to set it. It’s clear that the positive aspects of a warmer planet are not being included in the equation and it seems that mankind’s well being is secondary to Gaia’s.
Noting that “externalities” and “internalities” are not natural with economic transactions….they are bounded by fluid boundaries, these boundaries subject to politics and power, knowledge and science, myth and associated religion; in short, all of human strengths and weaknesses.
I think if politicians wanted to do something for the externalities in this country, they could have pushed a gas tax using the idea of a national security issue. I am probably over-estimating the American people, but I think defense is something anti-tax Americans respond to. Republicans all talked about importing less oil, even though their solution was “Drill, baby, drill!”
Now, with the politicization of the climate issue, I think that no real majority of American’s will ever be convinced to accept taxes on carbon.