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July 28, 2008

Damned if you do

Sorry, but isn't the whole point of these schemes to increase the price of energy consumption? And that being the case, aren't "brown-outs, high fuel taxes and lost jobs" not a bug but a feature of our new green zeal?

In other words, if our goal is to actually reduce carbon emissions, isn't the better plan the one that actually reduces carbon emissions - with the attendant consequences - and not the one that simply transfers wealth from some Canadians to other Canadians according to the amount of energy consumed?¹

Look, I know I sound partisan on this one, but I think that any discussion of the relative merits of the two main parties' environmental plans has to begin with a recognition that no-one is actually serious about reducing carbon emissions, because no-one is prepared to confront the economic cost of actually reducing carbon emissions, and that therefore it's not just the Tories who are trying to have it both ways - it's everyone.

(And that doesn't mean both Liberals and Tories. It means you and me.)

¹ [UPDATE (17:42 EDT)] I should add that, like most free-market economist types, I do support a carbon tax in the abstract as the best way to price the negative externality of carbon emissions. Of course even the most perfect carbon tax is an imperfect mechanism, since (a) it imposes what is, ultimately, an arbitrary price per ton, and (b) it results in an unearned boon to government coffers. A more tailored carbon tax would impose a cost on any carbon-producing energy use, whether individual or corporate, and would tie its revenues to green-related programs such as alternative energy research or implementation - as opposed to social programs for target constituencies. Such a tailored carbon tax would, I think, be the fairest and most efficient way to increase the price of emitting carbon - and consequently to reduce carbon emissions.

But such a tax would be pretty considerably regressive - if that sort of thing bothers you. That sort of thing obviously bothers the Tories, not least because they would be absolutely pilloried in the press if they tried to implement such a scheme, notwithstanding the fact that it's probably the best of the options. That sort of thing also bothers the Grits, which is why they've tried to avoid the consequences by applying the proceeds to social programs - with the result that their plan is essentially a tax on the rich, where the 'rich' is defined as basically 'anyone who lives in a suburb.'

What neither party can avoid is the fact that when you take a negative externality that has not been priced by the market (or, to be accurate, has been priced at a vanishingly small value) and assign to it a significantly higher price, then - however you implement that price-assignment - someone has to bear the cost of the new price. In other words, if (a) emitting C02 has been 'free' (or exceedingly cheap) and (b) the government imposes a high price on emitting C02, then emitting C02 is going to cost more. Sound obvious? Then consider that, as noted above, everyone in Ottawa is doing their damndest to avoid that obvious consequence.

But you can't. There's no such thing as a free lunch. We as a society appear to have decided that the market price of emitting C02 is too low, and that it is imperative that we assign a more 'accurate' price so as to prevent the anticipated consequences of continued low-cost emitting. That's fine; that's a policy decision. But the consequence of that decision is that the price of everything related to C02 emissions will rise. And you know what's related to C02 emissions? Everything. Not just gas for your car; not just coal for the power plant. Everything. The food you eat; the clothes you wear; the phones and computers and iPods you use; the tv you watch; the newspapers you no longer read; the toys you buy your kids; the shampoo that makes your hair shiny; everything; everything; everything.

And that - as I said at the beginning of this post - is the point. The market says emitting carbon is cheap, because people do not - or have not, until recently - valued it very highly. Some say that's because carbon emissions are a free-rider problem, in that everyone can contribute to carbon emissions while no-one really has to pay the price, individually. But that's not really true; if the claim is that carbon emissions degrade our environment to anywhere near the degree claimed by the environmental set, then clearly we all pay the price for carbon emissions. And yet confronted with the choice between consuming that next unit of energy - in the form of pretty much anything we might consume - or foregoing that consumption to preserve the environment in its current state, we all, in the aggregate, repeatedly and overwhelmingly opt to consume. Because we value that unit of pretty much anything more than we value the risk to the environment.

But now that aggregate price-setting has been deemed inefficient, and the low cost of emitting C02 has been labeled a 'market failure,' which is what happens when a few people disapprove of the way most people are acting. And so the state is stepping in to say "sorry, everyone, but you're wrong about carbon emissions, we know better and we know that emitting is in fact more expensive, so we're going to charge you for it." Well, fine; as I said before, that's a policy decision, and if it's a bit arbitrary for the government to charge for something it doesn't own, well, so is income tax.

But - just in case you haven't yet caught the theme of this rant - you can't jack up the price on carbon emissions without making carbon emissions cost more. There's no way out of it. And that, for the thousandth time, is the point. If we were left to our own devices, we wouldn't be that bothered about emissions; innately, and in the aggregate, and every time we buy gas or milk or a toothbrush, we say: "buying this toothbrush is more valuable to me than the risk of environmental degradation that can be attributed to the emissions created by the manufacturing and transport of this toothbrush." But we've now decided that it's not up to us - that we don't know what's good for us, that we don't value our environment the way we really should value our environment - which is to say, the way certain other people value the environment. So we're in the process of allowing the government to make carbon emissions a whole lot more expensive, so that the next time we go to buy a toothbrush and the toothbrush costs $6.00, we'll say: "gee, maybe I don't need a new toothbrush right now - maybe I can get by for another month or two on the old one, rather than encourage the risk of environmental degradation created by the manufacturing and transport of this new one."

That's fine; it's a policy decision, and it might even be the right one. But no matter how many child-tax credits you fund, no matter how much you claim that the carbon-tax will be revenue neutral (for the government - not for any individual taxpayer), there's no escaping the fact that poor people spend proportionately more on toothbrushes than rich people do.

If that sort of thing bothers you.


Posted by David Mader at 01:59 PM | (0) | Back to Main

July 24, 2008

Decline and Fall of Paul Martin, Jr.


Although to be fair, Martin did at least win an election.

Posted by David Mader at 10:01 PM | (0) | Back to Main

July 15, 2008

An Afghanistan Surge?

John McCain is calling for one. From his speech today:

It is precisely the success of the surge in Iraq that shows us the way to succeed in Afghanistan. It is by applying the tried and true principles of counter-insurgency used in the surge -- which Senator Obama opposed -- that we will win in Afghanistan. With the right strategy and the right forces, we can succeed in both Iraq and Afghanistan.
McCain calls for, among other things, a new unity of command in Afghanistan, not only within the American forces operating there but among all NATO countries. So here's my question: What's Canada's take on an Afghanistan surge? Do we have the troops to contribute to a boots-on-the-ground increase? If not, are we prepared to work with American forces in other respects, such as unity-of-command, in furtherance of a surge strategy? Do Canadian military commanders believe that a surge is possible? Promising? Useful? Necessary? And what do the parties think about the idea - would the Grits support a surge strategy if it offered the promise of an early (or earlier) withdrawal? Would the Tories support a surge notwithstanding the relative unpopularity of the Afghanistan war?

I'd love to see someone - say, an intrepid reporter at a prominent weekly newsmagazine - put these questions to the folks with the answers.

Posted by David Mader at 03:39 PM | (0) | Back to Main

July 09, 2008

Yes, Yes, For Goodness' Sake, Yes

Build it.


Posted by David Mader at 12:58 AM | (0) | Back to Main

July 08, 2008

What War With the Press?

The press loves Harper!

Of all the leaders, only Stephen Harper - the talented but curiously neglected Canadian prime minister - is able to point to a popular and successful record in office.

Some will regard it as alarming that, in current times, world leadership should rest with Canada. But the Canadian Tories are a model of how to behave during a downturn.

They have kept spending in check and reduced taxes. They are playing their full role in world affairs, notably in Afghanistan.

Rather than canting about saving the world (Mr Harper, in his quiet and courteous way, is a Kyoto-sceptic) they have addressed themselves to curing remediable ills and, above all, to putting their own affairs in order.

If the rest of the world had comported itself with similar modesty and prudence, we might not be in this mess.

Sure, it's the British press, and sure, the praise is somewhat tainted by faint damnation - but it's something!

Posted by David Mader at 01:49 PM | (0) | Back to Main

July 07, 2008

Let's Think This Through

From the Guardian:

Britons will today be urged to make saving food as important as saving energy, with the publication of a government report which reveals that more than 4m tonnes of food are wasted each year at a cost of hundreds of pounds per household. . . .

On his way [to a G8 meeting in Japan] yesterday, the prime minister referred to the report: "If we are to get food prices down, we must also do more to deal with unnecessary demand - such as all of us doing more to cut food waste which is costing the average household in Britain around £8 per week." . . .

Referring to the UK specifically, the report says the present crisis hits the poor hardest. The poorest 10% of UK households spent 15 % of their outgoings on food in 2005-06, while the richest 10% spent just 7%.

You hear this sort of statistic all the time - that the poor spend proportionately more of their income on necessary goods, such as food, than do the rich.

Well, what can be done about it? There are three options. (1) The rich can spend more of their income on food. After all, if the problem here is simply that the poor spend proportionately more, an increase in food purchases by the rich to a level equal to 15% of income would resolve the disparity. But of course that solution doesn't really jive with the PM's call for a reduction in "unnecessary demand." (2) The poor can spend less of their income on food. After all, the rich get away with spending only 7% of their income on food; the poor are over-spending by 8%! But somehow I doubt this sort of Swiftian response is what the PM has in mind.

So what's the third option? If the fact of a disparity in proportional food consumption is really a problem, and if it's a problem that cannot be properly fixed by either (a) increasing food consumption among the rich or (b) decreasing food consumption among the poor, then we must be focusing on the wrong part of the equation. The problem, remember is that the relative proportion of food consumption to income, as expressed by X/Y, differs among rich and poor. But if changing food consumption (X) doesn't work, that only leaves one option: change Y.

Y, of course, is income. It turns out - you may want to sit down for this - poor people have less income than rich people. It further turns out - this will really turn your head - when poor people and rich people spend exactly the same amount on food, that spending consumes more of a poor person's income than a rich person's income. So again: if the fact of a disparity in proportional food consumption is really a problem, and if it's a problem that cannot be properly fixed by either (a) increasing food consumption among the rich or (b) decreasing food consumption among the poor, then the only solution is to achieve parity not in food consumption but in income.

There is a name, of course, for a system of government that seeks to achieve income parity among its populace, although for the moment that name escapes me. But if, like me, you think that this sort of government is not in fact the solution, then there must be something wrong with the question.

And there is. Remember, the basic assumption here is that there is a disparity in proportional food consumption between rich and poor, and that this disparity is a problem that must be fixed. In fact, the disparity is nothing more than an economic fact - a state of affairs that will always exist when there is more than one income level.

Think of it this way: imagine a basket of food goods that, if consumed properly, will sustain an individual in good health for an entire year. Imagine that a poor person and a rich person both buy this basket of food goods, and that neither buys any other food goods for the rest of the year. Result: both rich and poor are sustained in good health, and both have spent precisely the same amount of money. But - the basket cost the poor person 15% of his annual income, while the same basket cost the rich person only 7% of his annual income.

Is this really a problem? It may or may not be fair - we haven't determined why the rich person is rich and the poor person poor, after all. But is it a problem that must be fixed by the government? Remember: the result, as regards health and fitness, is identical in both individuals. The poor person not only has all the food he needs to remain healthy for the year; he has exactly the same food as the rich person. The only difference is that he has less of his income left over to spend on things other than food.

Ah, you say, but those other things matter as well. And it's true! The poor person, like the rich person, must also pay for housing, and health care, and education, and transportation to and from work - he must pay, in other words, for all of those things that allow him to sustain himself as a healthy individual. But in each of those cases we can posit a 'basket' similar to the basket of food goods described above, and in each case we're left with the same result: poor and rich spend exactly the same amount and receive exactly the same result, but that result costs the poor person proportionately more of his or her income.

Now some people may be so poor that they simply cannot afford the aggregated baskets of goods that allow them to sustain themselves as healthy individuals. Perhaps they can afford the basket of food goods, but not housing; perhaps they can afford housing, but not food goods. It seems to me that an inability to afford the most basic basket of necessary goods - that is, a basket that includes the most limited set of goods that allows an person to sustain him or herself as a healthy individual - is a pretty good indicator of absolute poverty.

But what about those who can afford the basic basket of goods, but who are left with very little besides? Surely theirs is an unenviable lot; surely, as a matter of charity, we who are more fortunate - we who have more left over afterwards - may share our fortune. But unless we are subject to a forced redistribution of wealth, the fact of statistical disparity will always remain.

So remember that, the next time you see a statistic like the one quoted above, to the effect that the poor spend more of their income on X than the rich. That will be true always, so long as there is any variation, of any degree, between the poorest and the richest members of our society. And remember that unless it is to mandate increased spending by the rich or decreased spending by the poor, the state has only one mechanism to 'correct' the statistical disparity.

It's socialism.

Posted by David Mader at 01:06 PM | (2) | Back to Main