Shut Up and Eat Your Spinach
As per my prior post on this subject, cap-and-trade advocates are beginning to promote the argument that it will cost nothing to force hundreds of millions of people in the U.S. to use less gas. Ezra Klein, citing a post by Grist contributor Dave Roberts, says this of cap-and-trade:
This, in the short-term, makes gasoline more expensive. That’s the point of it. There are a variety of ways to compensate people for making gasoline more expensive, but gasoline will still be more expensive. That’s going to make cap and trade a tough sell. But that doesn’t mean it will be bad for the economy, or bad for people in general. Money not spent on gasoline is money spent on other things. As carbon-intensive products become pricier, other products will become cheaper. Lots of good stuff will happen, and my sense is that a move away from oil will actually entail significant lifestyle benefits. That’s why I talk about transit and food policy a lot. Transit is awesome. Not sitting in traffic makes people happier. Riding on subways is fun. Biking is a joy. Meat consumption is another major carbon issue, but here again, a diet where red meat was relatively more expensive and vegetables and grains relatively less would be healthier for us. It would mean fewer cardiovascular surgeries and less time watching loved ones breathe through a tube. It would free up health care money to spend on other things.
It is unclear whether he means that the direct economic costs of rationing emissions (what cap-and-trade means) minus the costs that would otherwise be caused by global warming will be zero or lower, or simply that the direct economic costs of rationing emissions will be zero or lower, but I think the natural reading of the paragraph is the latter. Certainly the latter is the (approximate) position of the linked Dave Roberts post with which Ezra says he agrees. Dave Roberts says that “even the pessimistic economic models shaping debate in D.C. show a very small hit to the economy from a cap-and-trade system”. In order to support this, he links to a study by those cap-and-trade pessimists, the Environmental Defense Fund.
This whole argument is nonsense. In my prior post, I link to various studies by the actual experts (many of them compiled by the IPCC) that go through the math in some detail. But consider this at a common-sense level: you are forcing people, through rationing, to use something like 80% less of a substance that they choose to use because they believe that it creates net economic utility (prior to externalities) as compared to any available alternative. There is a respectable (though as I’ve argued in many articles, incorrect) argument that the negative externalities outweigh all those private benefits, but it’s crazy to assert that the private benefits are zero, which is what Klein and Roberts are saying. Call it economic denialism.
You are left arguing this idea of “raised consciousness”: if only these fat, lazy, Whopper-eating, SUV-driving proles could be forced to ride bikes to work, eat different foods and take trains on vacation, then they would realize that they are better off. They’re just too stupid to know it.
It’s not stupidity. It’s inertia. Most people just live their lives on automatic.
— Consumatopia · Jul 5, 08:54 PM · #
Can the people on this blog please stop asserting that everyone who disagrees with them is insane? It really doesn’t help your (various) arguments.
— Miles · Jul 5, 09:08 PM · #
Jim,
Actually, there is a totally respectable school of thought that says that, in certain cases, mandatory reductions of emissions or technological changes can lead to greater economic efficiencies and reduced real costs.
The patron saint is probably Gregg Easterbrook, with his ‘eco-optimist’ tract A Moment on the Earth.
As a really simple For Instance, imagine that a carbon tax is put in place. Or, a auction cap-and-trade system. Some or all of the raised funds are put into federally-funded research. Some scientist, somewhere, funded by this income, comes up with some magic discovery of a fuel source which can run our cars, power our iPods, and tastes great with both fish and red meat! And, even better, it’s really cheap to make, much cheaper than oil at even $30 a barrel.
Haven’t we just made the “direct economic costs of rationing emissions…zero or lower”?
Less space-agey, of course, is Easterbrook’s repeatedly-told story of how an industry, after fighting tooth-and-nail against mandatory emissions reductions, finds that the economics savings realized in meeting the required emissions reductions far outweigh the costs of implementation. Absent the push from government action, those reductions would never have been realized, but it was better for the corporations, economically, to be forced to take the action.
What do you think?
~David
— David Samuels · Jul 5, 09:43 PM · #
Don’t forget, Jim: The proles need to bike to work so the elites can jet off to Aspen and talk about how terribly wasteful flyover country is. The hypocrisy of it all would be stunning, if it wasn’t so common place.
— Sonny Bunch · Jul 5, 10:50 PM · #
I’ve had several pretty involved posts over at the comment thread for Dave Roberts’s post, and I think it might be useful to clarify the debate by distinguishing between the different arguments that Roberts and Klein are making:
1. Action to fight global warming will goad people into making lifestyle choices that are good for them anyway, offsetting any economic costs.
I agree with you that this is complete bunk. In general, our best indication of what people desire for their personal well-being is their own spending. This shouldn’t be negated by vague suspicions from people who prefer a different lifestyle that if only everyone were coerced into behaving the same way, they’d acknowledge the evident superiority of a low-carbon existence. (All the talk about mass transit as a centerpiece of the anti-climate change effort also betrays a lack of quantitative intuition — I’ve been over the negligible likely effects of increased rail here.)
2. Our dependency on oil leaves the economy too vulnerable to oil price shocks. By eliminating this source of economic weakness,
This one has a sliver of possibility. You can make an economically cogent argument that high oil dependency causes oil price shocks to have negative macroeconomic consequences that go beyond the private cost of oil to each consumer. At best, however, this is a justification for increased taxes on petroleum products, not high carbon prices, whose effects are actually much larger for areas like electricity.
3. Replacing fuel spending with spending on low-carbon industry and infrastructure will “keep money at home,” generate new jobs, have positive multiplier effects, etc.
This is a pretty transparent collection of economic fallacies that can easily be used to justify almost any wasteful public spending.
4. Public spending and high carbon prices will speed the development of potentially valuable alternative energy technologies, which may benefit the economy even ignoring the effects of climate change.
This is the other point with a sliver of economic coherence. Underinvestment in private research is a well-known market failure, and if you posit dynamic learning with spillovers in technology, you can certainly justify subsidies for infant technologies. (I think that this is particularly appropriate for technologies like solar power that have to meet challenging cost thresholds before they become viable at all.)
As with point #2 above, however, the problem is that this is not a good argument for a high carbon price. High carbon prices lead to many kinds of economic losses that are not related to technological development in any way. Instead, at best this is an argument for greater public research spending and for targeted subsidies to industries like solar power. Admittedly, this puts the government in the business of “picking winners,” but that’s actually better than the massive collateral damage that’s implicit in using a carbon tax as a means to technological development.
——-
So that’s the score: two very bad points, and two points that might justify some kind of public policy, but not the specific policy being advocated.
As I’ve made clear before, I do think we do need a fairly stringent carbon tax, but I think that this debate is inseparable from the debate over the damages of climate change. Jim and I disagree not because I adopt the fantasy position that carbon consumption has no private benefits whatsoever, but because we have very different ideas about the economic damages from climate change — and that’s where the debate should be.
— Matt Rognlie · Jul 5, 11:23 PM · #
_In general, our best indication of what people desire for their personal well-being is their own spending. _
Maybe everyone around here is just a rationalistic superman (which wouldn’t really surprise me), but at least among the actual fallible human beings I know, regretting spending money or time on something is actually fairly common. I know I do it all too often, and it would do it more if I had more money. Sometimes people do things because they’re easy and predictable, not because it’s best for their well-being. There would be a lot less alcohol, tobacco, and television consumption otherwise.
A person’s spending, for most people, is the best guide to their maximized temporary comfort.
Would I advocate the government force people to be disciplined? No. But if there is something else serious at stake, I don’t think consumption habits should be taken too seriously as a revealed preference.
— Consumatopia · Jul 6, 12:25 AM · #
Consumatopia:
It’s not stupidity. It’s inertia. Most people just live their lives on automatic.
Sure, to a degree. But I assume you agree that just because Ezra Klein (or whoever) bikes to his public-interest job and then takes the Metro to a Dupont Circle bar to discuss crime statistics over drinks with his articulate and intelligent friends, that doesn’t exempt him from this observation.
Which leads directly to you later comment…
Would I advocate the government force people to be disciplined? No. But if there is something else serious at stake, I don’t think consumption habits should be taken too seriously as a revealed preference.
I think this means that you would advocate forcing people to act in a manner that is functionally identical to “more discplined” in the service of the higher good of avoiding future damages from global warming.
Miles:
Can the people on this blog please stop asserting that everyone who disagrees with them is insane? It really doesn’t help your (various) arguments.
I didn’t assert that Ezra was insane, but that his argument in this post was nonsense. I think that is very different. I subsequently defended this assertion in some detail.
David:
I’ve advocated spending tax money on just such research. Money is fungible, however. There is no more reason to tax carbon emissions to pay for this research (and by the way the implicit tax from the L-W proposal is about two orders of magnitude more than I have adovated spending) than there is to tax toy gun sales to pay for the Department of Defense.
Sonny:
I agree that this is a hige political blind spot for emissions reductions advocates.
Matt:
Thanks. I agree that you have highlighted the content of our agreement and disagreement.
— Jim Manzi · Jul 6, 01:33 PM · #
that doesn’t exempt him from this observation.
Correct. I’m not saying Klein’s way is better, I’m saying that most people, especially including myself, are guided more by inertia than conscious choice. The Internet, by redirecting our consciousness to the world of bits, only makes this worse.
I think this means that you would advocate forcing people to act in a manner that is functionally identical to “more discplined” in the service of the higher good of avoiding future damages from global warming.
There’s a difference between “more disciplined” as a goal in and of itself and discipline in the service of a higher end. I’m not arguing discipline is good, I’m arguing it’s not necessarily bad, therefore it’s an acceptable price to pay for some purposes.
Economics and human psychology are uncertain enough that it isn’t possible to know whether movement away from fossil fuels would leave us richer or poorer. Unlike ecological uncertainty, there’s no reason to be biased towards non-interference in human affairs, because while the climate is naturally stable when left alone (otherwise life could not evolve), human economics and personalities are naturally unstable and unpredictable. Our behavior is dominated by a strange sort of inertia in which we are very attached to the path we are on, even though we have no idea where it will lead. A second-order conservatism in which we become attached not to stability but to meta-stability—we insist that things keep changing exactly as they changed in the past. This is a self-undermining insistence. While it is not the government’s job to eliminate this inertia, we should not be in the business of nurturing it.
And given the situation with oil prices, people are starting to realize that big changes are going to be necessary in any event, and once we start transforming our economy, we might as well opt for green solutions (solar, nuclear, wind) instead of dirty ones (liquid coal).
I feel towards “it’s crazy to assert that the private benefits are zero”, the way you feel towards “the optimal carbon tax is certainly not zero”.
— Consumatopia · Jul 6, 04:06 PM · #
You are left arguing this idea of “raised consciousness”: if only these fat, lazy, Whopper-eating, SUV-driving proles could be forced to ride bikes to work, eat different foods and take trains on vacation, then they would realize that they are better off. They’re just too stupid to know it.
What I can’t understand is why people tend to be so much concerned with the fairness and decorum of asking this question (whether they would be better off) than what the actual answer to the question is. I find this is a conservative preoccupation, being more worried about whether they’re being dissed by liberals than about the actual substantive value of a particular policy prescription.
— Freddie · Jul 6, 06:32 PM · #
Freddie, while there may be conservatives for whom that is true, you aren’t really going to deny that Jim Manzi worries about the actual substantive value of policy prescriptions, are you?
— Consumatopia · Jul 6, 07:52 PM · #
I have a big piece due tomorrow and am leaving town for a week the day after that, so I may not get a chance to respond to this at any length. But a few quick notes.
1. As you either know and are being deceptive about, or don’t know (i.e., didn’t even click the damn link), Environmental Defense Fund did not do the study in question. All Nat Keohane did is aggregate results from the top seven most respected economic models (a list of which are available in the appendix of the paper). He is reporting their results, not generating results of his own. The consensus even among the conventional modeling crowd is that the economic impact of climate policy will be tiny.
2. The notion that liberals secretly just want to tell people how to live, and construct baroque arguments and theories about climate in order to cloak that fact, is an article of bedrock conservative faith but, as far as I can tell as an actual liberal who knows many other actual liberals, has virtually no basis in reality. It’s part of the faux-populist comic book the conservative movement has written over the last several decades.
3. This — “you are forcing people, through rationing, to use something like 80% less of a substance that they choose to use” — is almost comically demagogic. In the real world, what you are doing is incentivizing efficiencies and alternate energy sources that will provide the same substance in a more ecologically friendly way, in a process that’s going to happen incrementally over the course of 40 years. The notion that anyone is proposing to approach U.S. citizens and simply yank 80% of their stuff away is, or ought to be, beneath you.
3. I’ll have much more on computed general equilibrium models later, but for now: I’ve talked to about 10-15 economists over the last couple of weeks, and I can’t find a single one who will stand behind CGE models as predictive tools. No one has ever done a comprehensive study on which models work and which don’t, and why — like, say, a scientist might want. They have a roughly 100% failure rate at predicting events, and in particular have grossly overstated the cost of environmental regulations (the sheer size of their failure on SO2 trading alone should have disqualified them). They have largely been phased out of the economics world in favor of statistical and disequilibrium models. The one place their influence persists is in the public sector; no one in the private sector, where people reason to care about predictive accuracy, uses them. And they are only capable of running when fed a serious of grotesquely simplified assumptions that do not remotely correspond to how the world actually works (most damningly, they are not capable of adequately accounting for efficiency).
4. Relatedly, I’ll make the sociological observation that the non-denialist do-nothing crowd for which you are the champion bases its opposition to serious action almost entirely on theoretical abstractions from economics. Out in the real world, there are dozens and dozens of case studies from people and businesses that have driven down their CO2 emissions while increasing their productivity, at a net profit. Do I believe my lying eyes or your precious DICE model? I choose my eyes.
— David Roberts · Jul 7, 02:16 AM · #
Shit. Reading that over it’s rather more snotty than it needed to be — I apologize and plead severe exhaustion and deadline dread. Also, everything in #3 should be read with about about 42 degrees of confidence shaved off the tone. What I don’t know about models could fill volumes.
I think where we probably disagree in practice is about the potential for efficiency — whether the downward trend in carbon intensity can be accelerated. I think it can, and that investments in doing so will have handsome returns. Efficiency will be the cheap alternative in the short term, while renewables are scaling up and driving costs down. I assume you’ve seen the McKinsey report and have something to say about it. One other thing, and then I’m really going to stop procrastinating: I tend to think you (and lots of others) focus too much on the price, and on federal legislation. I agree a price on carbon alone could be a net hit on productivity, but it won’t be a price alone. What will make the difference is things we can do to make it easier for the market to transition, and lots of those policies will be hashed out in states and cities. I guess from your perspective that’s a bunch of counterproductive meddling, but if the energy market is ridden with market failures, information bottlenecks, misaligned incentives, and perverse subsidies, then some of those flaws can be addressed. I think it will happen from the bottom up. The number of smart, enthusiastic, geeked-out people converging on this problem, from the private and public sector both, belies your pessimism.
— David Roberts · Jul 7, 05:25 AM · #
Dave:
Don’t worry about it – I often long for some kind of a “worldwide delete” key about 1 minute after writing something.
I’ve generally relied on the IPCC for impact projections. Are you saying that you reject their competence in this area? If so, are you asserting that the economic impact of proposed emissions mitigation policies is unknowable or knowable by you (to a practically-useful degree of certainty)? If you assert that they are knowable by you, by what methodology have you determined which projections are accurate?
— Jim Manzi · Jul 7, 11:07 AM · #
Consumatopia:
Economics and human psychology are uncertain enough that it isn’t possible to know whether movement away from fossil fuels would leave us richer or poorer.
You may be shocked to fnd that I agree exactly with this statement. I believe we operate in a sea of ignorance (“we” as individuals and “we” as the human species). This is the real argument for markets, and an important part of the argument for human freedom. As a general rule, allowing people to try lots of things so that, over time, we can learn what works through trial-and-error is important because of it. Obviously, in practice, there are many exceptions, and no bumper-sticker argument like that is a comprehensive guide to anything, but I suspect you get my drift.
I see that this contradicts the statement that you have called me out on here:
I feel towards “it’s crazy to assert that the private benefits are zero”, the way you feel towards “the optimal carbon tax is certainly not zero”.
If I had been writing more rigorously, I would have said something like “I do not accept the argument that any policy analyst is better able to decide for all of these people what decisions would make them better off than they are themselves though collective experimentation.”
— Jim Manzi · Jul 7, 11:21 AM · #
I was born and raised in New York City, where I rode the subways to school and/or work for 11 years.
Today, I live in the Sun Belt, where I drive almost everywhere.
I feel qualified, then, to laugh when Ezra Klein suggests that riding the subway is “fun” or “a joy”! No, it wasn’t hell on Earth, either. It was a perfectly okay, fairly reliable, acceptably affordable way to get from one place to another, but that’s ALL it ever was or ever could be.
Right now, I drive about 30-40 minutes to and from work each day in a comfortable airconditioned car. I used to spend about 30-40 minutes commuting to work/school by subway. There’s no time saving either way. The car is a bit more comfortable and allows me to listen to music of my choice. The subway allowed me to read the newspaper (albeit while standing, and trying not to fall over), and saved me the trouble of seeking a parking space.
If I had a decent commuter rail system nearby, I’d probably use it, at least occasionally. But I can’t and won’t kid myself that it’s “fun”! It’s just another transportation option, with pluses and minuses.
— astorian · Jul 7, 07:13 PM · #
As a general rule, allowing people to try lots of things so that, over time, we can learn what works through trial-and-error is important because of it.
That’s a good point, and perhaps for that reason the Michael Pollan/Wendell Berry strategy of individual choices leading to government action is the way to go.
— Consumatopia · Jul 8, 02:43 AM · #