Your Fist and My Nose

Megan McArdle approvingly references Matt Yglesias’s post on limiting CO2 emissions. She cites these key paragraphs:

It’s worth going back to first principles on markets, property rights, and air pollution. To have a functioning market, you need to have property rights. And property rights need to be defined in some way or other. This includes taking some view of the relationship between property rights and particulate emissions into the air. On one conceivable conception of property rights, the Sierra Club could buy up a field somewhere and then assert that its property rights over the field give it the right to exclude any form of air pollution from wafting into its field. On that definition of property rights, which is the one “the Greens” would favor if we really wanted Stone Age economic conditions, industrial production would swiftly become impossible. You couldn’t so much as warm yourself with a fire before neighbors were accusing you of tresspassing for depositing microscopic soot particles in their lawns.

So obviously we don’t define the property rights that way.

Another way would be to say the air is just a kind of free-for-all. You just dump however much of whatever you want into it and forget about it. This is, needless to say, convenient for people who are producing a lot of pollution. But it’s not so convenient if there’s acid rain falling on your roof. Or if smog is wrecking your view. Or if you develop asthma as a result of poor air quality. Or, indeed, if your gets drowned in a flood or your fields go dry or your drinking water vanishes because of climate change. A third way is a find a middle ground. You’re allowed to emit some sulfur dioxide into the atmosphere so that industrial production can continue, but an unlimited amount so as to prevent the acid rain situation from getting out of control. The “green” proposal for carbon dioxide is essentially similar to this. It’s important, economically, that we allow there to be some carbon emissions. But it’s also important that we not have unlimited levels of greenhouse gases making the world hotter and hotter and hotter and hotter with all sorts of deleterious consequences for people’s lives.

This thought is evidence of a reasonable disposition, and is a superficially reasonable argument; but if we want to go “back to first principles”, we ought to go back to actual first principles. Yglesias seems to have an unarticulated (understandably so in a short post like this one) normative premise that if faced with the seeming logjam that a literal interpretation of “you can’t harm my property at all without my OK” would place on any economic activity, then the correct criterion for preventing these potentially unending claims of tortuous action is some kind of reasonable balancing of the benefits the action generates for the alleged transgressor as compared to the costs this action imposes on the property owner.

Of course, some version of this dilemma applies to more mundane situations like a neighbor’s campfire dumping particles on my hut, and so it should not be surprising that there is a complicated set of principles that bear on this issue going back as far as the misty origins of the common law. As one example, there is the idea that the first person to begin using a previously-unclaimed natural resource thereby creates a property right in its use that would provide at least some legal protection. This proceeds from the idea, articulated by not originated by Locke, that when I “mix my labor” with a previously-unclaimed natural resource, then I own it. Bove v. Donner-Hanna Coke Co. [1932] is a classic case of a court holding that an entire industrial area had an effective right to continue to emit increasing amounts of particulate emissions into the air because of this known historical behavior.

None of this is to say that legal doctrines exist that allow us to reconcile these competing interests effectively, or that I have shown that there is not some difference of kind rather than degree between these cases and an action with literally global scope, or that these principles are not just cover for power politics and so on; but I do think that any serious attempt to address the quandary that Yglesias illustrates has to confront this huge intellectual heritage.

But let’s grant the premise for a moment. On what basis would the hypothetical “we” draw the line that Yglesias proposes between (in my words) “enough allowable emissions to permit a healthy economy” on one hand, and “not so much that we trash the planet” on the other?

To a first-order approximation, there is exactly one action that creates the carbon dioxide emissions in the contemporary U.S. that would be subject to restriction: burning fossil fuels. Let’s start with the point that it is entirely artificial to isolate the hypothesized negative externality of global warming created by this action from all of the other positive and negative externalities created by it. Burning fossil fuels adds CO2 to the atmosphere and thereby increases the risks from global warming, but these fuels create social utility by generating energy at lower direct costs than alternatives, but the US needs to bear a huge military burden to protect oil supply chains in unstable geographies, but a car-based economy allows more people to satisfy their desire to live in detached homes with yards, but roads are subsidized to do this and it crates excess congestion, and so on and so on, ad infinitum.

How could we possibly weigh all of these against one another? A recent review of such analyses by European academics finds that the estimates for the external costs per kilowatt-hour of, for example, coal range from about .01 cents to $10. Think about this numerically. The cost of a kilowatt-hour in that you would buy for your house is on the order of 10 cents, so incorporating the external costs would lead to a price increase of somewhere between 0.1% and 10,000%. For all we know, prospective global warming damages might be a trivial or a dominant component of the external effects of burning fossil fuels.

Since he focuses only on global warming impacts of burning fossil fuels, what seems to be implied in Yglesias’s argument is either that this is false uncertainty, or that the worst case for the prospective impacts of global warming is so awful that that it trumps everything. But as I have argued many, many times, there is no good evidence for this proposition.

So, while his argument sounds like (and at some level is) a sensible way to think about the issue, he has neither considered alternative legal principles other than an administrative state that sets allowable emissions limits through supposedly utilitarian calculations, nor the (in my view, more important) issue of providing evidence for the implicit premise that prospective global warming damages are the dominant external effect of the actions that create carbon dioxide emissions.