"Liberal-tarian" vs. "Progressive" Carbon Regulation: Why Matt Yglesias Should Care About Ed Glaeser's Point

As always, I’m a couple of days late to the argument, but I wanted to make a point about the reaction Matt Yglesias has to a post by Ed Glaesar.

Matt’s basic response is: yes, “big government” frequently serves business and other special interests, and where it does libertarians and progressives can make common cause. But where it doesn’t, they can’t, and there’s no particular reason to think that libertarianism is per se more egalitarian than progressivism, nor any particular validity to the implicit argument that progressives favor “big government” as such, as opposed to favoring egalitarianism and being willing to use government as much as necessary to achieve their goals.

I think that gives short-shrift to a variety of arguments that principled advocates for small (and, more to the point, as-local-as-possible) government make: for example, that the further government is from the people, the more susceptible it is to capture by special interests; for another, that the liberal welfare state produces a “new class” of bureaucratic managers and social-service providers who then become the primary interest group to which these liberal programs are responsive, rather than the people they are intended to serve. There are, of course, progressive responses to these same arguments (are we to believe that state governments are actually less corrupt than Washington?), but they deserve a better rebuttal than “underpants gnomes.”

But I think these questions are better debated with reference to a specific policy question than in the abstract. So I’ll pick carbon regulation.

Posit for the sake of argument that we need to reduce carbon emissions. There’s a debate about whether we should tax carbon, ration carbon through a cap-and-trade scheme, have the government invest in alternative energy technologies, or what-have-you. What would a “small-government egalitarian” think about these various alternatives?

Well, let’s look at the alternatives from the perspective of which is most likely to be deformed by special interests. It’s pretty easy to see how a big government investment in alternative energy could become a boondoggle giveaway to connected business interests that does nothing to reduce carbon emissions. Meanwhile, a cap-and-trade scheme is often marketed as being preferable to a tax on carbon because of the additional business associated with the “trade” side of the scheme, and because the existence of a market in emission permits and offsets would ensure the most efficient allocation of the “resource” of net carbon emission. But, pretty much by definition, these very same arguments about cap-and-trade are arguments why a small-government egalitarian would be skeptical of the scheme – because it would be readily subject to capture by Wall Street interests among others. It sounds like the most “libertarian” solution to the carbon problem, until you realize that every aspect of this “market” is the result of specific regulatory decisions by the government, and that these will undoubtedly be subject to special interest pressure.

I suspect that a small-government egalitarian would say that the best solution, from the triple perspective of trying to avoid regulatory capture by special interests, maximize personal freedom and autonomy, and actually reduce carbon emissions, is to slap a tax on carbon and return 100% of the revenue raised to the people, ideally in the form of a per-capita birthright dividend, something I speculated about here by analogy with Alaska’s Permanent Fund. The effects of such a tax-and-distribute scheme would certainly be egalitarian. They would also clearly limit the degree to which government could grow as a consequence of the tax; obviously, there’d be some government staff-up to administer the tax, and more staff to come up with the formulas for how to calculate net emissions, and so forth, but we’d still be talking about something much closer to SSA than to the Pentagon. But most important, the opportunities for special-interest capture of the program would be severely limited because any failure to tax a particular source of emissions would result in a lower dividend – which is something the voting public might notice, particularly if an opposition politician brought it to their attention.

Matt might say that, if such a plan makes the most sense and is the most politically viable, then progressives should favor it, and there’s no reason to drag in a spurious “small-government egalitarian” ideology as a foil. But forgive me if I question the proposition that any political group is actually purely rational, and actually acting entirely out of concern for the common good. People who are, fundamentally, more distrustful of big government because they are convinced it will inevitably become the tool of special interests against the common good will be more alive to the kinds of things that can go wrong with big-government solutions than will other kinds of liberals who lack that basic distrust. By the same token, libertarians might be more likely to be won over to liberal perspectives if liberals can articulate arguments that libertarians would respect about how their policy proposals will actually limit government capture by special interests. Taking the above policy as an example: Matt would, I think, agree that a tax is preferable to a cap-and-trade scheme, for reasons of transparency and simplicity if nothing else, and because of the very real risk that the emission permits would wind up being sold for less than they are worth. But I doubt he’d argue that it would be a good idea in principal to return that money to the people, both because it will protect the tax from regulatory capture by business interests and because it would be the most egalitarian solution. That’s why I think it’s a perspective worth his attention.