"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.
But…lots of liberals favor a revenue-neutral carbon tax. Surf on over to Grist.org and poke around. You’ll find all manner of liberal engaged in (fairly strident) debate over the best form of carbon legislation, with a sizable faction in favor of revenue-neutral taxes.
Of course, these opinions are driven solely by a wonkish desire to craft the best possible policy, free of any ideological considerations. Quite the contrary. Nevertheless, the real problem is not so much a failure to engage with the concerns of other political factions, so much as the fact that other political factions are completely out to lunch on environmental issues.
I really, sincerely, deeply wish this weren’t the case. But when even a smart guy like Jim Manzi has decided to devote his considerable intellect to the absurd notion that we should do absolutely nothing to address climate change, it’s become clear that this basically a conversation liberals are going to have to have with themselves.
— Tom · Jan 26, 08:05 PM · #
Noah:
It’s your hypothetical, so let’s take as an assumption the fact that we need to reduce carbon emissions.
This would require (roughly) some mix of reducing energy use and reducing the carbon intensity of energy used. I’ll posit that if we’re talking about an absolute reduction in emissions, then at least some of this will have to come from reductions in carbon intensity. If we didn’t assume this, unless we wanted to cull the world’s population (a lot) and/or tell the roughly billion people moving through the development pipeline that sorry, but, you’re going to get poorer and/or force the populations of the US, Europe and Japan to accept a standard of living substantially less than that of Mexico, you can’t get to absolute reductions in emissions.
Any way you slice it, we would need to induce the creation of new technology that would not otherwise develop. It’s not at all obvious that the best way to do this would be to raise the price of emissions, either through taxing them or rationing them(i.e., cap-and-trade). Suppose, as a simple example, you develop a carbon scrubber for $1 billion. Or alternatively, there was a potential new solar panel technology that would cost $1 billion to test at scale, but had an estimated 20% chance of success, so it was not worth it for any one company to try, but from the perspective of the entire US (or world) this is a really worthwhile bet. In theory, by raising the price of carbon emissions high enough, you would induce cooperation among all the relevant parties to pool capital investments among themselves, but how practical would that be as compared to the pooling mechanism called the government? I’m not so sure.
It’s kind of like imagining that there is some awful form of cancer tha affects 100K people, and causes death withn 6 weeks. The only known treatment has terrible side effects and only creates 5 year remission for 20% of cases, and fails for 80%. It is very, very imperfect, but virtually everyone with the disease takes it because its better than the alternatives. Would the best approach to inducing a beter solution be to raise the price of the medicine because that wil encourage more investment? Or would you have the NIH try to do some basic research to spur the development of a better technology?
— Jim Manzi · Jan 26, 08:30 PM · #
Tom: I can’t claim to be fully conversant with the range of liberal opinion on the question, but most of the stuff I’ve seen calling for a revenue-neutral carbon tax has talked either about using a carbon tax to offset other, unrelated tax cuts, or about using the revenue to pay tax credits for carbon offsetting activity of one sort or another. I think I’m making a different argument above, precisely because I’m starting from the proposition that one of the goals of the policy would be to limit the scope of government intervention (and hence the probability of capture by special interests).
In any event, I think the real question isn’t whether liberals should “really” be libertarians, or whether libertarians should “really” be liberals, or even whether discrete political factions should be able to cooperate on this or that policy initiative, but whether it is a good idea for liberals to actively listen to the kinds of concerns a “small-government egalitarian” might have about this or that policy. Matt seemed to be arguing that liberals will come to the “correct” conclusions anyhow, so why bother listening to somebody who’s got a principled aversion to big government? I think that’s myopic – and, honestly, I think Matt does, too, because he has at times been exactly the kind of person who does that kind of listening, he’s just in a bit of a triumphalist mood these days.
— Noah Millman · Jan 26, 08:38 PM · #
Jim:
I understand your perspective. In a nutshell, it is: spend, don’t tax. I don’t think anybody serious and informed could advocate negative global economic growth as the solution to climate change – though it would achieve the objective of culling the world’s population (a lot). So that means looking for ways both to increase energy efficiency (more economic output for less energy input) and reduce carbon intensity (significantly increasing the percentage of energy from non-carbon-emitting sources).
If there are cheap, incremental ways to do this, a tax is exactly the way to get there. If we need a breakthrough technology, then you’re right that a tax is not going to get us there. But you have to look at the other side of the ledger as well: what are the odds the government gets us there by direct investment in research? In that regard, the billions of government funds that have been wasted on breakthrough “green car” technologies are a cautionary tale, as is the synthetic fuels debacle. There’s a real risk that rather than the Manhattan Project, you wind up with the carbon equivalent of the Space Shuttle.
Anyway, I’m glad we both agree that rationing is probably the least-optimal option.
— Noah Millman · Jan 26, 08:55 PM · #
Noah:
I totally agree that the boondoggle risk is real (and, at some level, certain). My poorly-worded comment was tying to make the point that it’s not obvious that a tax is more efficient than spending, but that one’s perspective depneds on excatly the factor that you highlight.
The most extreme version of “non-breakthrough” is currently existing technology that is just not economic at today’s prices. Few cap-and-trade advocates that point to the SO2 cap-and-trade program to limit acod rain admit (or, probably, even know) that this was exactly the case in that instance.
The reason that I think breakthrough technology would be needed in your CO2 hypothetical is just the raw increase in global energy load imnplied by a growing world population with growing energy needs per person. The math of that is really, really daunting, even if you assume (as most modelers do) continued improvement in existing technologies in the baseline case.
— Jim Manzi · Jan 26, 09:30 PM · #
Noah, there is a robust community of people on the left who favor fully-refunded carbon taxes of the kind you describe here, though details vary. Some folks want to use the revenue to reduce other taxes; some want to return it as a dividend, like you; some want to combine that latter strategy with a cap — what’s called “cap-and-dividend.” Concern over boondoggles is one of the big motivators. People on the left are not, as a class, insensate to that concern, though I personally think its overstated.
Ultimately I don’t think there’s going to be a clean, tidy silver bullet. There are some areas where demand elasticity is high and a price signal will cause a substantial shift toward low-carbon options. To some extent electricity is like this, particularly if utility regs are reformed. Contra Jim’s gloominess, there are renewable generating options that are a hair away from grid parity (cost competitiveness) with coal, even when externalities are not considered. And efficiency is a far larger and cheaper resource than most people know, far cheaper than either fossil fuels or renewables. We haven’t even scratched the surface.
But in many if not most areas, expansion of low-carbon options relies on infrastructure. Unless we get a much improved grid, renewables will be limited. Unless we get much more public transit, driving alternatives will be limited. (Or, if you prefer electric cars, plug-in stations.) Ultimately we’re going to need large-scale investment. (And even — horrors! — industrial policy to specifically encourage expansion of clean energy industries.)
We’ll also need regulatory reform. In some places that means tougher efficiency and/or performance regulations (on coal power plants, buildings, appliances, vehicles). In many places that will mean reforming or removing stupid regulations that pose a barrier to reducing carbon. (That’s something we should be able to agree on, no?) Some of these are federal but many are state (e.g., utility regs) or local (zoning regs).
So in my humble opinion, we’ll need carbon pricing, investment, and regulation — a three-legged stool. It is inevitably going to be messy and there will inevitably be inefficiencies and boondoggles to inform outraged Cato white papers. But in the long run, the social and economic benefits of freeing ourselves from fossil fuels and avoiding the worst of climate change will vastly, vastly outweigh those costs. (Greater local resilience and self-reliance will be among the benefits, which should appeal to you, no?)
Again contra Jim, this isn’t a mild, marginal problem to be solved with tweaks. On our present course we’re headed for catastrophe. We need to act quickly and boldly — WWII-mobilization style, not 5% carbon tax style — to meet the challenge. We can strive to minimize government overreach and dumbassery along the way, we can strive to focus on empowering rather than constraining local communities, but we can’t let the effort be held hostage to the kind of fussy concern over tidiness that often (it seems to me) limits the libertarian imagination.
— David Roberts · Jan 27, 10:07 AM · #