A Few Final Thoughts on Waxman-Markey

I know, that title promises all the verve of a library's reference room. Apologies, but my entry last week on how to think about the climate bill drew a few responses, and I thought I'd take the time to answer. First, to the main point of my post -- that if we can avoid imposing serious costs on other nations at a reasonable costs to ourselves, we should -- Jim Manzi replied:


I think this argument does not hold water.  In short form, the reason is because this ignores the point that the reason the U.S., Europe and similar geographies have historically emitted carbon dioxide is that these societies invented the modern economy.  Along with all that carbon dioxide the West put in the air, it also invented polio vaccine, the limited liability corporation, the high-efficiency power turbine and so on. While the West made a ton of money selling these things to what we now call developing countries, there were and are huge externalities because inevitably a lot of this knowledge leaks. The West invented the basic tools for increasing wealth that the successful parts of the developing world are now using to escape poverty, and incidentally emit more carbon dioxide.  It is less than obvious why we would select only one of these items, and determine that we have a moral duty to make reparations for it, without considering that the net global effect of the overall system that created these emissions has been extremely positive.  Ask yourself this question: Would you rather be born at the median income level in Bangladesh today, or at the median income level in Bangladesh in the alternative world where the entire Northern Hemisphere had never escaped life at the subsistence level.

This strikes me as a strange reply. For one thing, the deal we're offering developing nations here doesn't seem to me to be all that great. We offer Bangladesh the polio vaccine and then make their country unlivable, and they're supposed to be grateful? Perhaps if we were prepared to welcome them en masse into our highly developed economy, but of course this is out of the question.

But the big error in thinking here is that it assumes that economic growth -- in the past and, crucially, in the future, cannot take place without this level of carbon emissions. You can have the polio vaccine and warming or neither, in other words, and those are your only choices. But of course, this is absurd. One might have said that we could have our modern economy and an ozone hole, or acid raid, but not both, but they'd have been completely wrong. Had the federal gas tax been indexed to inflation over the past two decades, it is quite likely that our national emissions would now be significantly lower with basically no observable decline in economic growth relative to today. And we probably would have continued to invent new medicines along the way.

Meanwhile, Will Wilkinson thinks he's stumbled onto a serious gotcha moment for "statist-liberals."

The idea is that coordinated international action toward carbon reduction is a global public good, and that the probability of effective coordination increases significantly if the U.S. acts unilaterally. HOW DOES THIS WORK? Standard statist-liberal reasoning about public goods is that they will not be provided unless there is a  coercive mechanism in place (e.g., a state) to solve the assurance problem. But there is no state with global jurisdiction. So am I to understand that folks making the argument about the crucial role for Waxman-Markey in solving the international collective action problem don't really believe the standard story about the need for coercion in assuring compliance?

This seems almost deliberately dense. In particular, it makes no distinction between the world of billions of daily, anonymous transactions and the world in which a handful of great powers attempt to hammer out a diplomatic agreement. Unsurprisingly, it's very difficult to get millions of urban denizens to voluntarily come together to build and fund a road network or transit system in the absence of a coercive mechanism. The benefits are too broadly shared, and the incentive to free ride too great. But the smaller the number of players, the more concentrated the benefits, and the easier it is to find a mutually beneficial agreement.

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Ryan Avent is The Economist's economics correspondent and the primary contributor to Free Exchange, an economics blog

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