Cap-and-trade is a nice model for price mechanisms driven by social policy.
Unlike a tax, which slaps on a price increase, a cap and trade arrives at the price increase -- but that's ahhh theory -- then there's the details.
Here's Matt Yglesias, snub-gun journalist, on carbon emission markets:
"Capping the amount of allowable carbon dioxide emissions creates a new source of wealth in the economy — permission to emit carbon dioxide.Matt clangs the little-guy bell. Note that such a broad spectrum of tit-twist distributions are also lurking in the upcoming grand drafting of our public-option health insurance program.This, in turn, raises a question about how to allocate that resource. One suggestion, popular with industry and its tame dogs in congress, is to allocate it to industry. Give the permits away, and let companies either use them themselves or sell them to others.
Another suggestion, more popular with environmentalists and economists, is to auction the permits and then use the funds thereby raised to accomplish something useful....
They have the same macroeconomic impact, and presumably the same ecological impact. But the cap-and-rebate proposal results in gains for the bottom 40 percent of households, a tiny loss for the median quintile, and small losses for the top 40 percent.
The cap-and-giveaway proposal results in large losses for the bottom 80 percent of the population and a large gain for the top 20 percent.
Pinkos better get up to speed on this region of applied public economics, and start calling the balls and strikes accurately. Just unleashing the dogmas of class war to bark, bay, and howl benightedly at the rising of the congressional harvest moon is no good. Much more comes from understanding this shit from the inside out than screaming for the ultimo option that isn't an option.
Yes, in theory there is a Pigou tax that can do anything cap and trade can do -- like the carbon tax advocated by Father Smiff's pal Charles Komanoff.
And yes, single payer is a final solution devoutly to be sought.
But but but -- and the irony here gives me a tingle -- all you decentralizin' Eric Blair types get a wedgy over -- THE STATE.
To Josephine Average Wage Schmuckette, nothing, nothing more accurately operates as the lightning bolt of the state than a tax slap or a mandate. On this green stuff, and health stuff both, a few shrewd market mechanism designs (as in cap and trade on carbon emissions, and a fightin' pub op in the health sector) is a path to decentralization and lower-archy.
Interested? If so, here's a nice Ivy League site for your reading pleasure.
Comments (7)
Unfortunately, our whole industrial apparatus would have to redesigned in a radical way for us to some within a mile of environmental sanity. Doubly unfortunately, unless climate change scientists are either completely full of shit or way off the mark, this is one case where "moderation" is completely useless. Current proposals are like going from 20 cigarettes a day to 15 an calling it quitting. Agreed understanding the economic implications is important. But more important still is understanding the environmental implications. Obviously, if there is a market based solution and it is easier to implement than alternatives it should be implemented. But since things like human welfare and the continuation of a habitable environment are fundamentally contrary to the logic of the markets it's a fair assumption market-based proposals are really going to end up being snake oil and making us worse off (a fact our rotten health care system continues to prove).
Posted by Peter Ward | May 26, 2009 7:36 PM
Posted on May 26, 2009 19:36
"our whole industrial apparatus would have to redesigned in a radical way "
yes indeed and how eciting
our greatest industrial challenge since hitler wore his leather shorts to impress
his weekend guests
"this is one case where "moderation" is completely useless. Current proposals are like going from 20 cigarettes a day to 15 an calling it quitting"
caps can be set at any level pw
"understanding the economic implications is important. But more important still is understanding the environmental implications"
yes that's why a cap which sets the physical limit
is better then a pigou tax on carbon emissions
which only directly sets the economic cost
and must rely on estimates
of the price quantity adjustment effects
on actual emission levels
"if there is a market based solution and it is easier to implement than alternatives it should be implemented"
it isn't easier then a tax
it is only more direct
like an import quota over a tariff
but it for that reason
might be more difficult to game
this is where detailed analysis enters
and brittle conjections of dogma
crumble away
and oughta get swept out the back door
Posted by op | May 27, 2009 12:27 AM
Posted on May 27, 2009 00:27
"things like human welfare and the continuation of a habitable environment are fundamentally contrary to the logic of the markets "
thank u for that passage pw
it makes my point
yes private corporations operating
at their will
in open unregulated markets
are utter failures
at producing
--as a by product of their profit seeking--
" optimal social outcomes "
even where third party effects are only pecuniary
interventions by" the state"
often --maybe very often or even most times --could signifigantly improve social welfare outcomes
but these interventions themselves could be market redesigning and rules of "play"
here's an anology to one aspect of intervention and mechanism enhancement
the best atheletes are the ones that
benefit most from
in a well organized rule abiding contest ..eh
"it's a fair assumption market-based proposals are really going to end up being snake oil and making us worse off (a fact our rotten health care system continues to prove)."
is it market solutions or is it
corporate controled state actions
ie taxes and old fashion fine and prohibition regulation lead to similar nasty outcomes eh ???
look at the fed or most state auto insurance regulation etc etc
Posted by op | May 27, 2009 12:41 AM
Posted on May 27, 2009 00:41
http://www.aflcio.org/issues/healthcare/upload/jhacker_report.pdf
once more on pub op vs pri op
by "corporate carrier pigeon"
jake hacker
Posted by op | May 27, 2009 10:46 AM
Posted on May 27, 2009 10:46
http://www.bluegreenalliance.org/
let's hope this site
is not the best
prof-pleb-prole class synthesis
on green power
we can engineer
Posted by op | May 27, 2009 10:54 AM
Posted on May 27, 2009 10:54
OP-san, what convinces you that the alleged economics here is real? For starters, if Matt Iglesias thinks it's so, chances are good it's a massive trick.
Meanwhile, what makes you think it won't "work" pretty much like FCC licenses have? Which is to say, as a fig-leaf for rubber-stamping corporate capital's next wish?
Posted by Michael Dawson | May 27, 2009 2:28 PM
Posted on May 27, 2009 14:28
"massive trick"
always possible
most often more then likely
i suspect green is mobilizing
as a corporate america crusade
reducing emissions looks to be a good play in many dimensions
now the details will always contain
corporate prizes
how far the people bend it our way ???
less then a 5.7 on
the class struggle
ground motion scale
suggests not much
above a 5.7 starts to get interesting
last time i looked
the green weenie legion
operating largely without smurf support
could generated a 4.3 at max dudgeon
got a way to go
if the cap is not to come out
with fools' bells on it
similarly with pub op
Posted by op | May 27, 2009 7:30 PM
Posted on May 27, 2009 19:30