Monday, July 26, 2010

Krugman on "Greed and Cowardice" in the climate debate

Was Paul Krugman famous for his work in economics, or was it environmental studies? Right now, I'm not sure. From an op-ed article yesterday:
It has always been funny, in a gallows humor sort of way, to watch conservatives who laud the limitless power and flexibility of markets turn around and insist that the economy would collapse if we were to put a price on carbon.
Source. An intelligent person like Mr. Krugman can spot a bad argument, especially when it applies to his home discipline of economics. The passage above contains logical flaws which should have stood out to a Nobel Laureate.

- "Putting a price on carbon" is a bit more complicated than grabbing the sticker gun and tagging away like a manic grocery store employee.
There's carbon in pretty much everything (including humans). While the idea of "internalizing the externality" by taxing for the social cost of carbon is all very good in theory, the devil's in the details. How much should emitting a pound of carbon cost? Who would pay the tax and how would it be collected? What stops people from cheating? It's the tinkering with all of these complicated, yet extremely important factors which will really crush the economy. Just look at the government's performance in fighting drugs, poverty, crime, and war, then ask yourself whether they can handle the complexity of a global climate system.

 - The only reason that markets still have any power and flexibility is because of those "conservatives" who don't give in to the alarmist environmental message of the year. Examples are numerous, so I'll just pick an amusing one: Back in 1971, President Obama's science adviser predicted a coming ice age which would wreck agricultural productivity and usher in mass famine. Had we listened to the doomsayers back then, right now I'd be standing in a mile-long line to get my daily food ration instead of writing this blog. There's nothing so permanent as a government solution, so before we "fix" something it's good to be extra sure first.

In general, Krugman's argument is that "greed and cowardice" has prevented passage of the climate bill. By "greed" he means the efforts of climate change skeptics (last I checked, the other side of the debate gets a paycheck too) and by "cowardice" he means unwillingness to take drastic action based on environmentalists crying wolf yet again. It's funny, because the people demanding action against global warming could just as easily be called cowards, for doubting humanity's ability to change and adapt without some central authority telling us what to do. We survived multiple ice ages, two world wars and the Bush presidency. Have a little faith, eh?

I don't claim to be an expert on climate change science, but anyone who looks at the numbers can tell the proposed fix is not of the required scale to stop or even slow global warming. Even the EPA agrees that U.S. action would be ineffective. Two new coal plants are built in China each week; between them and India, the U.S. emissions total will be small potatoes pretty soon. If you think those countries will put climate paranoia in the U.S. and Europe ahead of development for their own people, you'll be sadly mistaken.

The bottom line is that in our current economic position, a cap and trade bill would impose immediate and serious costs in exchange for a small chance of preventing far-away catastrophe. We will all be impacted, one way or another, by the actions taken. Commentators like Mr. Krugman do a real disservice to the intellectual climate by presenting the issue as "good regulators vs. evil industry" because the reality is a lot more complicated. If Americans think it's worth prolonging the hard economic times to do something about carbon, that's the democratic process at work. However, Mr. Krugman shouldn't blindside the public by claiming that sweeping regulations can be passed without any cost to the economy, because it just isn't true.

Unfashionably Economic

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