Saturday, June 2, 2012

Carbon taxes and property rights

In a free market made up of individuals, environmental protection makes little sense for each individual, even if they would generally be willing to spend more to live in a cleaner world.  The environmental benefit gained by an individual as a result of their decision to buy, for example, a low-emissions vehicle is infinitesimal, as their car is only one out of millions, and the pollution generated by one's own car is carried away by the wind.  While the benefit of the individual's purchase is not limited to the individual, the cost to the individual is direct and personal.   Deciding to buy a polluting car makes no difference to one's own environment, but it can save tons of money.

Given this unlinking of cost and benefit, environmental improvement on a macro scale is impossible.  It just never makes sense for an individual to act responsibly.  Each polluting decision makes sense for the individuals involved, but taken in aggregate, we all are worse off.

One way to fix this situation is to outlaw certain decisions.  However, voters tend to not take too kindly to this approach, and it often makes for bad policy.  Another way to help line up individual and collective goals is to figure out a way to factor the cost of the pollution into the economics of the purchase.  This can be accomplished via a tax on the pollution.  It forces the individual to compensate the owners (everyone) of the resource (the environment) which is damaged by the individual's action.  This idea is the basis of civil law; if I damage your property, I have to compensate you for it.

2 comments:

The Aesthetic Prosthetic said...

See, it's this kind of thinking that is gonna bury democratic politics. While republicans have embraced post-liberalism, sacrificing the concept of self-interest for the new postmodern landscape of identity politics. The greatest instantiation of this is, of course, the Tea Party movement, where hundreds of thousands of poor, white workers actually vote against their own self-interest based upon their perceived identity as "americans." It's not enough to think of environmental concerns in terms of personal incentive. You have to think of it in terms of identity. Why did you buy a hybrid...well because, you're young, smart, liberal, and you prolly own a mac. Being environmentally conscious is simply part of that identity. What must be done is to find a way to make caring about the environment appealing to the identity of americans...the same way hating socialism or tearing up at the thought of defending freedom is now. No one will accept the kind of tax you're talking about if it doesn't fit their percieved identity for themselves. So the question is, how do you make caring about the environment part of being an "american?" It sounds stupid, but I think the best shot at this so far has been the PBS documentary series "The National Parks" by Ken Burns. For years, Ken Burns has played a key role in helping Americans understand themselves through his films. However, obviously, to create any substantive change, we would need to go much further than that.

NWest said...

I think you're on the right track here - economists for years have been trying to come up with ways to reduce negative externalities. Pollution taxes are a good way to handle this - but damage needs to be shown. Ammonia / Methane pollution from the nearby steel plant killing my pets/children is one thing, "Carbon" causing nebulous unknown damager is something else.