My Letter to the Economist on Climate Change
I recently sent the following letter to the editor of the Economist magazine:
In your most recent Lexington column you reiterated the Economist’s long standing preference for a carbon tax rather than a cap-and-trade system for dealing with global warming. Your preference has always puzzled me. The Economist is quite right to insist that providing market incentives is a better way of controlling carbon emissions than command-and-control style regulations. However, I have yet to see you make the case for carbon taxes.
A cap-and-trade system assumes that the government can set the optimal level of emissions and then lets the market determine the price of carbon. A carbon tax assumes that the government can determine the costs that emissions impose on society, price those through a tax and then lets the market determine the overall level of emissions. Another way of putting this, is that a cap-and-trade system assumes that scientists can determine the optimal level of carbon given the mosterously complex phenomena of the global climate. A carbon tax, in contrast, assumes that economists can determine the costs that carbon imposes on society given the monsterously complex phenomena of the climate’s effect on the economy.
Other than your publication’s name, I am at a loss as to why you believe that the scientists are at a disadvantage to the economists. Indeed, given the heroic intellectual feats that either policy demands, I’m at a loss as to which group of scholars has the edge. Sadly, I suspect that we actually don’t know.