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Worstall
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What amuses is that you are all rather recapitulating the arguments that the economists have been having over the past decade and more. For example: "I think it should be increased, over time, in an explicit way. Capital investment is slow to adjust to changes and businesses will need to see the future costs in order to plan accordingly." That's the William Nordhaus view. Start low now (say, $30 per tonne CO2-e) and provide a known rise over time to say $250 by 2040. This provides both certainty about investments for the future and also incentives to make sure that future investments are low to no carbon. The Stern view is that we can have a lower tax but start now: at, say, $80 per tonne. Higher now, yes, but lower in the future. Most economists would say that the Nordhaus view wins here: it's always going to be cheaper to make sure that new stuff is low carbon instead of tearing down what we've already got to make low carbon stuff. Allow the current infrastructure to reach the end of its natural economic life and replace it is cheaper than trying to replace it before it all wears out. Re cap and trade v carbon tax. CT gives you certainty about emissions reductions. But not about the price of them. Carbon tax gives you certainty on the price but not the amount. And the thing is (as the Stern Review tells us) what we should actually be targetting is the cost, the price, not the amount. We're not going to have no climate change, that's for sure. And we obviously don't want catastrophic such. So give that we're going to have some but not too much, what is the right amount? Clearly, that's where the costs of the climate change are equal to the costs of mitigating climate change. If a 1 oC rise (entirely made up numbers here) will cause $100 of damage then we're willing to pay $100 now (discounted to net present value of course) to avert that damage. But we'd be insane to pay $200 now to alleviate $100 of future damage. And silly to be only willing to pay $20 now to alleviate $100 of future damage. OK, you've got to add in expected outcomes (ie, probability of various temp rises, the damage they would do etc) and argue about the discount rate. But this is indeed exactly what the work of Nordhaus and Stern is all about. And given that it is this cost/price thing that we actually want to target then that's why we want to use a carbon tax not a cap and trade system. "Other than pacifying the Neo-Cons why would we want to make the carbon tax revenue neutral?" That's a political question. The point about the carbon tax is that it works even if it is revenue neutral. What the revenue is spent on is also entirely irrelevant. It works just because the tax is being levied. That's the point that people are trying to get across. "He is a regular contributor to Forbes Magazine and the Daily Telegraph. He seems very influential." Sadly I'm not influential at all: just another freelance journalist trying to make a living. It's also a standard complaint among economists. The more settled the economists think the answer is, the less influence that answer has on public policy. Just about every economist would agree that either c&p or a carbon tax is a full and complete solution to hte problems of climate change. Most would argue that the carbon tax is better. No country has a proper and full carbon tax. QED.
I would very much want to see the details of the incomes in that second chart. For the US has a strange way, internationally, of measuring the income of the poor. It is, by and large, solely market income (in more detail, market income plus direct cash transfers. But it excludes all transfers in kind and through the tax system. This matters because the majority of US poverty alleviation is done through transfers in kind and the tax system.) The Dutch system (and pretty much everywhere else) measures poverty and the incomes of the poor after transfers. So it does rather depend upon what Milanovic has done there. He may have corrected the US figure (I hope he has) so that we are indeed looking at post tax, post benefits incomes. Or, if he hasn't so corrected then we're looking at US numbers before poverty alleviation and redistribution of incomes and Dutch numbers post. I'd very much like to know which numbers he's using. Precisely where does this information come from?
"The distributional impact of a globalised world is skewed. Rising inequality and concentration of the benefits of the globalised world rest in too few hands." Yet from Milanovic we know that while in country inequality is rising, global inequality is falling. So which of the two should we be righteously worrying about?
I understand the point but there's another way at looking at the same facts: http://www.forbes.com/sites/timworstall/2012/03/10/dani-rodrik-on-the-distributional-effects-of-free-trade/ "I would start arguing from entirely the other end of that same argument. Free trade is the natural state, the distribution of incomes we get from free trade is the natural state against which others have to be measured. So, I would not ask the question “should we have more free trade and thus take $200 off Nicholas?”. Rather, “what is the justification for our restrictions on free trade which take $300 off John?”"
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Mar 10, 2012