And Thursday Makes A Comeback!

Wow, today was looking rough, but now I’m at home, self medicating a cold with Otter Creek Winter Ale and peach tea (the herbal medicine aisle at Whole Foods confuses and frightens me) and watching that episode of The Office where Jim bikes to work.  That isn’t even the good part!

Today Obama outlined his proposed budget for the next year or so, and beyond all the other stuff I like (and don’t) about it, he’s proposing to pay for some of the new spending by starting a cap and trade system for carbon emissions.  Cap and trade programs haven’t worked so great in Europe, mostly because they tend to not limit the total amount of carbon allowed to be emitted very well, they just put a price on it.  However, a good program, with a stringent carbon limit that decreases over time, would go a long way towards assigning pollution a real cost in the marketplace, and prompting the profit-driven to care about it.  So this is a step in the right direction.  Give the market what it needs to do the right thing for now, eh?  Plus it just makes me happy when a government plans to have the money it spends.  Should be interesting to see how Congress actually sets up the carbon market.  Here’s a bit more from the NYT Green Inc. column.

Then, some of my plotting this week paid off!  I’d been asked to review a new eco-thriller, Freezing Point by Karen Dionne, and it came in the mail today. According to the blurb, the main characters are a well-intentioned environmental activist, a declared eco-terrorist, and an apocalyptic horror from deep within the ice: promising! I also got a little Freezing Point-themed natural lip gloss thing with it, which was a nice touch.  See, full disclosure, so you can decide for yourself if the lip gloss prejudices me to like the book (it does, but I read a paragraph in the middle and I think I’d like it by itself anyway).

On to Friday…

(P.S. As I was finishing this up, V. came by with more medication from The Dairy Godmother– gingersnaps and strawberry-rhubarb cobbler with custard.  Take that, head cold!)

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4 Responses to “And Thursday Makes A Comeback!”


  1. 1 Mrcalculo February 27, 2009 at 1:53 pm

    Why is putting a price on something not the same as limiting it? Why should the maximum carbon output be falling over time? With a carbon tax system, provided you have a sensible estimate of the cost of the emissions, the amount of production post-tax will be roughly efficient. If an emissions cap is set properly this should accomplish essentially the same thing, but it seems much harder to figure out what the right cap should be. Still, cap and trade or carbon taxes do put a market price on pollution. There is no need for the cap to be declining over time for market participants to change their behavior efficiently. The fact that there may be more pollution than you would like there to be means one of two things: either the costs of pollution have been underestimated in which case anyone with a better estimate should be able to convince everyone to up the price or you have different tastes about pollution relative to the marginal market participant. While this might mean the outcome is not your ideal, this is not a general critique of market-based approaches. Most items are either priced higher or lower than my private valuation but this does not mean the market prices are “incorrect”. Cheers.

  2. 2 virescent March 1, 2009 at 3:31 pm

    Your comment appears to rely on the assumption that market systems provide the only worthwhile value for anything- despite being based on people’s notoriously poor sense of risk and skewed decision-making, and balanced to favor quick profits over all. This is a fascinating viewpoint, since it reeks of monetized nihilism to me. You admit you have different values for things than the market has placed on them. How do you arrive at these values? How do you reconcile them with whatever the market comes up with? Does market pricing not being “incorrect” make it correct?

    I do want to hear more from you on this, and I appreciate your comments, because I do like working through my own beliefs with the aid of people who have very different ones. Hopefully you get something out of the exchange of ideas, also.

    That all said, perhaps my main point wasn’t clear enough. I don’t think markets should regulate carbon- nowhere near it. The government, as a body specifically tasked with promoting the common good, should regulate carbon based on science. Requiring the markets to value carbon specifically is one tool I think they should use to bring the “cost” of carbon home to all of us. If that’s all the Obama administration does to make carbon emissions go away, they won’t be promoting the common good and general health/fortune of the nation. That’s why they should require the market price carbon- which it currently does not, the myth of consumer choice punishing polluters aside, because the conceit of free carbon is good for business- and they should manipulate that new carbon market by reducing the amount of carbon allowed to be produced here over time, to eventually get rid of carbon emissions entirely. The market has no interest in eliminating what it can charge for- how in the world do you trust it to reduce carbon emissions to acceptable levels?

    Now, I can’t quite tell, but if you’re asserting that letting the market, instead of the science, set acceptable carbon emission levels, is at all prudent, wise, constructive, good, helpful, worthwhile- then you have got a lot of explaining to do.

  3. 3 Mrcalculo March 3, 2009 at 12:30 am

    I don’t think that markets are the only way to value something, but I think they are the best way to value most things for the purpose of making public policy. When selecting what something is “worth” we need to average over a large number of people (if we want to be democratic about it) and markets are an excellent mechanism for doing this. Technically, there are some powerful results in economics about this: all competitive equilibria are Pareto optimal and all Pareto optima are supportable as competitive equilibria.

    It is not true that markets value quick profit over all else. Certainly, markets can be short-sighted and error prone but this is true of everybody! Its not like government is less prone to shortsightedness (I suspect they are more prone, but perhaps that is my bias). Large companies continually make long-term investments, take on debt, and act in a way that indicates quite a long horizon for planning. Profit can mean short term gains at the expense of the long-term, but this is not a tautology. Further, it is not clear to me that in the case where the most profitable thing to do is take a short gain that that is not the right thing to do. Basically, the biases that afflict markets afflict all decision making; your maintained assumption is that such considerations don’t matter as much for regulation but I think history is not on your side.

    When I said I value some stuff more than the market price I just meant that I would still buy it if it cost more. Stuff I value less I would only buy if the price fell by a certain amount. How do I come up with these values? Hard to say, but they are some complex function of my needs, preferences, local circumstances, etc. When I get to buy something for less than I value it, that is called my surplus. A nice result is that the price and quantity produced in a competitive market maximizes the sum of consumer surplus across all people. So even if you had a benevolent government setting prices, the competitive price would be a sensible choice for them to make.

    The market price is not the only sensible value for something, perhaps, but as I have explained above it does have a lot going for it. The allocation of activities resulting from a competitive market is efficient so that is why I think in general this is the “correct” value for policy; the price efficiently trades off the pluses and minus of an action integrating over all concerned parties. There are other ways to do this, but they all suffer from the enormous flaw that they are very very hard to estimate. The beauty of the market price is that it is easy to attain and very transparent.

    I don’t think markets should find the price of pollution. You correctly point out that this is an example of an externality so there will be overproduction of the bad since firms don’t internalize these costs. Thus, the gist of my post was that through science, etc we should figure out as best we can what the environmental cost of carbon is and charge a tax equal to that cost. Thus, if a ton of C02 costs us in present value terms 2 dollars, charge 2 dollars. If it costs 20 dollars, charge that. Then, facing these new prices for their activities, firms will automatically adjust their behavior to the efficient and socially optimal levels! There is no need to do anything else except update the tax as we get more information about the costs of carbon. I am almost certain the efficient thing to do is not to eliminate carbon completely; we get some benefits from releasing carbon and below some carbon is not that harmful. My point in short is that when firms have to face the environmental costs of their actions they will release the amount of carbon a benevolent dictator would want them to release. Thus if the tax (or cap) is set properly, they will reduce the emissions to acceptable levels. Maybe not acceptable to you, but I don’t really see why that is relevant.

  4. 4 bullmooser08 March 3, 2009 at 1:36 am

    Meg,

    The EPC recently approved the creation of the Ellen Pickering Environmental Excellence Award. You can find out more information on how to nominate a person or organization here: http://www.alexearthday.org/award.html


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