economics
The U.S. has finally come to accept that something needs to be done about global warming. The question now is how to do it. The fact that we don’t know how much of a reduction in emissions is necessary or how much a given reduction will cost makes the choice very difficult. Although the cap-and-trade has become the mechanism of choice in the United States and is the clear favorite for curbing greenhouse gases (eg. the Environmental Defense Fund supports cap-and-trade), there are still doubts. For one thing, as Samuelson says “no plausible ‘cap and trade’ program would significantly curb global warming.” For another, with quantity-based systems, there is no yardstick for determining equity among countries. Since the main reason the United States gave for refusing to ratify the Kyoto Protocol was that undeveloped countries were not asked to do their fair share, this is no small problem.
In theory, using a price-based mechanism like a carbon tax would be better 1) nationally because incentives could be set at an affordable level and the market used to find cost-effective solutions and 2) internationally because having every country control to same marginal cost would be a good basis for equity. But politically the carbon tax is impossible and any politically acceptable tax would be insufficient to have much impact.
It is to resolve this impasse that a feebate makes perfect sense: it uses prices to drive reductions in greenhouse gas emissions but it does so without collecting any net revenue.
Continue reading ‘A Feebate for Greenhouse Gases: Better than Either a Cap-and-Trade or a Carbon Tax’
There has been a flurry of arguments about inequality ever since Bernanke made his remarks on the subject, a few weeks ago. After wading through these arguments - which Mankiw (correctly) sums up as all coming back to Rawls versus Nozick, one concludes that this argument could go on forever because there is little or no basis for rational agreement. But there is a new, more promising way of framing the issue that comes out of left-libertarianism.
Although Rawls in A Theory of Justice developed a complex and elegant argument to show that if self-interested, rational people were engaged in a bargaining game to establish a society they would agree on limiting inequalities to those that benefit the least advantaged group, there are a number of reasons why this argument is not convincing. For one thing, we are not in the position of establishing a society so it is not very relevant (we might very well be willing to accept such a society if we were born into it but that is not the same as being willing to change from our current system to that one). Also Nozick’s counter-argument in Anarchy, State, and Utopia is, I believe, devastating: that such a “patterned” system would require redistribution after virtually every transaction (because it would likely undo the previously acceptable distribution) and would be unjust because it would conflict with any kind of property right or “entitlement.”
Where does this leave us? The predominant view is that this is just one of many examples of our inability to find common ground for values and we simply have no choice but to accept this state of affairs. Others, such as Alasdair MacIntyre (see After Virtue) argue that this is the result of the failure of the “enlightenment project” which, in destroying the traditional religious and Aristotelian context for morality and failing to establish a new one, left modernity with fragments of what was once morality without providing a common ground for values. As a result, our debates about values ultimately rest on personal feelings or opinion and take the form of “my goal is better than your goal.”
Continue reading ‘Inequality: Beyond Rawls vs. Nozick’
If you have read About Centrarian.com you know that politics cannot be centered without also centering economics ― which means correcting the economic system so it lives up to the claims of conservatives, namely that it efficiently allocate resources and approximate a merit system. The purpose of this page is to outline what is needed to accomplish this.
Private Property: Prevailing definitions of private property allow individuals to collect, not just merited compensation for their own labor, ideas and contributions to the economy, but unmerited shares of natural resource rents and output produced by people now dead. This needs to be corrected by having a new form of private property which allows individuals to claim their equal share (equal since no one individual has any greater right to a share than any other) of these non-individual sources of income). This would provide a base income for everyone, making the system both more equal and more of a true merit system.
Externalities are side effects whose costs or benefits are not included in decisions because they affect other parties without adequate compensation. The classic example of a negative externality is pollution generated a company affecting the health of people living downwind. An example of a positive externality is the increased selling price nearby home owners receive as a result of having a store or a mall being built nearby. Mechanisms need to be found to “internalize” such externalities so that when economic decisions are made they consider all the effects.
Uncompensated public costs and benefits are externalities that affect the general public rather than, or in addition to, private parties. These include environmental, economic, educational, and social effects of actions. As with externalities that affect private parties, mechanisms need to be found to internalize uncompensated public costs and benefits so that economic decisions are made with all of the effects being properly considered.
Wouldn’t it be nice if we could all agree on a vision for the future and just begin working together to achieve it - instead of getting stuck in ideological arguments before we begin?
Think, for a moment, about what this nation accomplished after the attack on Pearl Harbor. In less than four years, we managed to transform an economy crippled by the Great Depression and producing few war-related products (soldiers initially trained using broomsticks and trucks to take the place of rifles and tanks) into the most awesome war machine in history. By the end of those four years, this country had produced almost 300,000 planes, more than 70,000 ships, and millions of guns and bombs.
In terms of complexity, that transformation from a peacetime to a wartime economy was at least as complex as most problems we face today. Yet today we have lost confidence in each other and our government to resolve these problems. What is the single most important difference between then and now? We were united then. We are divided today.
The purpose of this website is to provide a basis for us to come together again so that we can solve the significant problems that confront us. How? Part of the answer is hinted at by the name of the site — Centrarian — by centering politics and economics. But centering politics does not mean centering politics in the conventional sense of Triangulation between the two sides as in the Third Way. What it does mean is that the skewed perspectives of the left and the right must be “unskewed” by correcting the faulty assumptions on which they are built. And politics cannot be centered without also centering economics.
Another part of the answer is taking a systems approach to politics. Most bloggers, pundits, interest groups, and politicians advocate particular political policies without taking into account, or trying to change the underlying political, economic and ideological systems. But this only makes matters worse by encouraging the endless conflict between interests. Instead of continuing to argue about whose interests and whose policies need to be advanced, we need to begin a cooperative effort to make our political and economic systems work better for everyone.
Centrarian.Com will attempt to remedy that. Please return February 1, 2007 when the site is complete and the blog begins.
