Michael Meeropol wrote: > I don't have the reference, but Harvard Economist Martin Weitzman (of > "the > Share Economy" fame) did a lot of work in which he came to the > conclusion > that carbon taxation was a more efficient way of fighting climate > change as > opposed to cap and trade ---
The problem with various of these studies, whatever their conclusion, is that they generally don't deal with either the physical realities of climate change nor the class realities. Instead they set up spreadsheets which are based on the belief that financial calculations suffice. I wrote about this several years ago as follows: Market lunacy: the use of financial calculation to answer material questions To see whether it's likely that the carbon tax will work, the Carbon Tax Center creates a "model" of the economy, that is to say, it refers to financial spreadsheets. They supposedly show how far the carbon tax will reduce carbon emissions from different economic sectors, how far it will affect the economy, how much revenue it will generate, etc. Yet how can these things be calculated without knowing what new methods of power generation, and of industrial production generally, will be put into operation; the effect of the presently-occurring climate changes on the economy and the needs these changes generate, such as for finding new sources of water; the attitude of different classes to the on-going environmental plans; etc. ? But the spreadsheets don't deal with these things. For that matter, how it is possible that the physical reality of climate change can only be estimated within broad limits, but the spreadsheets are supposed to give precise figures for the financial consequences of every environmental policy? Well, it turns that this is because these financial models and their spreadsheets don't consider what material changes will take place in the economy at all. Underneath their outward complexity, they are based on financial assumptions of the crudest and most simplistic nature. For example, a crucial assumption is that such and such an increase in the price of fossil fuels always results in the same percentage decrease in the use of fossil fuels. This is the so-called "elasticity" of fossil fuel usage with respect to fossil fuel price. Supposedly the elasticity doesn't vary as circumstances change, but remains the same year after year. Thus one can supposedly ignore what changes are taking place in technology, or even economic and political developments, since whatever takes place, the elasticity will stay the same. All one has to do is guess this magic figure, perhaps by observing what happens during price increases in one particular year. So these financial models predict the future with a few financial indices: elasticities, inherent rates of growth, and the size of the carbon tax. In this way, they pretend to give a realistic judgement of the effect of different government policies. But they are entirely based on the absurd assumption that the basic numerical indices are constant over the years. Well, let's look more closely at the elasticity of fuel use. Consider what happens to miles driven when gasoline prices go up. If a family is doing fairly well, at first they may continue to drive as before, and take economies elsewhere. Thus, at this point, the family's elasticity of gasoline usage is zero. With an additional price increase, the family may cut back on optional driving, resulting in a nice-looking figure for elasticity. But eventually, all the easy cutbacks are made, and the main driving is for essentials, such as getting to work or school. At this point, it is essential to the family to keep buying gasoline no matter what other economies have to be made, so the elasticity goes back to zero. Indeed, it is conceivable that, for some families, at a certain point the miles driven will actually increase when the price of gas goes up. For example, if the price is so high that the family can no longer afford its past purchases of gasoline, its members may have to seek additional jobs, which they may have to drive to. So much for the constant elasticity. (24) Indeed, the miles driven by the family may depend even more sharply on other things than prices, such as whether there is a really good public transit system or where jobs and schools are located. And experience already shows that a rise in price may have several different effects on public transit systems. For example, this year some places in the US have increased the frequency of buses and trains, while other areas, going into financial crisis, have actually cut back on public transit. Perhaps it may be argued that these different possibilities average out when one considers, not one family, but the entire population of a region. And indeed, it might be possible to obtain the average elasticity, at a certain moment in time, for a certain geographical area, at least provided gas prices don't change too much. But this average elasticity would generally vary from area to area, and year to year. Thus these financial models of the carbon tax are just market lunacy, the delusion that the entire world behaves like interest-bearing investments, with the rate of interest replaced by the elasticity. (25) Economists are used to interest-bearing bonds and other financial instruments paying a certain return; you don't have to know what type of company has issued it to calculate that return, and they apply the same thinking to carbon emissions. Moreover, it's not just the Carbon Tax Center that predicts the future in this peculiar way. It's how neo-liberals in general make pronouncements about the costs and benefits of environmental measures. It's done by neo-liberal economists like Prof. William Nordhaus, whose recent book "A Question of Balance: Weighing the Options on Global Warming Policies" confidently balances the costs and benefits of taking measures to avert global warming. It's even done by the Intergovernmental Panel on Climate Change, when it departs from its careful consideration of the science of global warming and looks into what is to be done about it. These calculations are based on ignoring the material factors and extrapolating financial indices on the basis that the future will simply be like the past. The spreadsheets may allow one to try different numbers for the rate of the carbon tax, the various types of elasticities, and the inherent rate of economic growth; but they assume these can be extrapolated for years, decades, or even a century or more. So no matter how complex the model, it's actually financial fantasy. (www.communistvoice.org/42cCarbonTax.html) -- Joseph Green _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
