1/01/2020

More Good Arguments Against a Carbon Tax

"Yes, the theoretical argument for correcting externalities is straightforward, and in their introductory environmental economics class, economists eagerly draw diverging social and private cost curves. 

In reality, they are much harder to come by. Bryan Caplan argues that while
the concept of externalities is not very controversial in economics, its application is. Defenders of free markets usually argue that externalities are manageably small; critics of free markets see externalities as widespread, even ubiquitous. (emphasis added)
Caplan also shows that the negative externality of a bad thing and the positive externality of a good thing are analytically identical; corrections for negative externalities (like carbon taxes) call for similar corrections to positive externalities. 

In the recent conversation between Sam Harris and Andrew McAfee, titled “The Great Uncoupling,” the latter follows the discussion about carbon taxes with a dreamy endorsement for the “undervalued” societal benefits that come from caring for young or elderly family members. Following his Pigouvian framework, that kind of positive externality ought to be subsidized, such as through a universal basic income (UBI). Interestingly, both McAfee and Harris instantly discard UBI proposals because their negative incentive and distortive drawbacks far outweigh their positive benefits. Even though the policy does some good, it is not worth addressing."