Friday, March 28, 2008

US trade and carbon policy

According to Businessweek, "the economic priesthood continues to devote enormous intellectual firepower to making the case for freer trade... In the battle of public-policy ideas, American economists do wield influence."

An example of this might be Greg Mankiw's NYT op-ed. Although Mankiw makes the best case for voting for McCain that I've seen yet, his point about taking Obama's and Clinton's opposition to trade with a grain of salt is well taken. After all, Obama has Austan Goolsbee working for him and even Clinton's "top economic advisor" (according to CNNMoney) has written "in the long run America will win more than it loses from an open global economy. What practical options do we have between simply assuming greater globalization will lift all boats, and resorting to self-defeating protectionism?"

I've initiated a "blogroll" in the bottom right area with Greg Mankiw's blog as the first entry. I admit that part of my appreciation for Mankiw follows from my discovery that he largely agrees with what I've been saying about carbon taxes. He does it better than I do, of course, when he talks about it as a Pigovian tax. I had the general idea when I talked about externalities but I didn't have the term. This is why it is generally more useful to listen to someone with an actual PhD in economics than to someone like me.

Perhaps the best article yet that I've seen on emissions policy is by the former president of Mexico, Ernesto Zedillo:

... a Kyoto-type framework ... is not feasible. The only approach that will ... relieve countries' apprehensions regarding sovereignty and free riding is one in which all countries agree to penalize their carbon emissions in such a way that, over time, an internationally harmonized carbon price prevails. Consequently, the negotiation's focus would not be on emissions quotas but on the harmonized carbon-price trajectory.

Of course, carbon taxes (on burning fossil fuels) would provide the easiest way for countries to comply with the system, and each country could then decide what to do with the tax revenue. Some might make their carbon tax revenue-neutral by reducing other taxes. ...

If you're worried about climate change but don't like carbon taxes, think about the messy or even impossible alternatives!

No comments: