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Ed Dolan on Other People's Money: Government, Oil Spills, Financial Crises & Limited Liaibility

June 8th, 2010 No comments

Ed Dolan (Professor at Stockholm School of Economics in Riga, Latvia and editor of the Austrian classic, The Foundations of Modern Austrian Economics (online here), and author of the classic pamphlet TANSTAAFL: An Economic Strategy for the Environmental Crisis (1971), has a post up at his new economics blog that ties together the above subjects, each a favorite of my own.

As I noted in a recent post referring to BP and ocean ecosystems :

Aren’t there huge and obvious commons-related problems that stem from government ownership and “management” of resources – be they federal lands, the seas, our fiat currency, or our financial institutions and publicly-listed companies?

But enough of me; here is the meat of Mr. Dolan’s post, What Oil Spills and Financial Crashes Have in Common: Gambling with Other Peoples Money (emphasis added):

:What do the Gulf oil spill and the recent financial crisis have in common? Both of them are the result of risk-taking gone wrong. …

The real trouble comes when you have a chance to gamble with other people’s money. Then you start looking for strategies that usually give you at least a modest payout even though they involve a small chance of catastrophic loss. These are called negatively skewed risks. You take these risks, even if you know they have a negative expected value, because you think you will pocket a gain most of the time. You expect that when disaster finally strikes, you will be able to walk away with your past winnings in the bank while sticking someone else with the loss.

Several common situations in business life give rise to the temptation to gamble with other people’s money. Executive compensation plans that emphasize short-term bonuses, include golden parachutes, and lack clawback provisions are one example. Not only top executives face such incentives–mid-level traders, engineers, and analysts may also take risks in the hope of bonuses or promotions, with the expectation that the worst that can happen in case of catastrophe is that they lose their jobs. Stockholders may condone such risk taking because they are protected by limited liability.

Both the Gulf oil spill and the financial crisis had their origins in negatively skewed risks. Investigators in the Gulf disaster are looking at whether BP and its contractors underplayed downside risks when they made technical choices, ignored warning signs, and neglected preparations for dealing with a worst-case spill. In the financial crisis, negatively skewed risks involved excessive leverage, manipulation of ratings, design of complex securities, and several other factors.

What can be done? Regulations can be made stricter, but who will regulate the regulators? Who will ensure they are not captured by special interests? Compensation plans can be changed–but if shareholders do not take the initiative, can outsiders fix the system for them? Corporations can be held to strict standards of legal liability, but individuals who make bad decisions are not necessarily the ones to pay when their corporate employers are found liable.

There is no magic bullet. We can only hope that after a couple of really big disasters, people will be more alert to early warning signs the next time.

What Ed has failed to note is that both the financial crisis and the BP oil spill/Gulf crisis are examples of the “Tragedy of the Commons” – when the commons are either the government pocketbook itself, or resources owned/managed by the government. Solutions to management of the Gulf lie in giving more rights – such as “catch rights” and a veto over oil and gas development – directly to resource users like fishermen. With their livelihoods on the line, they would be much more diligent than government can ever be in making sure oil and and gas development proceeds safely.

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Edwin Dolan: applying the Lockean framework to climate change

February 13th, 2008 2 comments

I would like to bring readers’ attention to Edwin G. Dolan’s “Science, Public Policy and Global Warming: Rethinking the Market Liberal Position“, from the Fall 2006 issue of The Cato Journal: www.cato.org/pubs/journal/cj26n3/cj26n3-3.pdf.  Dolan examines libertarian, “market liberal” reactions to climate change and walks through Lockean provisions that he believes require further consideration and elaboration by libertarians in the context of climate change.

FWIW, Dolan was the editor of the Austrian classic, The Foundations of Modern Austrian Economics (Kansas City: Sheed and Ward, 1976)(online here: http://www.econlib.org/LIBRARY/NPDBooks/Dolan/dlnFMAContents.html), and author of the classic pamphlet TANSTAAFL: An Economic Strategy for the Environmental Crisis (Holt, Rinehart and Winston, New York, 1971), which outlined Dolan’s chief perspective:

The fundamental principle on which this strategy is built may be expressed in a simple slogan—There Ain’t No Such Thing As A Free Lunch, the “TANSTAAFL principle,” for short. The TANSTAAFL principle is closely related to the fundamental theorem of ecological economics, that everything depends on everything else. Everything worthwhile has a cost. Whenever you think you are getting something for nothing, look again—someone, somewhere, somehow is paying for it. Behind every free lunch there is a hidden cost to be accounted for.

The task of ecological economics is to figure out how to restructure the economic system so that these hidden costs will be brought out into the open, with the ultimate aim that no one who benefits from the use of the environment will be able to escape without paying in full. The rest of this book is devoted to working out specific applications of this general strategy in order to deal with specific problems.

In the interest of assisting readers, I take the liberty of excerpting liberally from Dolan’s Cato article below.

First, Dolan suggests that many libertarian climate skeptics are acting quite as if they are “conservatives” of the type condemned by Friedrich Hayek.  Dolan cites Hayek’s 1960 essay, “Why I am Not a Conservative” (1960), in which Hayek identified the following traits that distinguish conservatism from market liberalism:

• Habitual resistance to change, hence the term “conservative.”
• Lack of understanding of spontaneous order as a guiding principle of economic life.
• Use of state authority to protect established privileges against the forces of economic change.
• Claim to superior wisdom based on self-arrogated superior quality in place of rational argument.
• A propensity to reject scientific knowledge because of dislike of the consequences that seem to follow from it.

Second, Dolan examines whether any of the above “conservative” traits are at work in libertarian positions on climate change.

… We need to address several questions. One issue is what the status is of the privileges and interests of those who are threatened by the possibility of climate change and of those who are threatened by proposed actions to mitigate it. Which of these has the greater claim to the sympathy of market liberals, when viewed in terms of the standards they apply in other areas of public policy? Another issue is what the values are that lie behind the positions taken by various parties to the debate. The issue of values may determine when market liberals can make principled alliances with one of the other corners of the triangle and when they want to make only tactical alliances. Still another issue is what manner of argument should be employed. For example, what is the proper attitude toward the purely scientific element in the global warming controversy? It will be worth taking a closer look at this last issue before proceeding further.

Hayek expresses himself so well on the role of science that it is worth quoting him at length:

Personally, I find that the most objectionable feature of the conservative attitude is its propensity to reject well-substantiated new knowledge because it dislikes some of the consequences which seem to follow from it—or, to put it bluntly, its obscurantism. I will not deny that scientists as much as others are given to fads and fashions and that we have much reason to be cautious in accepting the conclusions that they draw from their latest theories. But the reasons for our reluctance must themselves be rational and must be kept separate from our regret that the new theories upset our cherished beliefs. . . . By refusing to face the facts, the conservative only weakens his own position. Frequently the conclusions which rationalist presumption draws from new scientific insights do not at all follow from them. But only by actively taking part in the elaboration of the consequences of new discoveries do we learn whether or not they fit into our world picture and, if so, how. Should our moral beliefs really prove to be dependent on factual assumptions shown to be incorrect, it would hardly be moral to defend them by refusing to acknowledge facts [Hayek 1960: 404](emphasis added).

This passage raises obvious questions for the global warming debate. What lies behind the skepticism of market liberals regarding the propositions that the world is getting warmer at a rate that is unusually rapid in climate history, if not altogether unprecedented, and that this apparent trend is likely the joint product of natural cycles and human activity, rather than of the former acting alone? Are liberals correctly rejecting an inadequately grounded scientific fad? Or are they refusing to acknowledge facts for fear that doing so would upset their cherished beliefs?  …

Fortunately, the supposed dilemma is a false one. Liberals have long acclaimed the market as a way of adapting to change, and climate change should be no exception. … Also, market liberals should know well that effective environmental policy does not have to take the form of heavy-handed commandand-control measures. … The same kind of market-oriented policies should be possible in the case of climate change.

In short, if one takes into account both the market’s potential for adapting to change and market-based policy alternatives, there is no reason for market liberals to be anything but open-minded toward ongoing developments in climate science, whether those developments, as they unfold, reveal indications or counter-indications of global warming.

There could, instead, be another explanation for some market liberals’ apparent close-mindedness toward the global warming hypothesis. It could be that, when taking a position on issues of climatology, they are speaking not from perceived threats to their beliefs, but out of loyalty to conservative interests with whom they have struck some tactical alliance. For example, policies designed to reduce greenhouse gas emissions, no matter how carefully market-guided in their design, are likely to undermine the interests of politically powerful producers of carbon-based energy. Equally, they are likely to have a disproportionate impact on the United States relative to other, less carbon intensive, economies. It is understandable that a conservative member of Congress could be pledged to uphold the interests of energy industry workers or shareholders from his or her home constituency. It is also understandable that a U.S. negotiator at an international conference could work to increase the benefits for the United States of a proposed treaty while shifting the costs to other countries. What is harder to understand is why market liberals would see fit to support such positions, unless for the narrowest of tactical reasons. …

(emphasis added) 

Third, Dolan spends considerable time discussing how the Lockean framework of rights and duties applies to climate change, which he frames as follows:

In the case of global warming, the relevant unenclosed commons include the world air-shed, which, in one of its several competing uses, serves as a sink for greenhouse gasses, and the oceans, which serve as a sink for heat generated by the greenhouse effect and a catchment basin for melting ice. (We are still stipulating scientific certainty of these effects.) Whatever adverse impact the Midwestern power plant has on the Bangladeshi farmer are transmitted through the effects of greenhouse gas emissions on these common-property resources. What does a Lockean approach tell us about rights to make use of the global atmospheric and oceanic commons, and about how those rights might be established?

Dolan walks carefully through Locke’s three rights and three corresponding duties, which he summarizes as follows:

Rights:
• to property in one’s own person
• to property in the fruits of one’s own labor
• to property in land and natural resources taken from nature when mixed with one’s own labor

Duties:
• to abstain from harming others
• to abstain from taking property of others
• to leave enough and as good for others when taking from the common

His discussion here is quite useful.

Finally, Dolan summarizes his own analysis of “the proper market-liberal position on global warming,” that is, one “constructed on a sound Lockean respect for the persons and property of others”:

First, market liberals should keep arguments based on comparisons of costs and benefits in proper perspective. The fact that an action produces net benefits, even very large net benefits, does not shield the actor from liability if it also does harm. The relative magnitude of the costs and benefits, or their relative probabilities, is, in this regard, irrelevant. The duty not to harm people in their persons or property is not to be bypassed on the basis of any facile cost-benefit calculus. This is an essential part of what distinguishes the classical liberal tradition from other political theories that would invoke the power of the state to override individual rights in favor of some greater societal utility. This being said, cost-benefit calculations may in some other respects be relevant to the formulation of a market-liberal position on global warming. They may help choose between different mechanisms for implementing climate change policy. They may be relevant to the decision of whether to abstain from possibly harmful actions, or to risk possible harm while accepting a contingent duty of restitution. And they may be relevant to whether harm is better avoided by mitigation of climate change, or instead compensated through investments that help victims of climate change to adapt.

Second, the market-liberal position should be distinct from a conservative position that defends unjustly acquired privileges. Liberalism in America, in particular, grew up in a Lockean state of nature where it was really true, or at least seemed true, that homesteaders, loggers, grazers, and industrialists could take what they needed while leaving “enough and as good for others.” What the environmentalist side of the global warming debate is telling us is that we no longer live in such a world. It is not just that we can take no more from the commons; we have quite possibly already taken so much as to have breached our duty not to engross. To be sure, the science of just how much can safely be taken is not yet perfect. We may be way past the limit already or still a bit short of it. But to cry foul because those who have taken the most are now asked to bear a substantial share of the costs is not liberalism.

Third, market liberals should keep a clear head when it comes to the relationship between science and public policy. It is fine to be legitimately cautious when policies are urged on the basis of weakly established scientific fads. One should be vigilant against attempts to smuggle questionable economic or political assumptions into scientific analysis, as is sometimes done in the global warming debate, and also to possible biases in research produced by grant-seeking and public choice considerations. But at the same time, as Hayek warned, any reluctance to accept new scientific theories must itself be rational and must be kept separate from the regret that the new theories may upset cherished beliefs (let alone that they threaten the financial interests of useful allies). This is a fine line to walk, and I fear that the market-liberal camp may at times have overstepped it.

Fourth, market liberals should think about the implications of their principles not just for public policy, but for their personal conduct. It is fashionable in some conservative circles to ridicule environmentalism as a new religion that calls for a personal morality of abstinence (see, for example, Schlesinger 2005). Perhaps market liberals would not want to describe their beliefs as a religion, but all of the great thinkers to whom they pay homage make it clear that the duty not to harm others in their persons or property is not just an abstract guideline for public policy, but a specific imperative of personal morality.  To cede the moral high ground on environmental issues to the left is not just tactically foolish, it is unprincipled. To put it simply, a market liberal should not be ashamed to drive a Prius rather than a Humvee.

These broad outlines of a market-liberal position on global warming leave a great deal of room for debate and discussion. They leave open the whole area of how to design a policy to deal with global warming. Are the flaws of the Kyoto Protocol so serious that it is worse than doing nothing at all? Perhaps so—even its staunchest supporters acknowledge that it has many limitations. Should we act now, based on current scientific knowledge? Or should we wait, while firmly insisting on the principle of contingent liability, being prepared to make restitution should subsequent harm turn out to be greater than optimists think it will be? In formulating global warming policy, should each country act unilaterally, based on a duty to avoid harm regardless of what others do, or is it best to try to negotiate international agreements? If measures are to be taken, what role should be given to market-based mechanisms like tradable permits? How can such market-like devices, if used, be introduced in a way that respects existing property rights? How do such devices relate to Lockean principles regarding enclosure and management of residual unenclosed commons?

By addressing these and other questions, market liberals can make a uniquely valuable contribution to the global warming debate. If, however, they allow themselves to be perceived as ostriches whose only policy in the face of uncertainty is to hope for the best while ignoring the worst, and base their position on climate policy on arguments that they would disdain in any other context, they will end up making no useful contribution at all.

(emphasis added)

I hope others will take the time to look through Dolan’s framework, which I believe is useful as a call for constructive engagement by libertarians, even as it does not examine particular policy suggestions* or claim to be complete.  (For example, as Jeff Tucker has observed on another thread, Dolan’s article does not discuss the competency of the state to address climate change, if it is a problem.)

(h/t Donny with an A: http://mises.org/Community/members/Donny-with-an-A.aspx.  I note also that Sheldon Richman of the Foundation for Economic Education also recommends Dolan’s essay and calls for less wishful thinking and greater engagement by libertarians in the December 8, 2006 edition of The Freeman: The Goal Is Freedom: Global Warming and the Layman, http://www.fee.org/in_brief/default.asp?id=966.)

*  I note that Dolan has previously discussed pollution trading permits in the context of acid rain; his remarks were examined by Robert McGee and Walter Block in their “Pollution Trading Permits as a Form of Market Socialism and the Search for a Real Market Solution to Environmental Pollution,” Fordham Environmental Law Journal, vol. 16 (1994): 58  http://law.fordham.edu/publications/articles/100flspub4011.pdf.

Categories: Block, climate, Dolan, Hayek, libertarian, Locke, TANSTAAFL Tags:

A handy list of TT posts on BP, the Tragedy of the Government-Owned Commons, Corporations and Oil Serfdom

June 18th, 2010 No comments

For a preceding post, I put together an index to my posts to date, and  thought it might be useful to bump it up to a more neasily accessible stand-alone post.

In case anyone has missed it, I’ve done quite a bit of posting on the BP problem, in a manner intended to be fruitful (and not simply a noodge). Here are my posts, in chronological order:

Risk-shifting, BP and those nasty enviros (a response to Lew Rockwell)

Poor statists! If we close our eyes tightly enough, we can see clearly that Corporations are innocent VICTIMS, of governments that foist on them meaningless grants like limited liability & IP, and of malevolent, grasping citizens

Sheldon Richman doesn’t feel sorry for BP, either

Corporations uber Alles: Conveniently inconsistent on “abstractions” like “the environment”, Austrians overlook their preference for “corporations” over individuals,& their lack of interest in problem-solving

Persons-R-Us? Here’s someone’s interesting thought experiment: “What If BP Were A Human Being?”

Does it make any sense to treat corporations as “persons”, given the differences in incentives structures?

As BP’s oil spills into one of those inconvenient “ecosystems”, now even Reason TV rants about “dying oceans”

Time-out for some light humor on BP’s “ecosystem”: The BP Oil Spill Re-Enacted By Cats in 1 Minute!

Who’s at the short end of the stick when Government “Play[s] Fast and Loose with Civilization” in the Gulf of Mexico?

Ed Dolan on Other People’s Money: Government, Oil Spills, Financial Crises & Limited Liability

Scott Sumner misses government role in “sh*t happens”; epitomizes discussions of BP/offshore oil development

Kevin Carson says, “In a Truly Free Market, BP Would Be Toast”

More useful discussion by Carson, both on BP’s fate in a free market, and on the inept, feckless and captured regulatory state

Matt Yglesias, like many Austrians, misses the role of government in “Agency Problems and Corporate Misconduct”

A BP Reader: statist corporations, “the environment” and the Tragedy of the Government-Owned/-Managed Commons

Sheldon Richman joins Gene Callahan in naively arguing that, IF man’s activities are responsible for climate change, we need not government but simply louder and more obnoxious enviros

As Callahan and Richman laud consumer/moral pressure on polluters, others tell us a BP boycott is stupid

Rand Paul: a caricature of libertarian views on energy

BP: Unless we are to get lost in legal fictions, like Harry Shearer we must look beyond the shareholder curtain

Such a big crisis, yet so few words? Scratching my head over sporadic, thin drive-by postings at LvMI on our growing BP/Gulf disaster

Oil-Serfs-R-Us or the Tragedy of the Government-Owned Commons: the puny Lousianna “Shrimp King” humbled by BP & the Feds

“Economic insight and analysis”? Statist voicepiece WSJ headlines Broken Window Fallacy nonsense: Oil Spill May End Up Lifting GDP Slightly!

Sad: in a numbskull post, “libertarian” Ron Bailey touts cost-benefit analysis as justification for offshore oil drilling, ignores issues of who benefits, who loses & who decides

On ocean drilling, it’s time for Ron Bailey, oil flack (and other libertarians), to meet Ron Bailey, “tragedy of the commons” guru and to stand up for the Oil Serfs

The Eve of Destruction: Excellent post on how Government and statist corporations like BP are stifling community responses to the unfolding Gulf disaster

Disturbing news/views on the manageability of the BP gusher

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Such a big crisis, yet so few words? Scratching my head over sporadic, thin drive-by postings at LvMI on our growing BP/Gulf disaster

June 18th, 2010 2 comments

Yes, another BP post!

It’s a bit puzzling – and disturbing – that, in the midst of an ongoing and epochal pollution event, LvMI authors seem to have so little to say about BP, the federal or state governments that have arrogated to themselves the rights to own and manage shared marine resources, the local communities who can see their ways of life being destroyed but lack any right to respond, the heavy-handed BP/Fed-run cleanup, media black-out and community lock-out, the trashing of a very important commons, or the ongoing stream of misunderstanding and mis analysis by politicians, pundits and the public.

Here’s not simply a golden opportunity, but a NEED to discuss, on the basis of Austrian and libertarian principles how things SHOULD work and COULD be improved, but no.

Instead of any sharing of insights or calls for ideas, we are treated to:

What’s going on? Has the cat of smug hatred for “enviros” and “commons” and a conservative love of corporations and the burgeoning corporations-government partnership pretty much got everyone’s tongue? Are the issues not important enough? Or do Austrian insights or concerns simply not extend to pollution or to fishermen, shrimpers or oystermen or – shudder – when nature-lovers butt heads with corporations and government?

Our little oil gusher is now two months, something on the order of an Exxon Valdez every few days, and ticking, “Relief wells” are two months away, and we have no assurance that they will work. May I recommend abit of action?

I left the following comment on Doug French’s post:

TokyoTom June 17, 2010 at 8:48 am

Doug, so what is YOUR point with this post?

Just taking a stab at your Rorschach blot, could you be decrying the state interventions of limited liability and bankruptcy law, that (1) free shareholders from possible liability for the downside risks that their investment imposes on broader society and (2) let the executives of failing companies keep their jobs while jettisoning shareholders and short-changing voluntary creditors and involuntary victims?

Sincerely,

TT

 

Oh, in case anyone has missed it, I’ve done quite a bit of posting on the BP problem, in a manner intended to be fruitful (and not simply a noodge). Here are my posts, in chronological order:

Risk-shifting, BP and those nasty enviros

Poor statists! If we close our eyes tightly enough, we can see clearly that Corporations are innocent VICTIMS, of governments that foist on them meaningless grants like limited liability & IP, and of malevolent, grasping citizens

Sheldon Richman doesn’t feel sorry for BP, either

Corporations uber Alles: Conveniently inconsistent on “abstractions” like “the environment”, Austrians overlook their preference for “corporations” over individuals,& their lack of interest in problem-solving

Persons-R-Us? Here’s someone’s interesting thought experiment: “What If BP Were A Human Being?”

Does it make any sense to treat corporations as “persons”, given the differences in incentives structures?

As BP’s oil spills into one of those inconvenient “ecosystems”, now even Reason TV rants about “dying oceans”

Time-out for some light humor on BP’s “ecosystem”: The BP Oil Spill Re-Enacted By Cats in 1 Minute!

Who’s at the short end of the stick when Government “Play[s] Fast and Loose with Civilization” in the Gulf of Mexico?

Ed Dolan on Other People’s Money: Government, Oil Spills, Financial Crises & Limited Liability

Scott Sumner misses government role in “sh*t happens”; epitomizes discussions of BP/offshore oil development

Kevin Carson says, “In a Truly Free Market, BP Would Be Toast”

More useful discussion by Carson, both on BP’s fate in a free market, and on the inept, feckless and captured regulatory state

Matt Yglesias, like many Austrians, misses the role of government in “Agency Problems and Corporate Misconduct”

A BP Reader: statist corporations, “the environment” and the Tragedy of the Government-Owned/-Managed Commons

Sheldon Richman joins Gene Callahan in naively arguing that, IF man’s activities are responsible for climate change, we need not government but simply louder and more obnoxious enviros

As Callahan and Richman laud consumer/moral pressure on polluters, others tell us a BP boycott is stupid

Rand Paul: a caricature of libertarian views on energy

BP: Unless we are to get lost in legal fictions, like Harry Shearer we must look beyond the shareholder curtain

 

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A BP Reader: statist corporations, "the environment" and the Tragedy of the Government-Owned/-Managed Commons

June 16th, 2010 No comments

For lack of a better place I left the following note on the moribund comment thread at Lew Rockwell’s May 5 “Feel Sorry for BP?” post:

TokyoTom June 16, 2010 at 2:41 am

It’s more than a little disappointing – given how serious the economic damage being wrought by the BP situation is, and the role of government and BP in the genesis of the problem – how unproductive this thread has turned out to be.

Here is more information and analysis for any interested Austrians out there:

My related blog posts (including comments on/links to posts by Sheldon Richman, Kevin Carson, Ed Dolan, Matt Yglesias, Scott Sumner and Shawn Wilbur) can be found here: http://mises.org/Community/blogs/tokyotom/search.aspx?q=bp

Roderick Long has links to various posts by others (Carson, Richman, plus Darian Worden, Gary Chartier, Alex Knight) here:
http://aaeblog.com/2010/06/08/roundup-on-bp/

My posts on fish and ocean drilling are also relevant:
http://mises.org/Community/blogs/tokyotom/search.aspx?q=fish
http://mises.org/Community/blogs/tokyotom/search.aspx?q=ANWR

Regards,

Tom

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Scott Sumner misses government role in "sh*t happens"; epitomizes discussions of BP/offshore oil development

June 9th, 2010 No comments

Another BP post!

1. Over on his The Money Illusion blog, Chicago-school economist Scott Sumner has a curiously uninsightful post up on the BP oil spill: “Stuff Happens“. Perhaps some of my friendly enviro-hater readers here might like it, but I didn’t. I left the following comments (still pending approval as I copy them here) (emphasis added):

Scott, what you’re rather glaringly missing with your cost-benefit analysis – which blithely ignores the real face of “externalities” – is the institutional setting, which can be summed up as a tragedy of the government-owned and (rather expensively) mis-managed comonns.

Ed Dolan is exactly right about incentives problems facing BP and regulators, none of whom really directly own the downside risks, which instead are borne by fishermen, oystermen, shrimpers, the tourist industry, those who value wildlife and a clean environment, and those who consume what harvesters catch. Some of these are very marginalized communities, but all face tremendous difficulties organizing and expressing their interests effectively with respect to resources on which their very livelihoods may depend, but in which they have no ownership rights.

On the other hand, the oil industry are very powerful actors, very well organized and represented in the corridors of power and influence (remember Cheney’s secret energy meetings, and that BP was one of Obama’s largest donors?), and are adept at shifting risks to others (though self-damage is possible when catastrophic losses occur). As Ed Dolan rightly notes, this is built into their very nature as a result of the government grant of limited (zero) liability to shareholders, who have disincentives to monitoring too closely or to questioning whether profits come at the expense of others who – because of government ownership – have no effective voice regarding losses they bear.

It’s hard to feel much sympathy for either the oil cos or government in theis Avatar-like situation, but I don’t mean to castigate either as “evil”. Rather, we simply need to take a close look at the problems of Moral Hazard that our government interventions – from grants of limited liability, to government resource ownership and concomitant inept and occasionally management – have been fuelling.

Answers lie not in gross CBA analysis, but in letting resources users own the rights to manage and harvest wild resources (which would give them direct claims agains polluters), AND to determine when and where seabed resources are developed. (NOAA’s successful experiments with “catch rights” need to be vastly scaled up.) We would still have oil & gas development, but the fishermen would do a vastly better job of policing the oil companies – who would have to face other resource users with full incentives and abilities to protect their livelihoods. (Obversely, oil companies would also be better managers if they had control over the very valuable fish harvest rights in particular blocks, and would manage to in a way that would reflect such value.

Sincerely,

Tom

Austrian-leaning Ed Dolan, whose recent post on Moral Hazard and agency issues I have just noted, joins in on the comment thread. 

Sadly, Sumner is not alone in paying little attention to those who are at the short-end of the messy oil stick.

2. Liberal blogger Matt Yglesias has a useful blog post up in response to Scott; unfortunately his comment thread has fallen into blind, clear-sighted partisan bickering.

3. I see Richard Posner now has a similar blind piece of blather up at the Washington Post: “From the oil spill to the financial crisis, why we don’t plan for the worst”; more on Posner perhap’s later.

4. Sadly/fortunately, for those of you who haven’t seen or (or could use a little further diversion) this litle one-minute “BP kittens ” YouTube video does a better job than virtually all discussions I’ve seen in noting relevant agency and institutional failure issues.

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Towards a productive libertarian approach on climate, energy and environmental issues

February 10th, 2010 No comments

[This is a work in progress and largely taken from previous posts, but readers might find some value in it in the meanwhile.]

1. Heated but vacuous climate wars

On environmental issues in general and climate in particular, find me someone (like George Will) ranting about “Malthusians” or “environazis” or somesuch, and I’ll show you someone who doesn’t understand – or refuses to acknowledge – the difference between:

(1) wealth-creating markets based on private property and/or voluntary interactions/contracts protected by law, and

(2) the tragedy of the commons situations that result when there are NO property rights (atmosphere, oceans), when the pressures of developed markets swamp indigenous hunter-gather community rules, in many cases where governments formally own and purport to manage “public” resources, and when governments absolve purportedly “private” actors from liability for harms to others (such as via grants of “limited liability“).

So what’s the deal? Here’s a perfect opportunity for skeptics to educate the supposedly market ignorant, but they refuse, preferring to focus instead on why concerned scientists must be wrong, how concerns by a broad swath of society about climate have become a matter of an irrational, deluded “religious” faith, or that those raising their concerns are “misanthropes” or worse.

Such pigheadedness is met by those on the left likewise see libertarians and small-government conservatives as deluded and/or deliberate pawns of evil Earth-destroying corporations.

Both sides, it seems, prefer to fight – and to see themselves as right and the “others” as evil – rather than to reason.

While we should not regret that we cannot really constrain human nature very well, at least libertarian and others who profess to love markets ought to be paying attention to the inadequate institutional framework that is not only poisoning the political atmosphere, but posing risks to important globally and regionally shared open-access commons like the atmosphere and oceans (which are probably are in much more immediate and grave threat than the climate). And they also ought to recognize that there are important economic interests that profit from the current flawed institutional framework and have quite deliberately encouraged the current culture war.

2. Why the reflexive libertarian disengagement?

I have on numerous occasions tried to point out, to posters on the Mises Blog who have addressed climate issues, the stunning unproductivity of the approach that they have taken — that of focussing on science and dismissing motivations and preferences, rather than exploring root causes and middle ground, and have continued to scratch my head at the obstinacy and apparent lack of vision.

The following seem to be the chief factors at work in the general libertarian resistance to any government action on climate change:

– Many libertarians, as CEI’s Chris Horner has stated,  see “global warming [as] the bottomless well of excuses for the relentless growth of Big Government.”  Even libertarians who agree that is AGW is a serious problem are worried, for good reason, that government approaches to climate change will be a train wreck – in other words, that the government “cure” will be worse than the problem.

– Libertarians have in general drifted quite far from environmentalists (though there remain many productive free-market environmentalists/conservationists). Even though libertarians and environmentalists still share a mistrust of big government, environmentalists, on the one hand, generally have come to believe that MORE government is the answer, despite all of the problems associated with the socialized ownership of resources and/or inefficient bureaucratic management (witness the crashing of many managed fisheries in the US), the manipulation of such management to benefit bureaucratic interests, special interests and insiders (wildfire fighting budgets, fossil fuel and hard rock mining, etc.) and the resultant and inescapable politicization of all disputes due to the absence of private markets. On the other hand, many libertarians  reflexively favor business over “concerned citizens”, while other libertarians see that government “solutions” themselves tend to snowball into costly problems that work in favor of big business and create pressures for more government intervention. Thus, libertarians often see environmentalists as simply another group fighting to expand government, and are hostile as a result.

– Libertarians are as subject to reflexive, partisan position-taking as any one else. Because they are reflexively opposed to government action, they find it easier to operate from a position of skepticism in trying to bat down AGW scientific and economic arguments (and to slam the motives of those arguing that AGW must be addressed by government) than to open-mindedly review the evidence or consider ways that libertarian aims can be advanced by using the pressure from “enviro” goals.

This reflexive hostility – at times quite startingly vehement – is a shame (but human), because it blunts the libertarian message in explaining what libertarians understand very well – that environmental problems arise when property rights over resources are not clearly defined or enforceable, and when governments (mis)manage resources, and that there are various private steps and changes in government policy that would undo the previous government actions that are at the root of environmentalists’ frustrations.The reflexive hostility is also a shame because it has the effect, in my mind rather clearly, of rendering libertarians largely blind to the ways that large energy, power and certain manufacturing corporations continue to benefit from (and invest heavily in maintaining) the existing regulatory structure, in ways that shift large costs and risks to unconsenting third parties.

– There are some libertarians and others who profess to love free markets at AEI, CEI, Cato, IER, Master Resource and similar institutions that are partly in pay of fossil fuel interests, and so find it in their personal interests to challenge both climate science and policy proposals that would impose costs on their funders.

I felt particularly struck by the commonness of a refrain we are hearing from various pundits who prefer to question the good will or sanity of environmentalists over the harder work of engaging in a good faith examination and discussion of the underlying institutional problem of ALL “environmental” disputes:  namely, a lack of property rights and/or a means to enforce them. 

3. The whys of climate concerns and calls for “clean” energy

I want to get started with a list of policy changes that I think libertarians can and should be championing in response to the climate policy proposals of others.

The incessant calls for – and criticism of – government climate change policies and government subsidies and mandates for “green/clean power” both ignore root causes and potential common ground.  As a result, both sides of the debate are largely talking past each other, one talking about why there is a pressing need for government policy to address climate change concerns, while the other is concerned chiefly about the likelihood of heavy-handed mis-regulation and wasted resources. This leaves the middle ground unexplored.

There are plenty of root causes for the calls for legislative and regulatory mandates in favor of climate policies and clean / green / renewable power, such as:

  • concerns about apparent ongoing climate change, warnings by scientific bodies and apprehensions of increasing risk as China, India and other developing economies rapidly scale up their CO2, methane and other emissions,
  • the political deals in favor of environmentally dirty coal and older power plants under the Clean Air Act,
  • the enduring role of the federal and state governments in owning vast coal and oil & gas fields and relying on the royalties (which it does not share with citizens, but go into the General Pork Pool, with a relatively meager cut to states),
  • the unwillingness of state courts, in the face of the political power of the energy and power industries, to protect persons and private property from pollution and environmental disruption created by federally-licensed energy development and power projects,
  • the deep involvement of the government in developing, encouraging and regulating nuclear power, and
  • the frustration of consumer demand for green energy, and the inefficient and inaccurate pricing and supply of electricity, resulting from the grant by states of public utility monopolies and the regulation of the pricing and investments by utilities, which greatly restricts the freedom of power markets, from the ability of consumers to choose their provider, to the freedom of utilities to determine what infrastructure to invest in, to even simple information as to the cost of power as it varies by time of day and season, and the amount of electricity that consumers use by time of day or appliance.

4. Is a small-government, libertarian climate/green agenda possible and desirable?

So what is a good libertarian to suggest? This seems rather straight-forward, once one doffs his partisan, do-battle-with-evil-green-fascist-commies armor and puts on his thinking cap.

From my earlier comment to Stephan Kinsella:

As Rob Bradley once reluctantly acknowledged to me, in the halcyon days before he banned me from the “free-market” Master Resource blog, “a free-market approach is not about “do nothing” but implementing a whole new energy approach to remove myriad regulation and subsidies that have built up over a century or more.” But unfortunately the wheels of this principled concern have never hit the ground at MR [my persistence in pointing this out it, and in questioning whether his blog was a front for fossil fuel interests, apparently earned me the boot].

As I have noted in a litany of posts at my blog, pro-freedom regulatory changes might include:

Other policy changes could also be put on the table, such as:

  • an insistence that government resource management be improved by requiring that half of all royalties from mineral and fossil fuel development be rebated to citizens (with a slice to the administering agency), and
  • reducing understandable NIMBY problems by (i) encouraging project planners to proactively compensate persons in affected areas and (ii) reducing fears of corporate abuses, by providing that corporate executives have personal liability for environmental torts (in recognition of the fact that the profound risk-shifting that limited liability corporations are capable of that often elicits strong public opposition and fuels regulatory pressure).

5. Other libertarian discussants

A fair number of libertarian commenters on climate appear to accept mainstream sciences, though there remain natural policy disagreements. Ron Bailey, science correspondence at Reason and Jonathan Adler, a resources law prof at Case Western, Lynne Kiesling at Knowledge Problem blog, and David Zetland, who blogs on water issues, come to mind.

I`m not the only one – other libertarian climate proposals are here:

  • Jonathan Adler at Case Western (2000); he has other useful commentary here, here,
  • Bruce Yandle, Professor Emeritus at Clemson University, Senior Fellow at PERC (the “free market” environmentalism think tank) and a respected thinker on common-law and free-market approaches to environmental problems, has in PERC’s Spring 2008 report specifically proposed a A No-Regrets Carbon Reduction Policy;
  • Iain Murray of CEI; and
  • Cato’s Jerry Taylor is a frequent commentator and Indur Goklany has advanced a specific climate change-targeted proposal.
  •  AEI’s Steven Hayward and Ken Green together have provided a number of detailed analyses (though with a distinct tendency to go lightly on fossil fuels).

Several libertarians recently urged constructive libertarian approaches to climate change:

There have been several open disputes, which indicate a shift from dismissal of science to a discussion of policy; the below exchanges of view are worthy of note:

  • The Cato Institute dedicated its entire August 2008 monthly issue of Cato Unbound, its online forum, to discussing policy responses to ongoing climate change.  The issue, entitled “Keeping Our Cool: What to Do about Global Warming“, contains essays from and several rounds of discussion between Jim Manzi, statistician and CEO of Applied Predictive Technologies, Cato Institute author Indur Goklany; climate scientist Joseph J. Romm, a Senior Fellow at the Center for American Progress; and Michael Shellenberger and Ted Nordhaus, the co-founders of The Breakthrough Institute.  My extended comments are here.
  • Reason Foundation, posted an exchange on Climate Change and Property Rights June 12th, 2008 (involving Reason’s Shikha Dalmia, Case Western Reserve University law professor Jonathan H. Adler, and author Indur Goklany); discussed by Ron Bailey of ReasonOnline here; here`s my take.
  • Debate at Reason, October 2007, Ron Bailey, Science Correspondent at Reason, Fred L. Smith, Jr., President and Founder of CEI, and Lynne Kiesling, Senior Lecturer in Economics at Northwestern University, and former director of economic policy at the Reason Foundation.
  • Reason Foundation, Global Warming and Potential Policy Solutions September 7th, 2006 (Reason’s Shikha Dalmia, George Mason University Department of Economics Chair Don Boudreaux, and the International Policy Network’s Julian Morris).

 

Finally, I have collected here some Austrian-based papers on environmental issues that are worthy of note:

Environmental Markets?  Links to Austrians

Ones such paper is the following: Terry L. Anderson and J. Bishop Grewell, Property Rights Solutions for the Global Commons: Bottom-Up or Top-Down?

A note to Lew Rockwell regarding the reflexive irrelevancy of libertarians on the climate/big government morass

December 20th, 2009 4 comments

Lew Rockwell has a post up on the Mises Economics Blog – “The Left Fell into the Climate Morass” – that has just come to my attention. I`m not from the left, but as a right-leaning, free-market enviro, I offered Lew a few comments, which I copy below:

Lew, I think most of your criticism of the left and of environmentalists is apt, but “libertarians” have only to look in the mirror to see someone to blame for the lack of productive discourse on environmental and regulatory issues, and the reason why libertarians are being marginalized in the confused debate over the legitimate role of the state.

Libertarians in general continue to:

– ignore the opportunities created by widespread concerns about climate change risks to partner with both left and right to seek to undo counterproductive state/federal regulation:
http://mises.org/Community/blogs/tokyotom/archive/2009/11/03/a-libertarian-immodestly-makes-a-few-modest-climate-policy-proposals.aspx

– refuse to follow-up on their own analyses to dig more deeply to see that the roots of the disastrous cycle of regulation (and snowballing fights over the wheel of government) lie in the grant of limited liability to corporate investors, and the resulting externalization of risk and undermining of common law property protections:
http://mises.org/Community/blogs/tokyotom/search.aspx?q=limited+liability

– as Ed Dolan suggested, continue to act as the “conservatives” that Hayek despised by refusing to question the legitimacy of the favors provided to statist enterprises under the status quo, and turn a blind eye to the direct role that “libertarians” play in the gamesmanship such enterprises continue (such questions of motives being “ad homs” except when addressed to alarmists, in whch case it is “cui bono”):
http://mises.org/Community/blogs/tokyotom/archive/2008/02/13/edwin-dolan-applying-the-lockean-framework-to-climate-change.aspx
http://mises.org/Community/blogs/tokyotom/archive/2009/10/07/ad-homs-r-not-us-discussions-over-rent-seeking-necessitate-painful-wrestling-with-slippery-quot-cui-bono-quot-demons.aspx

– instead of acknowledging the legitimacy of concerns over man`s onslaught on nature and local communities (arising both from a lack of property rights problem and from the hand of kleptocratic governments) prefer a self-comforting irrelevancy, both on climate and on resource issues generally:
http://mises.org/Community/blogs/tokyotom/archive/2009/10/30/the-road-not-taken-ii-austrians-strive-for-a-self-comforting-irrelevancy-on-climate-change-the-greatest-commons-problem-rent-seeking-game-of-our-age.aspx
http://mises.org/Community/blogs/tokyotom/archive/2009/11/04/for-climate-fever-take-two-open-air-atom-bombs-amp-call-me-in-the-morning-quot-serious-quot-suggestions-from-kinsella-amp-reisman.aspx

– rather than honest engagement, prefer a tribal hatred of misanthropic “watermelons” and a smug love of strawmen and ad-homs:
http://mises.org/Community/blogs/tokyotom/archive/2009/11/05/the-road-not-taken-v-libertarian-hatred-of-misanthropic-quot-watermelons-quot-and-the-productive-love-of-aloof-ad-homs.aspx

Time once again for some self-satisfied, but ultimately empty tribal holiday cheer?

http://mises.org/Community/blogs/tokyotom/archive/2007/12/16/holiday-joy-quot-watermelons-quot-roasting-on-an-open-pyre.aspx

Sincerely,

Tom

John Quiggin plays Pin-the-tail-on-the-Donkey with "Libertarians and delusionism"

November 3rd, 2009 No comments

John Quiggin, a left-leaning Australian economist and professor at the University of Queensland, has noted my recent post on the penchant for bloggers
and readers at the Mises Blog to attack climate science – are “almost universally committed to delusional views on climate science“, as he puts it – though these are not words fairly put into my mouth.  Like me, though, Quiggin wonders why wonders why libertarians focus on climate science at the near-exclusion of policy discussions, since (1) he sees “plenty of political opportunities to use climate change to attack subsidies and other existing interventions” and (2) he supposes that the environmental movement`s widespread shift “from profound suspicion
of markets to enthusiastic support for market-based policies such as
carbon taxes and cap and trade” seems like a big win for libertarians.

Quiggin previously commented on “Libertarians and global warming” last June; this seems to be a follow up.

Quiggins posits that Austrians/libertarians exhibit a “near-universal rejection of mainstream climate science,” and asserts that:

we can draw one of only three conclusions
(a) Austrians/libertarians are characterized by delusional belief in
their own intellectual superiority, to the point where they think they
can produce an analysis of complex scientific problems superior to that
of actual scientists, in their spare time and with limited or no
scientific training in the relevant disciplines, reaching a startling
degree of unanimity for self-described “sceptics”
(b) Austrians/libertarians don’t understand their own theory and
falsely believe that, if mainstream climate science is right, their own
views must be wrong
(c) Austrians/libertarians do understand their own theory and correctly
believe that, if mainstream climate science is right, their own views
must be wrong

John concludes:

“Overall, though I, think that acceptance of the reality of climate
change would be good for libertarianism as a political movement. It
would kill off the most extreme and unappealing kinds of a priori
logic-chopping, while promoting an appreciation of Hayekian arguments
about the power of market mechanisms. And the very fact of uncertainty
about climate change is a reminder of the fatality of conceits of
perfect knowledge.”

While John asks a good question and reveals some appreciation of markets, it`s clear that he is still pretty much groping in the dark when it comes to understanding libertarians` concerns about climate policy, indeed, even as to libertarian aims and concerns generally. He also overlooks various cognitive/psychological factors that appear to be at play. Naturally, I appreciate the opportunity for discussion.

1. Before addressing his three possible conclusions, let me note that while “market-based policies such as
carbon taxes and cap and trade” may seem to John “like a big win for libertarians”, this is most definitely NOT the case for most libertarians in the context of climate change, as these “market-based policies” represent an enormous expansion of government that libertarians feel very strongly, based on past experience, will be profoundly porky, counterproductive and costly. In the face of the fight for favor in Washington and the choice of opaque cap-and-trade over a more open rebated carbon tax and other deregulatory options, there is good reason to believe that libertarians are right.

2. Regarding conclusion (a), let me first note that John reveals the self-same “conceit of perfect knowledge” that he accuses Austrians/libertarians of having: the “acceptance of reality of climate change” would undoubtedly be good for everyone, but just what is that reality, and how can a layman of any stripe confirm himself that climate is changing and that man is responsible? The very fact that this “reality” is nearly impossible to confirm personally (even over the course of a lifetime) means that even those whom John considers as having “accepted reality” have basically just adopted a frame of reference, on the basis of the consistency of the AGW frame with other previously established mental frames, a reliance on authority, peer-group acceptance, etc.

“Reality” in this case inevitably, for most people, has very large personal and social components; accordingly, both “acceptance” and “skepticism” of it may look like a group belief, which may help to explain why it is possible to perceive “a startling
degree of unanimity” of views on climate science, the contents of such views varying by group.

As for Austrians/libertarians, while I don`t think it is fair to conclude they (we) are characterized by delusional belief in
their own intellectual superiority, but that many do have a belief, not so much in the superiority of their intellect, but in the correctness of their views on political science and economics (this is common in other groups, of course). This may affect their views on climate science, for several reasons that I have noted to John previously, and may be related for some of them to his conclusions (b) and (c).

3. Concerning conclusions (b) and (c), these are both over-generalizations; libertarians are a heterogenous bunch. But if I may generalize myself, to me there appears no conflict whatsoever between Austrian views, which are primarily about interpersonal relations and the role of government, and climate science. “Mainstream science” has nothing to do with these views, so if Austrians are wrong about “mainstream climate science”, this does not imply that any Austrian views
must be wrong. So Quiggins` (c) is wrong.

Quiggins`(b) – that Austrians may not understand their own theory and
may falsely believe that, if mainstream climate science is right, their own
views must be wrong – may be right for some Austrians, but certainly not generally. Rather, what I suspect is going on is much more ordinary, as I previously noted to Quiggin as a comment on his related June post; that I need to repeat myself indicates that maybe John is having cognitive difficulties of his own (emphasis added):

John, thanks for this piece. As a libertarian who believes that
climate change IS a problem, I share some of your puzzlement and have
done considerable commenting
on this issue [see this long list]. Allow me to offer a few thoughts on various factors at
work in the general libertarian resistance to taking government action
on climate change:

– As Chris Horner noted in your linked
piece, many libertarians see “global warming [as] the bottomless well
of excuses for the relentless growth of Big Government.”  Even those who
agree that is AGW
is a serious problem are worried, for good reason, that government
approaches to climate change will be a train wreck – in other words,
that the government “cure” will be worse than the problem.


Libertarians have in general drifted quite far from environmentalists.
Even though they still share a mistrust of big government,
environmentalists generally believe that MORE
government is the answer, while ignoring all of the problems associated
with inefficient bureaucratic management (witness the crashing of many
managed fisheries in the US), the manipulation of such managment to
benefit bureaucratic interests, special interests and insiders
(wildfire fighting budgets, fossil fuel and hard rock mining, etc.) and
the resultant and inescapable politicization of all disputes due to the
absence of private markets. Libertarians see that socialized property
rights regimes can be just as “tragedy of the commons” ruinous as cases
where community or private solutions have not yet developed, and have
concluded that, without privatization, government involvement
inevitably expands. Thus, libertarians often see environmentalists as
simply another group fighting to expand government, and are hostile as
a result.

Libertarians are as subject to reflexive, partisan
position-taking as any one else. Because they are reflexively opposed
to government action, they find it easier to operate from a position of
skepticism in trying to bat down AGW scientific and economic arguments (and to slam the motives of those arguing that AGW
must be addressed by government) than to open-mindedly review the
evidence.
This is a shame( but human), because it blunts the libertarian
message in explaining what libertarians understand very well – that
environmental problems arise when property rights over resources are
not clearly defined or enforceable, and also when governments
(mis)manage resources.

I`ve discussed a number of times how we all easily fall into partisan cognitive traps, as summarized here.

A related piece of the dynamic is that some libertarians may feel that if they agree that AGW may be a problem, that this will be taken – wrongly – by others in the political arena as a conclusion that the libertarian message is no longer relevant.

4. Some support for these points can be seen in Edwin Dolan`s 2006 paper, “Science, Public Policy and Global Warming: Rethinking the Market Liberal Position” (Cato), in which Dolan suggests that many libertarian climate skeptics are acting quite as
if they are “conservatives” of the type condemned by Friedrich Hayek
Dolan cites Hayek’s 1960 essay, “Why I am Not a Conservative” (1960),
in which Hayek identified the following traits that distinguish
conservatism from market liberalism:

• Habitual resistance to change, hence the term “conservative.”
• Lack of understanding of spontaneous order as a guiding principle of economic life.
• Use of state authority to protect established privileges against the forces of economic change.
• Claim to superior wisdom based on self-arrogated superior quality in place of rational argument.
• A propensity to reject scientific knowledge because of dislike of the consequences that seem to follow from it.

Further support is provided by Jonathan Adler, a libertarian law professor at Case Western who focusses on resource issues, and who has concluded that climate change is a serious concern, and that man is contributing to it. His February 2008 post, “Climate Change, Cumulative Evidence, and Ideology” (and the comment thread) is instructive:

“Almost every time I post something on climate
change policy, the comment thread quickly devolves into a debate over
the existence of antrhopogenic global warming at all. (See, for
instance, this post
on “conservative” approaches to climate change policy.) I have largely
refused to engage in these discussions because I find them quite
unproductive. The same arguments are repeated ad nauseum, and no one is
convinced (if anyone even listens to what the other side is saying). …

“Given my strong libertarian leanings, it would certainly be
ideologically convenient if the evidence for a human contribution to
climate change were less strong. Alas, I believe the preponderance of
evidence strongly supports the claim that anthropogenic emissions are
having an effect on the global climate, and that effect will increase
as greenhouse gases accumulate in the atmosphere. While I reject most
apocalyptic scenarios as unfounded or unduly speculative, I am
convinced that the human contribution to climate change will cause or
exacerbate significant problems in at least some parts of the world.
For instance, even a relatively modest warming over the coming decades
is very likely to have a meaningful effect on the timing and
distribution of precipitation and evaporation rates, which will, in
turn, have a substantial impact on freshwater supplies. That we do not
know with any precision the when, where, and how much does not change
the fact that we are quite certain that such changes will occur.

“So-called climate “skeptics” make many valid points about the
weakness or unreliability of many individual arguments and studies on
climate. They also point out how policy advocates routinely exaggerate
the implications of various studies or the likely consequences of even
the most robust climate predictions. Economists and others have also
done important work questioning whether climate risks justify extreme
mitigation measures. But none of this changes the fact that the
cumulative evidence for a human contribution to present and future
climate changes, when taken as a whole, is quite strong. In this
regard, I think it is worth quoting something Ilya wrote below about
the nature of evidence in his post about 12 Angry Men”:

People
often dismiss individual arguments and evidence against their preferred
position without considering the cumulative weight of the other side’s
points. It’s a very easy fallacy to fall into. But the beginning of
wisdom is to at least be aware of the problem.

“The “divide
and conquer” strategy of dissecting each piece of evidence
independently can make for effective advocacy, but it is not a good way
to find the truth”

I  noted the following in response to Adler:

I think that there are many Austrians who understand WHY there might
be a climate change problem to which man contributes, as the atmosphere
is an open-access resource, in which there are no clear or
enforceable property rights that rein in externalities or that give
parties with differing preferences an ability to engage in meaingful
transactions that reflect those preferences. 

But, flawed human beings that we are, we have difficulty truly
keeping our minds open (subconscious dismissal of inconsistent data is
a cognitive rule) and we easily fall into tribal modes of conflict that
provide us with great satisfaction in disagreeing with those evil
“others” while circling the wagons
(and counting coup) with our
brothers in arms.

Sadly, this is very much in evidence in the thread to your own post.

5. I have pulled together a post that indicates that a number of libertarians are trying to engage in good faith on climate change, and which may also serve as a good introduction for interested readers to libertarian thinking on environmental issues.

6. Finally, let me note that many of the problems that concern libertarians also concern progressives, chief of these being the negative effects of state actions on communities, development and on open-access (and hitherto local, indigenous-managed) commons.  This is the same concern that the Nobel Prize committee expressed when extending the prize in Economics to Elinor Ostrom, signalling their desire for a change in international aid policy.

You might find these remarks by Nicholas Hildyard, Larry Lohmann, Sarah Sexton and Simon Fairlie in “Reclaiming the Commons” (1995) to be pertinent; domestic cap-and-trade is an enclosure of the atmospheric commons, for the benefit of firms receiving grants of permits and costs flowing regressively to energy consumers, and internationally represents a vast expansion of state authority and bureaucracies, with attendant enclosure of local resources:

The creation of empires and states, business conglomerates and
civic dictatorships — whether in pre-colonial times or in the modern
era — has only been possible through dismantling the commons and
harnessing the fragments, deprived of their old significance, to build
up new economic and social patterns that are responsive to the
interests of a dominant minority. The modern nation state has been
built only by stripping power and control from commons regimes and
creating structures of governance from which the great mass of humanity
(particularly women) are excluded. Likewise, the market economy has
expanded primarily by enabling state and commercial interests to gain
control of territory that has traditionally been used and cherished by
others, and by transforming that territory – together with the people
themselves – into expendable “resources” for exploitation. By enclosing
forests, the state and private enterprise have torn them out of fabrics
of peasant subsistence; by providing local leaders with an outside
power base, unaccountable to local people, they have undermined village
checks and balances; by stimulating demand for cash goods, they have
impelled villagers to seek an ever wider range of things to sell. Such
a policy was as determinedly pursued by the courts of Aztec Mexico, the
feudal lords of West Africa, and the factory owners of Lancashire and
the British Rail as it is today by the International Monetary Fund or
Coca-Cola Inc.

Only in this way has it been possible to convert peasants into
labour for a global economy, replace traditional with modern
agriculture, and free up the commons for the industrial economy.
Similarly, only by atomizing tasks and separating workers from the
moral authority, crafts and natural surroundings created by their
communities has it been possible to transform them into modern,
universal individuals susceptible to “management”. In short, only by
deliberately taking apart local cultures and reassembling them in new
forms has it been possible to open them up to global trade.[FN L.
Lohmann, ‘Resisting Green Globalism’ in W. Sachs (ed), Global Ecology:
Conflicts and Contradictions, Zed Books, London and New Jersey, 1993.]

To achieve that “condition of economic progress”, millions have
been marginalized as a calculated act of policy, their commons
dismantled and degraded, their cultures denigrated and devalued and
their own worth reduced to their value as labour. Seen from this
perspective, many of the processes that now go under the rubric of
“nation-building”, “economic growth”, and “progress” are first ad
foremost processes of expropriation, exclusion, denial and
dispossession. In a word, of “enclosure”.

Because history’s best-known examples of enclosure involved the
fencing in of common pasture, enclosure is often reduced to a synonym
for “expropriation”. But enclosure involves more than land and fences,
and implies more than simply privatization or takeover by the state. It
is a compound process which affects nature and culture, home and
market, production and consumption, germination and harvest, birth,
sickness and death. It is a process to which no aspect of life or
culture is immune. ..,

Enclosure tears people and their lands, forests, crafts,
technologies and cosmologies out of the cultural framework in which
they are embedded and tries to force them into a new framework which
reflects and reinforces the values and interests of newly-dominant
groups. Any pieces which will not fit into the new framework are
devalued and discarded. In the modern age, the architecture of this new
framework is determined by market forces, science, state and corporate
bureaucracies, patriarchal forms of social organization, and ideologies
of environmental and social management.

Land, for example, once it is integrated into a framework of
fences, roads and property laws, is “disembedded” from local fabrics of
self-reliance and redefined as “property” or “real estate”. Forests are
divided into rigidly defined precincts – mining concessions, logging
concessions, wildlife corridors and national parks – and transformed
from providers of water, game, wood and vegetables into scarce
exploitable economic resources. Today they are on the point of being
enclosed still further as the dominant industrial culture seeks to
convert them into yet another set of components of the industrial
system, redefining them as “sinks” to absorb industrial carbon dioxide
and as pools of “biodiversity”. Air is being enclosed as economists
seek to transform it into a marketable “waste sink”; and genetic
material by subjecting it to laws which convert it into the
“intellectual property” of private interests.

People too are enclosed as they are fitted into a new society where
they must sell their labour, learn clock-time and accustom themselves
to a life of production and consumption; groups of people are redefined
as “populations’, quantifiable entities whose size must be adjusted to
take pressure off resources required for the global economy. …

enclosure transforms the environment into a “resource” for national or
global production – into so many chips that can be cashed in as
commodities, handed out as political favours and otherwise used to
accrue power. …

Enclosure thus cordons off those aspects of the environment that are
deemed “useful” to the encloser — whether grass for sheep in 16th
century England or stands of timber for logging in modern-say Sarawak
— and defines them, and them alone, as valuable. A street becomes a
conduit for vehicles; a wetland, a field to be drained; flowing water,
a wasted asset to be harnessed for energy or agriculture. Instead of
being a source of multiple benefits, the environment becomes a
one-dimensional asset to be exploited for a single purpose – that
purpose reflecting the interests of the encloser, and the priorities of
the wider political economy in which the encloser operates….

Enclosure opens the way for the bureaucratization and enclosure of
knowledge itself. It accords power to those who master the language of
the new professionals and who are versed in its etiquette and its
social nuances, which are inaccessible to those who have not been to
school or to university, who do not have professional qualifications,
who cannot operate computers, who cannot fathom the apparent mysteries
of a cost-benefit analysis, or who refuse to adopt the forceful tones
of an increasingly “masculine” world.

In that respect, as Illich notes, “enclosure is as much in the
interest of professionals and of state bureaucrats as it is in the
interests of capitalists.” For as local ways of knowing and doing are
devalued or appropriated, and as vernacular forms of governance are
eroded, so state and professional bodies are able to insert themselves
within the commons, taking over areas of life that were previously
under the control of individuals, households and the community.
Enclosure “allows the bureaucrat to define the local community as
impotent to provide for its own survival.”[FN I Illich, ‘Silence is a
Commons’, The Coevolution Quarterly, Winter 1983.] It invites the
professional to come to the “rescue” of those whose own knowledge is
deemed inferior to that of the encloser.

Enclosure is thus a change in the networks of power which enmesh
the environment, production, distribution, the political process,
knowledge, research and the law. It reduces the control of local people
over community affairs. Whether female or male, a person’s influence
and ability to make a living depends increasingly on becoming absorbed
into the new policy created by enclosure, on accepting — willingly or
unwillingly — a new role as a consumer, a worker, a client or an
administrator, on playing the game according to new rules. The way is
thus cleared for cajoling people into the mainstream, be it through
programmes to bring women “into development”, to entice smallholders
“into the market” or to foster paid employment.[FN P. Simmons, ‘Women
in Development’, The Ecologist, Vol. 22, No.1, 1992, pp.16-21.]

Those who remain on the margins of the new mainstream, either by
choice or because that is where society has pushed them, are not only
deemed to have little value: they are perceived as a threat. Thus it is
the landless, the poor, the dispossessed who are blamed for forest
destruction; their poverty which is held responsible for
“overpopulation”; their protests which are classed as subversive and a
threat to political stability. And because they are perceived as a
threat, they become objects to be controlled, the legitimate subjects
of yet further enclosure. …

People who would oppose dams, logging, the redevelopment of their
neighbourhoods or the pollution of their rivers are often left few
means of expressing or arguing their case unless they are prepared to
engage in a debate framed by the languages of cost-benefit analysis,
reductionist science, utilitarianism, male domination — and,
increasingly, English. Not only are these languages in which many local
objection — such as that which holds ancestral community rights to a
particular place to have precedence over the imperatives of “national
development” — appear disreputable. They are also languages whose use
allows enclosers to eavesdrop on, “correct” and dominate the
conversations of the enclosed. …

Because they hold themselves to be speaking a universal language,
the modern enclosers who work for development agencies and governments
feel no qualms in presuming to speak for the enclosed. They assume
reflexively that they understand their predicament as well as or better
than the enclosed do themselves. It is this tacit assumption that
legitimizes enclosure in the encloser’s mind – and it is an assumption
that cannot be countered simply by transferring what are
conventionbally assumed to be the trappings of power from one group to
another….

A space for the commons cannot be created by economists,
development planners, legislators, “empowerment” specialists or other
paternalistic outsiders. To place the future in the hands of such
individuals would be to maintain the webs of power that are currently
stifling commons regimes. One cannot legislate the commons into
existence; nor can the commons be reclaimed simply by adopting “green
techniques” such as organic agriculture, alternative energy strategies
or better public transport — necessary and desirable though such
techniques often are. Rather, commons regimes emerge through ordinary
people’s day-to-day resistance to enclosure, and through their efforts
to regain livelihoods and the mutual support, responsibility and trust
that sustain the commons.

That is not to say that one can ignore policy-makers or
policy-making. The depredations of transnational corporations,
international bureaucracies and national governments cannot be allowed
to go unchallenged. But movements for social change have a
responsibility to ensure that in seeking solutions, they do not remove
the initiative from those who are defending their commons or attempting
to regenerate common regimes — a responsibility they should take
seriously.

Might there be good reason NOT to rush into a vast expansion of government world-wide?

 

A libertarian immodestly summarizes a few modest climate policy proposals

November 3rd, 2009 No comments

[Folks, I hope you do a better job than I do at saving draft posts before they`re finalized; I just lost alot of work. This will necessarily be shorter.]

I have on numerous occasions tried to point out, to posters on the Mises
Blog who have addressed climate issues, the stunning unproductive approach. Rather than simply reiterating my criticisms, let me get started with a
list of policy changes that I think libertarians can and should be
championing in response to the climate policy proposals of others.

The incessant calls for – and criticism of –
government climate change policies and government subsidies and mandates for “green/clean power” both ignore root
causes and potential common ground.  As a result, both sides of the
debate are largely talking past each other, one talking about why there
is a pressing need for government policy to address climate change
concerns,
while the other is concerned chiefly about the likelihood of
heavy-handed mis-regulation and wasted resources. This leaves the
middle ground unexplored.

There are plenty of root causes for the calls for legislative
and regulatory mandates in favor of climate policies and clean / green / renewable power,
such as:

  • concerns about climate change,
  • the political deal in favor of dirty coal and older power plants under the Clean Air Act, 
  • the enduring role of the federal and state governments in owning
    vast coal and oil & gas fields and relying on the royalties, which it do not go to
    citizens but into the General Pork Pool, with an unhealthy cut to states), 
  • the unwillingness of state courts, in the face of the political
    power of the energy and power industries, to protect persons and private property from
    pollution and environmental disruption created by federally-licensed energy and power projects,
  • the deep involvement of the government in developing, encouraging and regulating nuclear power, and
  • the
    frustration of consumer demand for green energy, and the inefficient
    and inaccurate pricing and supply of electricity
    , resulting from the
    grant by states of public utility monopolies and the regulation of the pricing
    and investments by utilities, which greatly restricts the freedom of power
    markets, from the ability of consumers to choose their provider, to the
    freedom of utilities to determine what infrastructure to invest in, to
    even simple information as to the cost of power as it varies by time of day and season, and the amount of electricity that consumers use by time of day or appliance.

So what is a good libertarian to suggest? This seems rather straight-forward, once one doffs his partisan, do-battle-with-evil-green-fascist-commies armor and puts on his thinking cap.

From my earlier comment to Stephan Kinsella:

As Rob Bradley once reluctantly acknowledged to me, in the halcyon days before he banned me from the “free-market” Master Resource blog, “a
free-market approach is not about “do nothing” but implementing a whole
new energy approach to remove myriad regulation and subsidies that have
built up over a century or more.”
But unfortunately the wheels of this principled concern have never hit the ground at MR [my persistence in
pointing this out it, and in questioning whether his blog was a front for
fossil fuel interests, apparently earned me the boot
].

As I have noted in a litany of posts at my blog, pro-freedom regulatory changes might include:

  • accelerating cleaner power investments by eliminating corporate
    income taxes or allowing immediate depreciation of capital investment
    (which would make new investments more attractive),
  • eliminating antitrust immunity for public utility monopolies (to
    increase competition, allow consumer choice, peak pricing and “smart metering” that will
    rapidly push efficiency gains),
  • ending Clean Air Act handouts to the worst utilities (or otherwise
    unwinding burdensome regulations and moving to lighter and more
    common-law dependent approaches),
  • ending energy subsidies generally (including federal liability caps for nuclear power (and allowing states to license),
  • speeding economic growth and adaptation in the poorer countries
    most threatened by climate change by rolling back domestic agricultural
    corporate welfare programs
    (ethanol and sugar), and
  • if there is to be any type of carbon pricing at all, insisting that it is a per capita, fully-rebated carbon tax
    (puts the revenues in the hands of those with the best claim to it,
    eliminates regressive impact and price volatility, least new
    bureaucracy, most transparent, and least susceptible to pork).

Other policy changes could also be put
on the table, such as an insistence that government resource management
be improved by requiring that half of all royalties be rebated to
citizens
(with a slice to the administering agency).

I`m not the only one – other libertarian climate proposals are here:

Several libertarians have recently been urging constructive libertarian approaches to climate change:

These discussions and exchanges of view are also worthy of note:

  • The Cato Institute has dedicated its entire August 2008 monthly issue of Cato Unbound, its online forum, to discussing policy responses to ongoing climate change.  The issue, entitled “Keeping Our Cool: What to Do about Global Warming“, contains essays from and several rounds of discussion between Cato Institute author Indur Goklany; climate scientist Joseph J. Romm, a Senior Fellow at the Center for American Progress; and Michael Shellenberger and Ted Nordhaus, the co-founders of The Breakthrough Institute.  My extended comments are here.

  • Debate at Reason, October 2007, Ron Bailey, Science Correspondent at Reason, Fred L. Smith, Jr., President and Founder of
    CEI, and Lynne Kiesling, Senior Lecturer in Economics at
    Northwestern University, and former director of economic policy at the
    Reason Foundation.
  • Reason Foundation, Global Warming and Potential Policy Solutions September 7th, 2006 (Reason’s Shikha Dalmia, George Mason University Department of Economics
    Chair Don Boudreaux, and the International Policy Network’s
    Julian Morris)

Finally, I have collected here some Austrian-based papers on environmental issues that are worthy of note:

Environmental Markets?  Links to Austrians

One such paper is the following: Terry L. Anderson and J. Bishop Grewell, Property Rights Solutions for the Global Commons: Bottom-Up or Top-Down?