Search Results

Keyword: ‘quiggin’

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?

Resources on Elinor Ostrom

January 15th, 2010 No comments

[Note: This is a work in progress]

Elinor Ostrom is the guru of CPR regimes; anyone interested should look into her fascinating and highly-regarded work, particularly
her seminal and extensively researched Governing the Commons (1990). Here is a review.

A profile of Ostrom, who is a member of the National Academies of Science and and Editor of its Proceedings, is here:

Her work can be found here:,+Elinor&hl=en&btnG=Search


and here:

[She is a member of the American Academy of Arts and Sciences, the National Academy of Sciences, and the American Philosophical Society,
and a recipient of a number of prestigious awards. Her other books include Rules, Games, and Common-Pool Resources (1994); The Commons in the New Millennium: Challenges and Adaptations (2003); The Samaritan’s Dilemma: The Political Economy of Development Aid (2005); Understanding Institutional Diversity (2005); and Understanding Knowledge as a Commons: From Theory to Practice (2007).]

Here is one link to get readers started:

Elinor Ostrom et al.,
Revisiting the Commons: Local Lessons, Global Challenges, Science 9
April 1999:

Here is one general bibliography on commons research:

1.  Here are the statements from the 2009 Nobel Prize committee:

a.  From the press release:

Elinor Ostrom has demonstrated how common property can be successfully managed by user associations. Oliver Williamson has
developed a theory where business firms serve as structures for
conflict resolution. Over the last three decades these seminal
contributions have advanced economic governance research from the
fringe to the forefront of scientific attention.

Economic transactions take place not
only in markets, but also within firms, associations, households, and
agencies. Whereas economic theory has comprehensively illuminated the
virtues and limitations of markets, it has traditionally paid less
attention to other institutional arrangements. The research of Elinor
Ostrom and Oliver Williamson demonstrates that economic analysis can
shed light on most forms of social organization.

Elinor Ostrom has challenged
the conventional wisdom that common property is poorly managed and
should be either regulated by central authorities or privatized.

Based on numerous studies of user-managed fish stocks, pastures, woods,
lakes, and groundwater basins, Ostrom concludes that the outcomes are,
more often than not, better than predicted by standard theories. She
observes that resource users frequently develop sophisticated
mechanisms for decision-making and rule enforcement to handle conflicts
of interest, and she characterizes the rules that promote successful

b.  The background explanation is useful and contains a pointed criticism of many centrally-directed approaches to common pool resources (emphasis added):

If we want to halt the degradation of our natural environment and prevent a repetition of the many collapses
of natural-resource stocks experienced in the past, we should learn
from the successes and failures of common-property regimes. Ostrom’s
work teaches us novel lessons about the deep mechanisms that sustain
cooperation in human societies.

It has frequently been suggested that common ownership entails excessive resource utilization, and that it is
advisable to reduce utilization either by imposing government
regulations, such as taxes or quotas, or by privatizing the resource.
theoretical argument is simple: each user weighs private benefits
against private costs, thereby neglecting the negative impact on others.

However, based on numerous empirical studies of natural-resource management, Elinor Ostrom has concluded that common
property is often surprisingly well managed. Thus, the standard
theoretical argument against common property is overly simplistic.
It neglects the fact that users themselves can both create and enforce rules that mitigate overexploitation.
The standard argument also neglects the practical difficulties associated with privatization and government regulation. …

There are many …. examples which indicate that user-management of local resources has been more
successful than management by outsiders. …

[T]he main lesson is that common
property is often managed on the basis of rules and procedures that
have evolved over long periods of time.
As a result they are more
adequate and subtle than outsiders – both politicians and social
scientists – have tended to realize. Beyond showing that
self-governance can be feasible and successful, Ostrom also elucidates
the key features of successful governance. One instance is that active
participation of users in creating and enforcing rules appears to be
essential. Rules that are imposed from the outside or unilaterally
dictated by powerful insiders have less legitimacy and are more likely
to be violated. Likewise, monitoring and enforcement work better when
conducted by insiders than by outsiders. These principles are in stark
contrast to the common view that monitoring and sanctioning are the
responsibility of the state and should be conducted by public employees.

2.   Miscellaneous recent materials

On December 16, Spiegel Online ran the following interview with Elinor Ostrom

NPR’s Planet Money: Podcast: Elinor Ostrom Checks In (October 23, 2009)

Lecture at Cornell University: “Collective Action and the Commons: What Have We Learned?” (September 17, 2009)

// <!–[CDATA[
var smh = new SWFObject(“players/cornell_main.swf”, “ei_test”, “654”, “451”, “9”, “#f0eee1”);
smh.addVariable(“videoID”, “571”);
smh.addVariable(“startSecs”, “0”); smh.addVariable(“endSecs”, “3548”);
smh.addParam(“allowScriptAccess”, “always”);
smh.addParam(“wmode”, “transparent”);
smh.addParam(“allowfullscreen”, “true”);
smh.addParam(“quality”, “high”);

3.  These following earlier posts:

Elinor Ostrom? Austrians praise the Nobel laureate’s work on how human communities successfully manage resource conflicts

by TokyoTom

Elinor Ostrom awarded the Nobel prize in economics? Who? no doubt some
of you are wondering. Well, sharp-eyed readers will have noted that I
have referred to her any number of times (which I will reprise later,
as this post has gotten too lengthy). I excerpt below some of the
praise Elinor Ostrom has…

sum games: Get yer Elinor Ostrom here! A reprise of posts on rolling up
our sleeves to address real problems that “markets” (& govt.) now

by TokyoTom

I excerpt below, in chronological order, portions of my prior posts
here that refer to Elinor Ostrom (the political scientist who recently
was awarded the Nobel prize in economics) and are indebted to her
thinking. Perhaps items 3 and 10 are most accessible for readers in a
hurry to find links to her…

Elinor Ostrom: Another Nobel Laureate jumps the climate shark (Proceed at Own Risk)

by TokyoTom

On December 16, Spiegel Online ran the following interview with Elinor
Ostrom , whose 2009 Nobel prize in economics (shared with Oliver
Williamson ), was widely applauded by Austrian economists (and whose
work I have referred to any number of time previously ). Der Spiegel
asked some good questions,…

Tragedy of the panicked enviro III: learning from Elinor Ostrom about cooperative action

by TokyoTom

This is the second follow-up to my post ” Grist and the tragedy of the
panicked enviro “, where I try to clarify the institutional frameworks
for understanding and addressing resource problems, in response to
confusion in comments by others. T Worstall Posted 5:27 pm 27 Aug 2009
TokyoTom makes…

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

by TokyoTom

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…

Not Climate Change Welfare, But Capitalism and Free Markets

by TokyoTom

… is what poor countries need. So corrrectly argues Keith Lockitch of
the Ayn Rand Institute , in a new article that responds to the
agreement, by the delegates of industrialized nations at the December
climate change conference in Bali, to activate an “adaptation fund”
that would help…

Libertarians to lefty-enviros: without community-based property rights, sustainable fisheries are impossible

by TokyoTom

Readers from RealClimate , thanks for your visit. Here`s my comment
with embedded links: #188 / 245: Neal & Jim, thanks for the
references to the successful experiments in Iceland, NZ and the Alaskan
pollock fishery to replace the tragedy of the government commons with
property rights approaches…

Ron Bailey of Reason congratulates Al Gore

by TokyoTom

[updated] A great new post by libertarian Ron Bailey of Reason here:
Congratulations to Al Gore But be wary of the man’s proposed solutions
for global warming. Ronald Bailey | October 12, 2007 1. Here are some excerpts
(emphasis added), followed by a copy…

Using the State to solve common resource problems?

by TokyoTom

How exactly do you transfer commons into private ownership in a fair
way, even for easily divided up stuff like land? That’s the trillion
dollar question that someone asked me on a recent thread ( ) regarding my
suggestion that better definition…

Jon Bostwick agrees on another post that “Man is clever but not wise
(“homo sapiens” is a misnomer)”, but further comments (emphasis added):
“True. But humanity is wise. Men create cultures, economies and law.
“Man’s flaw is that he is over confident of his own intelligence…
Categories: Uncategorized Tags:

Bob Murphy, Implicit Apologist for Coal, Misconstrues the Real Debate & Lessons from "Climategate"

December 7th, 2009 3 comments

Bob Murphy recently offered LvMI readers a post; “Apologist Responses to Climategate Misconstrue the Real Debate”; I left a few comments in response (minor edits).

(My apologies to Bob for  borrowing and tweaking his title.)

Bob, interesting title –

“Apologist Responses to Climategate Misconstrue the Real Debate (Quantitative, not Qualitative)”

Have you failed to notice that practically every commenter on threads here, as well as at “MasterResource” misunderstands and misconstrues precisely what you have spelled out?

Interesting place to post it, as well.  MasterResource? Isn`t that Rob Bradley`s so-called “free market” energy blog that bans libertarian commenters who dare to note:

– the blog`s failure to ever actually argue for freer energy markets or to criticize the dirty favors given under the status quo to coal, or

– the blog`s close affiliations with naked rent-seeking groups like IER (which Exxon expressly de-funded due to its no-longer “productive” stance on climate change)(and which pays you for your climate work) and American Energy Alliance?


It`s curious that you focus on climate “apologists”, while ignoring how you yourself so adroitly act as one for the reflexive “skeptics”:

– “It’s true, an email from Phil Jones by itself doesn’t make Richard Lindzen right or wrong, but when policymakers need to decide which scientific experts they can trust, then the CRU emails are very relevant.”

Um, wouldn`t a “real” skeptic say you are both appealing to authority, and by referring to trust, dismissing some on an “ad hom” basis, without addressing their arguments?

– You slip by the obvious nonsense deliberately spouted by Limbaugh, Fox and others, by pretending they`re actually being reasonable:

“Of course, what Limbaugh and the Fox interviewer meant was, “The theory that says governments around the world need to heavily intervene in their energy sectors right away, or else our grandchildren will face climate catastrophes, cannot be justified by careful scientific research.”

Respectfully, hogwash. Why the effort to put lipstick on pigs?

While I find a fair bit of your post to be useful, other parts are misleading:

– “the issue isn’t, “Is ‘climate’ a useful theory to explain thermometer readings?” No, the real debate concerns very specific and quantitative disagreements.”

This really misses the gist: the real scientific dispute about ONE aspect of climate science is about climate “sensitivity” – the long-term, multi-decadal average temperature response of the Earth`s surface temperature to a doubling of CO2 – and is a specific disagreement over quantities that can only be GUESSED at in advance and are very difficult to estimate even in retrospect.

You – like “skeptics” like Lindzen – totally ignore ocean acidification.

– “The reason QED (quantum electrodynamics) is powerful is that it allowed physicists to make very precise predictions that were experimentally verified.”

It`s funny that you mention this, as if it implies we should ignore/discount climate science – until it can be “experimentally verified.”  Well, we`re running the experiment right now, except we have no “control”, no re-runs, and little or no control over the very experiment itself. Excuse me for not finding cnfort in this, or in your lack of willingness to address it.

– “If the climate scientists cannot tell if a particular remedy is working, it means that they aren’t exactly sure how the climate would have evolved in the absence of such a remedy. In other words, Trenberth at least is admitting that he is not at all confident in the precise, quantitative predictions that the alarmists are citing as proof of the need for immediate government intervention.”

Bob, scientists all recognize that there is a great deal of unpredictibility/”noise” in the climate system; there simply are are NO “precise, quantitative predictions” that any scientist is making. I`m surprised you find anything surprising here.

– “`All the rest is economics.`   Since that is Schmidt’s view, it’s not surprising that he thinks Climategate is much ado about nothing.”

I read this differently; Schmidt indicates, that from a scientists`s view,  we ought to immediately stop forcing the climate, but acknowledges that the decision is not his to make, and involves cost-benefit money/political decisions that belong to others.

– “Those of us who are not experts on climate models now have proof that the official line that “the science is settled” was a bluff.”

It`s not clear what you actually mean here, Bob, but in any case you have absolutely no such thing.  The “official line” has always been a political argument about that society should respond to growing scientific knowledge; these emails do NOT alter the underlying knowledge.

– “but the confidence we should right now place in their modeling is much lower than what their biggest enthusiasts have been assuring us for years.”

On what basis do you offer this opinion, and the implicit comfort that coal producers/utilities/their investors want to give us that burning all the rest of the world`s fossil fuels will leave the climate/oceans hunky-dory (ignoring all the dangerous gunk included it)?


Let me close with a note that, despite my criticisms, I commend Bob`s effort; I encourage him to continue to check that he`s not falling prey to sophisticated forms of self-delusion:


Road Not Taken II: Austrians strive for a self-comforting irrelevancy
on climate change, the greatest commons problem / rent-seeking game of
our age

A few more “delusional” thoughts to John Quiggin on partisan perceptions & libertarian opposition to collective action

Categories: Bob Murphy, climate change, Rob Bradley Tags:

[Update] A left-wing economist discusses "Libertarians and global warming"

June 18th, 2008 No comments

Australian economist John Quiggin (whom I’ve cited previously on climate change costs) has a post up with this title, both at his own blog and at Crooked Timber.  Does anybody care to comment?

My own response to John was as follows:

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. 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.



[Updated] Bob Murphy heroically nitpicks the CBA model of reluctant carbon tax advocate, William Nordhaus

June 5th, 2008 2 comments

Bob Murphy, an economist at Rob Bradley‘s Institute for Energy Research, has posted on the main Mises Blog a link to a paper that he has submitted to an economic journal, “Rolling the DICE: Nordhaus’ Dubious Case for a Carbon Tax“.

[Update:  Bob thoughtfully copied environmental economist David Zetland on his draft paper, and while he has not returned to comment at his own Mises thread, Bob has made further comments at David’s blog and at his own shared blog.]

IER promotes Murphy’s paper as ambitiously “tackl[ing] the basic premise of pricing carbon … using William Nordhaus’ DICE model as the representative of economic orthodoxy”, but it seems to me that both his objectives and his achievements are far more modest.  Murphy:

(1) fails to attack either the fundamental premises of orthodox cost-benefit analysis as applied to climate change or the basic premises of the DICE model,

(2) focusses chiefly on various uncertainties involved in the parameters in Nordhaus’ model, while ignoring not only that such uncertainties cut in more than one direction, but that other economists have strongly argued that Nordhaus has underestimated or mishandled important damages and uncertainties (e.g., John Quiggin and Sterner & Persson) and has simply misunderstood the usefulness of CBA in the face of important uncertainties that CBA cannot easily handle (e.g., Martin Weitzman, Richard Tol, others),

(3) fails to note the point (made by McKitrick and others) that even if imperfect, carbon taxes, if substituted for income, capital gains and other taxes, will significantly lessen important economic distortions; and

(3) fails to offer much in the way of Austrian approaches to CBA, much less to the property rights and preference issues involved in economic decisions involving significant externalities or open-access common resources, fails to point to possible ways in which government policy may be inefficient, costly, and subject to the skewing effects of rent-seeking, and fails to recommend important policy changes that are needed to facilitate a transition to a lower carbon economy, by promoting economic freedom, competition in energy and power markets, easing corporate tax depreciation rules that slow innovation, and strengthening property rights and common law enforcement mechanisms (Bruce Yandle and Jon Adler have both made concrete suggestions on desirable policy changes; what is holding back people at LvMI?)

In short, what Murphy delivers is flawed and far less than billed.

[Update:  As Ludwig von Mises himself noted (see my blog post Mises on fixing externalities“), private property institutions arose in response to the economic inefficiency of older systems that did not force economic actors to bear the external effects of their actions.  We are intelligent and occasionally rational creatures – why should we not be pro-actively considering what institutions might be desirable and feasible for dealing with the effects of our activities on the atmosphere and  climate (and oceans, ecosystems and unowned species, or how to improve governance in countries that don’t recognize or protect property rights)?]

I copy below (with some typo corrections) the comments that I posted on Bob’s Mises thread; I will try to revisit later to add links and further resources:

Bob, thanks for posting this

Here are a few quick notes:

– although you note that every step in Nordhaus’ analysis involves uncertainty, you have failed to note Marty Weitzman’s recent work that tells us how strongly uncertainly serves as a factor SUPPORTING early action – an important factor that neither Nordhaus nor you take into account at all. Weitzman states, “the influence on cost-benefit analysis of fat-tailed structural uncertainty about climate change, coupled with great unsureness about high-temperature damages, can outweigh the influence of discounting or anything else.”

– while you indicate that one key area of uncertainty is that future GHG concentrations may be overstated, your observations actually suggest the opposite – that because the oceanic sink is finite, as it becomes saturated atmospheric GHG concentrations are apt to rise even more sharply.

– while you indicate that the temperature increase form a given GHG concentration may be overstated, you ignore the possibility of the opposite – that the long-term temperature impact of a given GHG level may be higher than the number Nordhaus has used. Further, given paleo evidence that Hansen has noted, it appears unlikely that climate sensitivity will be less than 3 degrees C.

– Similarly, while you note that economic damages from a given temperature increase may be overstated, you fail to address the possibility that such damages may be understated – and also fail to note that the Earth is apparently more sensitive to climate changes than has been expected, witness the rapid Arctic/Greenland melting that we are seeing at only a 0.7 C increase, and the rapid expansion of tropical zones.

– it is a distinct possibility that Nordhaus has underestimated nonmarket damages, as John Quiggin and others argue. In any case, Nordhaus does not account for the changing relative prices for various goods and services that the changing composition of the economy and climate change will induce,as Sterner and Persson have noted in a recent paper at RFF:

“future scarcities that will be induced by the changing composition of the economy and climate change should lead to rising relative prices for certain goods and services, raising the estimated damage of climate change and counteracting the effect of discounting. … [C]hanging relative prices … has major implications for a correct valuation of future climate damages. We introduce these results into a slightly modified version of the DICE model (Nordhaus 1994) and find that taking relative prices into account can have as large an effect on economically warranted abatement levels as can a low discount rate.”

– in looking at damages, you tend to focus on the US picture alone, without regard to other nations – largely poorer ones – in which greater net losses are expected to be felt. You also completely fail to address, even in the case of the US, that benefits and impacts will not be uniformly shared, and that those with net benefits presently have no obligation to compensate those shouldering losses.

– while you fairly note that Nordhaus’ analysis can be helpful in comparing the relative net costs and benefits of different proposals, you fail to note that with changed assumptions, even using Nordhaus’ model as is, much higher estimates of “optimal” levels of carbon taxes can be derived.

– You point to Nordhaus’ remarks on how free-riding be various countries will drastically affect the benefits to be derived from any carbon taxes, but argue that this itself is a justification for the US to free ride, rather than for us to work to coordinate compliance by others.

– You also seem to be very worried that a coordinated approach would actually result in heavily distorted worldwide production, when widespread noncompliance by the various Kyoto parties indicates how ready nations are not to unilaterally assume burdens that other nations will not share.

– You also express concern that any coordinated approaches to climate change may be difficult to unwind as information changes, when it is clearly that various nations (and their industries) are acutely aware of comparative advantage and quite ready to react to what others are or are not doing (in the fact of the easy movement of capital).

– Further, you have confused measures like possible geoengineering and carbon sequestration approaches – which would be incentivized by carbon taxes and are a form of “mitigation”, with what is properly considered as “adaptation” to unavoided temperature increases and climate changes.

There are of course many other points that one would like to see Austrians making – such as the benefits of freeing up the economy from burdensome regulations (while strengthening property rights and private litigation remedies), adding greater degrees of freedom and competition to energy markets to drive greater energy efficiency, allowing immediate depreciation of capital investments, and the desirability of avoiding government-directed investments and subsidies – but perhaps these are things you intend to address in another paper spelling out a truly Austrian approach, rather than nitpicking at a single conventional CBA argument?



(I apologize that this is link-poor, but it seems like the best way to actually have this comment posted.)

Published: June 12, 2008 7:49 AM

Bob, allow me to suggest that you (and others) may also wish to consider taking a look at addressing also the recent short pieces by Joe Stiglitz, Tom Schelling and Ken Arrow others in last year`s The Economists’ Voice; they are as relevant as Nordhaus, and much more accessible to the average reader:

Joseph Stiglitz, A New Agenda for Global Warming

Kenneth J. Arrow, Global Climate Change: A Challenge to Policy

Thomas C. Schelling, Climate Change: The Uncertainties, the Certainties and What They Imply About Action

Published: June 12, 2008 9:41 AM

Ron Bailey of Reason congratulates Al Gore

October 15th, 2007 No comments

[updated] A great new post by libertarian Ron Bailey of Reason here:

Congratulations to Al Gore
But be wary of the man’s proposed solutions for global warming.
Ronald Bailey | October 12, 2007

1.  Here are some excerpts (emphasis added), followed by a copy of my comments over at Reason:

[Gore is] wrong to characterize global warming as a moral and spiritual problem. Man-made global warming is not some kind of environmental sin. It’s just another commons problem that has emerged as human civilization continues to develop. Most environmental problems arise in what are called open-access commons. That is, people pollute air and rivers, overfish lakes and oceans, cut down rainforests, and so forth because no one owns those natural resources and therefore no one has an interest in protecting them.

The point is clearest in the case of tropical forests and fisheries. No one owns the forests or fisheries, so anyone may exploit them. No one has an incentive to leave any trees or fish behind because, if they do, someone else will harvest them and get the benefits for themselves. In other words, those who immediately benefit from exploiting the resource do not bear the long-run costs of its ultimate destruction. This mismatch between benefits and costs is a recipe for disaster. Similarly, no one owns the global atmosphere, so there is no incentive for anyone to protect it from various pollutants, including greenhouse gases that tend to raise average global temperatures.

Generally, humanity has solved environmental problems caused by open-access situations by either privatizing the relevant commons or regulating it.  …

As a skeptic of government action, I had hoped that the scientific evidence would lead to the conclusion that global warming would not be much of a problem, so that humanity could avoid the messy and highly politicized process of deciding what to do about it. Although people of good will can still disagree about the scientific evidence for climate change, I now believe that Gore has got it basically right. The balance of the evidence shows that global warming could well be a significant problem over the course of this century.

Yale economist William Nordhaus … calculates that the optimal policy would impose a carbon tax of $34 per metric ton carbon in 2010, with the tax increases gradually reaching $42 per ton in 2015, $90 per ton in 2050, and $207 per ton of carbon in 2100. A $20 per metric ton carbon tax will raise coal prices by $10 per ton, which is about a 40 percent increase over the current price of $25 per ton. A $10 per ton carbon tax translates into a 4 cent per gallon increase in gasoline. A $300 per ton carbon tax would raise gasoline prices by $1.20 per gallon. Following this optimal trajectory would cost $2.2 trillion and reduce climate change damage by $5.2 trillion over the next century. …

Man-made global warming is an economic and technical problem of the sort that humanity has solved many times. For example, forests are expanding in rich countries because they have well-developed private property rights. Also in rich countries, regulations have helped once polluted rivers and lakes to become clean and have drastically cut air pollution. One of the keys to solving environmental problems is economic growth and wealth. …

In any case, global warming is not the result of environmental sin; it is the result of human progress creating another commons problem. … I have no doubt that man-made global warming is an economic and technical problem that an inventive humanity will solve over the course of the 21st century.

Still, congratulations are in order to Al Gore for being recognized by the Nobel committee for his persistence in trying to get humanity to pay attention to this new commons problem.

2.  Here is a digest of my comments to Ron:

Basically, a great post, but I’ve got a few small quibbles.

1.  You were right last year when you said that “In the end, the debate over global warming and its obverse, humanity’s energy future, is a moral issue.”

2.  I share your understanding of the economics and institutional problem and agree that a straightforward explanation of these is important for very many.

3.  However, you forget what evolutionary psychology, Ostrom and Yandle have explained to us so well about how our innate moral sense drives and underpins mankind’s success as a species by enhancing our ability to cooperate and to overcome commons issues.

Our long history of developed rules and institutions (informal and formal now overlapping) are based on our moral sense and the effectiveness of these rules depends critically on our moral investment in accepting their legitimacy – witness our views on murder, theft, lying and “not playing by the rules” – and in voluntarily complying with them.

Our moral sense reinforces our judgments about when rules/institutions are not working and the need to develop new ones in response to changing circumstances and new problems.  When we see a problem that we think requires change, it is unavoidable that we respond to the status quo, the behavior of people within it and the need for change with a moral sense. 

This is simply a part of our evolutionary endowment.  (Of course, other parts of our endowment accentuate our suspicions of smooth talkers and help us catch free riders and looters and to guard against threats from outsiders.)

4.  Accordingly, while it’s unclear how deliberate Gore’s talk of “a moral and spiritual challenge” and “lifting the global consciousness” is or whether this is a productive approach for some people, I think it is fairly clear that, in order to build consensus for a solution to the climate commons problem (and other difficult commons problems) and to ensure that any agreed solutions are actually implemented, we will need to bring our moral senses to bear.

In other words, it is RIGHT to worry about climate change, but no meaningful/effective “solution” can be reached or implemented unless it is FAIR and the parties involved have sufficient TRUST (backed by information) in each other.

5.  You have understated the AGW problem, especially in light of the inertia both in our energy systems and in the climate, the long duration of CO2 and other GHGS, and the rapidity with which the climate is already changing – faster than even this year’s IPCC reports:

6.  It is surprising that in referring to Nordhaus you have not indicated the ways in which it seems clear that Nordhaus has understated the costs and risks of climate change and the utility of acting sooner rather than later, as noted by Weitzman, Sterner & Persson, Quiggin and others, or that by “revenue recycling” as noted by McKitrick we can substantially reduce the costs of carbon abatement policies.

7.  You fail to note that while there are real costs to our economies to build climate change institutions, once established in principle any resulting carbon pricing reflects real costs and is not a “cost” to the economy.

8.  It is a puzzle that you did not note that the most powerful way to call forth the investment and behavior changes that would help us to “find a cheap, low-carbon source of energy” and to limit GHG emissions would be to find ways that would effectively price GHG emissions.

9.  Finally, one further comment on this:

“One of the keys to solving environmental problems is economic growth and wealth.  … So keep in mind that anything that unduly retards economic growth also retards ultimate environmental clean-up, including global warming.”

Not sure what you’re driving at here.

As far as developing countries go, efforts by Western nations to address climate change are actually net subsidies to them (by dampening Western demand for fossil fuels) and are providing incentives and investment for growth.

And as for Western economies, at least in principle internalizing externalities by enclosing commons (that have provided value which has not been factored into GDP) doesn’t retard economic growth, but enables it by forestalling the destruction of resources, permitting greater wealth-generating private transactions and reducing inefficiency.