Paul Krugman’s recent column, “An Affordable Salvation [2],”
gushes about how, now that the “junk science”-loving (and Nazi-hugging)
former occupant of the White House is gone, we can finally start saving
the planet. And it won’t cost much, either! That is, if only we can
get cap-and-trade skeptics to stop practicing “junk economics.”
“The best available estimates,” according to Krugman, suggest that
turning industrial civilization green will basically be painless, and
in the end will actually be good for us. Perhaps his “best available
estimates” include the recent, breathless press release [3]
from the Environmental Defense Fund: “For about a dime a day we can
solve climate change, invest in a clean energy future, and save
billions in imported oil.” New EDF slogan: Saving the planet and 90
cents will get you a cup of coffee!
In the Rube Goldberg scheme of alternative energy sources, permits,
taxes, carbon credit swapping, and rebates known as “cap-and-trade,” I
count at least six additional charges consumers will directly or
indirectly face. First, there is the cost of less efficient [4]
“green” energy production, which will be passed on to consumers.
Second, there is the charge for emissions permits, which will also be
passed on to consumers.
Third, there are the private and governmental bureaucratic costs of administering this system. Fourth, there are costs from lobbying [5]
and inefficient allocations of carbon credits to congressional
districts in exchange for pro-cap-and-trade votes, to industries in
exchange for union support, and to companies in exchange for campaign
contributions.
Fifth, there are inefficiencies that will result from the illegal
selling and trading of credits and the costs of prosecuting this
corruption. Finally, there’s the cost of industry leaders and
investors’ uncertainty regarding possible cap-and-trade regulations the
government could decide to introduce or expand any time it wants.
But, Krugman reassures us, carbon credits would become a “scarce”
resource, just like oil, land, and water; he snidely adds that the
“magic” of the free market should allow it to “cope” with emissions
limits just fine.
Any idiot realizes that natural resources are not the same thing as
artificial, government-imposed restrictions. The former allow us to be
productive; the latter prevent it. Legal leg irons are not amenable to
expansion through scientific innovation.
Mocking laissez-faire capitalists for believing the free market is
“magic” is a straw man—no one ever said the marketplace could
compensate for unpredictable, industry-destroying, government-imposed
limits, which preclude the very existence of the free market. How’d
the “magic” of the marketplace do in overcoming “scarce” resources in
the former Soviet Union?
In case we’re still not persuaded that cap-and-trade isn’t suicidal
folly, Krugman tempts us that “committing ourselves now might actually
help the economy recover from its current slump.” This, from an
“economist” whose patron saint is John Maynard Keynes, who once
famously said that the government could stimulate the economy by
putting money in jars, burying them, and paying unemployed people to
dig them up again.
If “green” business were profitable, wouldn’t companies already be
doing it? If alternative forms of energy were so efficient, would they
need massive government subsidies to keep the companies that produce
them from going bankrupt [6]?
Krugman argues that cap-and-trade would “create major incentives for
new investment—investment in low-emission power plants, in
energy-efficient factories and more.” All of which, of course, are
less efficient and less preferable to investors. Cap-and-trade might
allow for “major technological innovation,” as he claims, but at the
cost of discarding already profitable, more efficient innovation.
The “argument from economy” is designed to reassure those who think
cap-and-trade is necessary that it is affordable, and those who think
cap-and-trade is not necessary that it at least will not hobble our
economy. But those who are rightly skeptical of cap-and-trade should
be aware that it is anything but a harmless indulgence.
