The Latest from Cafe Hayek

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Commenting on this recent EconLog post by Scott Sumner, Thomas Lee Hutcheson writes:

The point of a carbon tax (tax on net emissions of CO2 and methane) is that is is exactly as large as it needs to be (requiring the least amount of lifestyle changes) to minimize those future costs. If future costs are not large, neither will be the tax on net emissions of CO2 and methane. The idea is to minimize the sacrifice.

In response to Mr. Hutcheson’s comment, I wrote (and posted as a reply at EconLog) the following (here slightly amended):

Mr. Hutcheson: Who will determine in practice what is the optimal carbon tax “to minimize those future costs.” And how will this determination in practice be made? We already tax carbon fuels, and we’ve done so for a long time. How do you know that the current array of taxes – include those on retail gasoline sales – aren’t optimal? Perhaps these taxes are now even super-optimal. There is no way to know.

We can, of course, draw graphs on whiteboards and create models with specified parameters and reaction functions. The former are analytical tools that only enable us to understand and describe some general, abstract features of optimally set taxes. The latter – the models – unavoidably are infused with many assumptions – some explicit, some implicit – the realism of many of which we cannot really know. Our knowledge is especially meager if the modelers purport to make predictions for decades out.

Of course, we can’t know future-generations’ preferences. But this fact is minor. More importantly, we can’t know what discoveries and innovations will happen in the future. To truly know what is the optimal level of taxation of carbon we’d have to know the different kinds of discoveries and innovations that would emerge under each of the countless different possible alternative levels and systems of carbon taxation. We cannot begin to know any such thing.

The fact that humanity continues to emit carbon does not tell us that the current level of emissions is too high. Nor is such information given to us by fact that the earth continues to warm (even if, as I willingly grant, all of this warming is the product of human activity). We do not know and we cannot know.

In the face of such inescapable ignorance, a perfectly legitimate course of action is to do nothing – or nothing further – to tax or regulate with the aim of reducing carbon emissions. Indeed, I believe that this course of (government in)action is the best one available, at least until god chooses to share with us its detailed knowledge about such matters. I hold this belief with reinforced confidence because of the fact that carbon fuels themselves have overwhelmingly powered (and continue to power) the countless innovations that have made human existence safer and more comfortable.

Do the following mental experiment. Suppose you could go back in time to circa 1900 and prevent the introduction and use of air-conditioning. Suppose further that you know that if you chose to prevent air conditioning, the world in 2022 would have less carbon in its atmosphere. That result would indeed be an advantage. But not an advantage without cost.

How much less carbon in the atmosphere in 2022 would you think is minimally necessary to justify a world without air conditioning? How much less carbon in the atmosphere today would you think is minimally necessary to justify a world with 50 percent less air conditioning? With ten percent less air conditioning? How could someone in 1900 have known such a thing?

Now do the same mental experiment, not with air conditioning, but instead with automobiles.

All one can do in such mental experiments is to guess, and to guess rather wildly at that. And, frankly, that’s all one can do when attempting today to calculate the optimal carbon tax.

I believe to be preposterous the widespread presumption that we possess, or can come to possess, sufficient knowledge to inform us what will be the likely full consequences of further raising carbon taxes. In practice, we cannot know if any increase in such taxes will move us closer to or further from optimality. In the blinding light of this inescapable ignorance, I say that we at least avoid further artificially raising the cost of carbon fuels – fuels which were a major source of power for the industrial revolution and continue today to be the major source of power to produce the standard of living that affords rich-world denizens the luxury to fret about climate change.

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In my column for the January 23rd, 2013, edition of the Pittsburgh Tribune-Review I remembered my Nobel-laureate colleague Jim Buchanan, who at the age of 93 died two weeks earlier. You can read my tribute to Jim beneath the fold (link newly added).

Note that the James Buchanan who I remembered was a real person, unlike the “James Buchanan” that a Duke University “historian” (so called) and her poorly informed, or ideologically blinkered, apologists portray in their fictional works masquerading as factual works.

(more…)

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George Will warns that “‘stakeholder’ capitalism is parasitic progressivism.” Two slices:

Semantic infiltration is the tactic by which political objectives are smuggled into discourse that is ostensibly, but not actually, politically neutral. People who adopt a political faction’s vocabulary also adopt — perhaps inadvertently, but inevitably — the faction’s agenda. So, everyone who values economic dynamism, and the freedom that enables this, should recoil from the toxic noun “stakeholder.”

The Oxford Reference definition is “all those with interests in an organization,” including “shareholders, employees, suppliers, customers, or members of the wider community (who could be affected by environmental consequences of an organization’s activities).” Which means: everyone. “All” in the “wider community” who claim an “interest.” Anyone can make such claims; no one can refute them.
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In a dynamic society, resources are efficiently disposed by corporate managements whose primary duty, which other corporate activities do not compromise, is to maximize shareholder value by profitably supplying the demand for goods and services. Furthermore, in a congenial society, boundaries are respected: Most people say about most things, “this is none of my business.”

Self-proclaimed stakeholders, parasitic off others’ labor and accumulation, assert that everything is their business. Actually, although everyone has a right to advocate progressivism, no one has a right to insist on a stake in deploying others’ property for the stakeholders’ political ends.

Here’s a thought that Ryan Grim’s essay on wokism sparked in Arnold Kling.

Speaking of the insanity of wokism, recent Stanford graduate Ginevra Davis decries what has become of her alma mater.

Colleen Hroncich and Solomon Chen reflect on yesterday’s U.S. Supreme Court ruling in Carson v. Makin. A slice:

Carson v. Makin is centered on Maine’s tuition assistance program, one of the oldest school choice programs in the nation. Created in 1873, the program funds students from a town without a public school to attend a school of their parents’ choice—whether private or public, in‐​state, or out‐​of‐​state. For more than a century, parents could direct these funds towards religious schools. In 1980, Maine Attorney General Richard S. Cohen released an opinion that said funding a child to attend a school with a “pervasively religious atmosphere” would be unconstitutional. In response, the legislature changed the law to prohibit families from using the tuition assistance at religious schools.

The Institute for Justice filed a federal lawsuit in 2018 on behalf of three sets of parents—Alan and Judy Gillis, David and Amy Carson, and Troy and Angela Nelson—whose children qualified for the program but were prevented from directing funds towards the schools they preferred because those schools provided religious instruction. The district court initially found for the state and the First Circuit affirmed on appeal. Last July, the Supreme Court agreed to hear the case.

In today’s ruling, as it did previously in Espinoza v. Montana Department of Revenue, the Court flatly rejected the respondent’s claims that allowing religious schools to receive the tuition funds violates the first amendment.

The Wall Street Journal‘s Editorial Board rightly criticizes Biden’s endorsement of a bill, newly passed by the House, that would require the Federal Reserve to include among its goals greater “racial equity.” A slice:

Now House Democrats want to codify racial equity as part of the Fed’s mandate. Their bill would require the Board of Governors and FOMC to “exercise all duties and functions in a manner that fosters the elimination of disparities across racial and ethnic groups with respect to employment, income, wealth, and access to affordable credit.”

The bill directs the Fed to include race in monetary policy, the operation of payment systems, and the supervision of banks and non-banks deemed by the Financial Stability Oversight Council to be systemically important.

Central bankers have a hard enough time balancing full employment with stable prices. Adding a racial equity mandate could cause their models to go catawampus. How small would the black-white unemployment gap have to be, and how high would prices have to climb, before the Fed considers raising interest rates?

My George Mason University Econ colleague Vincent Geloso describes the very real, if often delayed, “damaging ripples of government intervention.”

Who’d a-thunk that the outcome reported here by Eric Boehm about covid funding would ever occur?

For more on the grotesque waste uncorked by covid hysteria, see this piece by Peter Suderman.

Aaron Kheriaty warns of the dangers of the attempt in California to punish dissent by physicians from the official position on covid vaccines. (DBx: Every reasonable person, regardless of his or her position on the efficacy and safety of covid vaccines, should be appalled by this attempt.)

Ian Miller explains that vaccinating toddlers against covid is unwise.

Marty Makary, Vinay Prasad, and Neeraj Sood are among the many physicians who signed a letter, addressed to top U.S. government covidocrats, urging elimination of many remaining covidocratic diktats. (HT Jay Bhattacharya) A slice from the letter:

Many European countries, U.S. states and Canadian provinces have already updated their COVID-19 policies to reflect that vaccines and infection-acquired immunity have reduced the risk of a severe COVID-19 outcome for youth, and to acknowledge that all mitigation measures have unintended consequences. Massachusetts, the United Kingdom, Denmark, Norway, British Columbia and elsewhere have recommended an end to routine screening testing and mandatory isolation periods for children. Most have also eliminated any COVID-19 vaccine requirements for children to fully participate in public life.

The CDC’s COVID-19 school guidelines continue to cause significant disruption to children’s education and to working parents, while providing no demonstrable public health benefit in limiting COVID-19 spread. These policies have serious unintended consequences–-such as school closures, increasing school absences, forcing parents to miss work, and the expense and time of testing. At this point, nearly all U.S. adults and children are protected by either vaccination or infection-acquired immunity, and the U.S. is seeing far lower hospitalization and mortality rates than in prior surges.

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… is from page 15 of Edwin Cannan’s splendid November 13th, 1931, Sidney Ball Lecture – a lecture titled “Balance of Trade Delusions“:

The easiest and least thankless method of dealing with a very large income is to invest a large proportion of it, and even with moderate incomes the rule is that the bigger they are the larger is the proportion likely to be saved. Redistribute net income in the direction of taking from the rich and giving to the poor, and you are pretty certain to diminish savings.

DBx: Yes. And diminished savings brings about diminished production and improvement of capital goods and services – that is, diminished production of capital goods as well as diminished improvement and maintenance of existing capital goods. Compared to what they would otherwise have, workers have fewer and worse tools and infrastructure with which to work. In turn, diminished production and improvement of capital goods and services ensures that worker pay will be lower than it would have been without such a diminution of savings.