Waxman-Markey

IMO, Jim Manzi continues to own defenders of the preposterous cap and trade bill. His latest assessment of the state of play:

So let’s review the overall bidding, at least as I see it:

1. Everybody agrees that if Waxman-Markey becomes law, and it does not lead to a global, binding and enforced agreement to severely reduce global greenhouse gas emissions, then it makes U.S. taxpayers worse off economically.

2. I have presented an economic argument that even if such a global agreement were achieved it would accomplish in the best case a net increase in NPV of global consumption of 0.2%, and a practical argument that it would almost certainly reduce global economic welfare. These specific arguments remain undisputed.

3. Those who argue that Waxman-Markey would lead to a global agreement have provided no evidence that it would have this negotiating effect, and are presenting what is, at best, a pretty idiosyncratic negotiating premise that by giving away our leverage as one participant in a collective action problem we will somehow increase our ability to get others to sacrifice on our behalf.

The thing is, Jim’s arguing from the basis of extremely generous assumptions.

Many of the people making a big deal about the bargaining value of this bill rarely (never?) use similar logic in similar circumstances. The idea is that coordinated international action toward carbon reduction is a global public good, and that the probability of effective coordination increases significantly if the U.S. acts unilaterally. HOW DOES THIS WORK? Standard statist-liberal reasoning about public goods is that they will not be provided unless there is a  coercive mechanism in place (e.g., a state) to solve the assurance problem. But there is no state with global jurisdiction. So am I to understand that folks making the argument about the crucial role for Waxman-Markey in solving the international collective action problem don’t really believe the standard story about the need for coercion in assuring compliance? Because that would sure change a lot of debates about a lot of things! To put it another way: if you think that the probability is low that smaller-scale public goods can be provided through voluntary mechanisms without government, shouldn’t you think the probability is even lower the larger the scope of the coordination problem?

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31 thoughts on “Waxman-Markey

  1. I am not a fan of this cap and trade bill, but I can see it in the context of international negotiation. It starts slow, as any cap or tax program does, and charts a ramp for future emissions. Perhaps with certain international agreements that ramp would be retained, but if not it certainly can all be re-legislated in the climate bill of 2012.I'm not really buying the argument that I think Will is making, that we can do nothing because “nothing” is the optimum international game strategy… and I certainly don't see any real-world 'non-coercive' successes in carbon emissions.

  2. “Standard statist-liberal reasoning about public goods is that they will not be provided unless there is a coercive mechanism in place (e.g., a state) to solve the assurance problem. But there is no state with global jurisdiction.”The US could attack a random sample of noncomplying countries with badass weapons & general malice. You could call it an economic stimulus!

  3. Will, not to quarrel with your main point, but I'd be interested to know whether you think Manzi's 1. and 2. are applying the right welfare standards: in the first case US taxpayers, rather than global residents; and in the second focusing on consumption/economic welfare (haven't read the context, so don't know exactly what this is supposed to include or not).Not sure whether this would change the analysis much.

  4. This post makes no sense. Quite obviously the coercive state will still play the main role in any cascading global warming legislation. The very simple argument that Manzi or Wilkinson can't seem to understand is that there needs to be evidence of actual widespread action before nation's start using their coercive state power to regulate green-house gases. Someone has to step out first. We are hardly first anyway but since we spew out more gas than everyone else, it's very important that we take a step. Others will follow. If no one follows then repeal the damn thing. Come on guys, it's not that hard. And the alternative of doing nothing or almost nothing is inordinately risky.

  5. Oh and of course, their will be a quasi statist enforcement of places like China if they don't eventually comply. We'll carbon tax their imports. I've little doubt that Europe would join in on that. The state is very active in this whole scheme indeed. Just use your imagination a bit. There is no alternative except denying global warming exists. But that's the dumb person's solution.

  6. Charting a ramp won't make other countries do anything, ever.There are, indeed, no real-world non-coercive successes in reducing carbon emissions (other than, perhaps, pushing nuclear power). However, given that Will's argument is that this bill won't make any coercive success either that's not a compelling counter, is it?

  7. Why will others follow, and which ones?Explain to me the logic whereby China and India handicap themselves or their export customers to keep CO2 levels down, because the US did so first? To the extent they're jaw-jawing on the subject at all, it's to try and shut down competition in manufacturing.(I also, of course, deny your claims about the “risk” of doing nothing, and your claims about the risks of action – “repeal the damn thing” doesn't repeal its consequences. And since its consequences are comparative impoverishment, it should be repeated that caring about the environment is a luxury for the rich.Make people poorer and they stop giving a fig for CO2 emissions and maybe slowing a quarter of a degree of warming in a hundred years.)

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  9. There is no alternative? Well a carbon tax instead of cap and trade is one alternative. Another alternative is accepting global warming is a reality and spending devoting resources to something that will actually have a positive impact somewhere instead of creating lots of room for political rent seeking. I'm afraid you lack perspective.

  10. Accepting AGW for the sake of argument, the only solution is technological advancement, which can only be achieved by a vibrant economy in an open society. The same open society and its vibrant economy will be best equipped to deal with any near term consequences. Nibbling around the edges of AGW with carbon tax or cap and trade will only cause harm.

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  12. NEW YORK (Reuters) – Stock futures extended losses on Thursday as further labor market weakness fueled doubts about a quick economic recovery and Britain's reduced rating outlook signaled more fallout from the credit crisis. S&P 500 futures fell 10 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures shed 90 points, and Nasdaq 100 futures dipped 15 points. Keep buying the dips? Or dow 5000?

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  15. The renewable energy sector will soon be Germany's largest employer.By all means, argue about the trivial details while giving away a big chunk of this century's market for exports.

  16. Good question.I think the answer is: Yes the probability of coordination without coercion is low, but if we really believe that GHG are a problem we should try anyway.The second answer is: in some situations there are ad hoc bribery arrangements (coaseian bargains) that can enable coordination. For example, we could give China billions of dollars to stop emitting so much carbon. [After all, we have to bribe big coal with permit giveaways to get them to back Waxman-Markey]. And Will would be right to say, are liberals being consistent? And sometimes the answer will be no, and maybe liberals can start taking a broader view of the possibilities of governance/coordination.

  17. Bull Shit. Matt Yglesias very often makes similar claims in similar circumstances. He support America having low trade barriers as part of our leadership to get other countries to lower theirs. He supports reducing our nuclear arsenal in hopes of making the NPT more effective. Moreover the same argument can be turned against you. I assume that you think America leading to lower trade barriers was a good idea. One of the things that you perhaps overlook is that even if our efforts to create global cooperation to prevent Global Warming fail at that task they could still help in our long term need to have global governance on global environmental issues, and to provide assistance to developing countries to more effectively deal with environmental externalities that they face. For instance even if you thought global warming was a myth you could still make a strong case that China needs a cap and trade system on the other toxic emissions from their power plants. Finally i must say your unwillingness to consider the dangers of never doing anything about Global Warming are pretty annoying. If we never address this economic externality the world will end. Yes it would be nice if we could time our intervention perfectly and disign it perfectly, but that is not how politics works. Instead the change happens to early or to late and incorporates poorly designed policies to help ease the transition. If we fail to do this now then it will be two or three decades before we get another chance. At that point the policies will have all their current problems and more and the costs of having waited will be higher.

  18. And yet some global public goods DO get provided even in the absense of a coercive global state, e.g. eradication of smallpox, Montreal accord on CFCs etc. The interesting question is how this happens under some conditions and not under others. You may know Scott Barret's book “Why cooperate? The incentive to supply global public goods.” If not, that's the one to read. Incidentally, he concludes that the disincentives for a global climate change are rather large (and hence that we should start looking more seriously at geo-engineering options.) But that's based on an analysis of the conditions specifically pertaining to climate control as a public good, rather than on a blanket dismissal of the possibility of providing any global public goods.

  19. I'm with br. History's chock full of examples of international co-operation directed at solving international problems. Sharing scientific knowledge, standard maritime laws, ending slavery, standards of time, weights and measures. In modern times, we have the Internet, disease eradication, international law like the Geneva convention, Montreal protocol. In the few cases that spring to mind, these by now uncontroversial institutions were created/agreed upon in the face of fierce opposition; slavery, France v. England on where zero longitude went, CFCs. And from what I recall, in each case the international movement was led by initially small coalitions of countries that gradually expanded. Also in almost every case, you have (even today) hold outs. Africa is still a source for slaves. Only 154 of 196 UN countries have signed onto the Beijing update to the Montreal protocol. As in so many libertarian arguments, this one ignores the reality that societies are held together, and held in relationship with one another, by an enormous body of nearly invisible institutions and laws that have cemented into custom and habit. Champions of liberty would be much better served (in this case) by arguing that the details of Waxman-Markey, to make the distribution mechanism for those credits as free and fair as possible. An open-market auction system, say, with a transparent process for setting the reserve prices.

  20. OK actually a lot of people on the left do warry about this. That is why Krugman is for carbon tariffs. Second nobody believes that no collective action problems can be solved without government. After all Obama got elected president by convincing a bunch of people to donate money to his campaign. Third of all some of us see issues like Global Warming as a reason to create global governance, which may well be very hard to do, but we haven't got a lot of choice.

  21. “I assume that you think America leading to lower trade barriers was a good idea.”

    Of course I do, but, Craig, if you think that the only benefit of lowering trade barriers is to get other countries to lower theirs, then you completely fail to understand the argument for free trade. Certainly it's a complicated one, and politicians generally fail to make it. But unilateral free trade has powerful benefits to us even if other countries don't lower their trade barriers. Or perhaps you believe that the New Zealand and Australian agricultural industries are weak?

    “For instance even if you thought global warming was a myth you could still make a strong case that China needs a cap and trade system on the other toxic emissions from their power plants.”

    Yes, but the other toxic emissions have a powerful difference– their negative effects are concentrated locally and regionally. When the US limits SO2 emissions, the benefits accrue locally. (There's some spillover to Canada, but the vast majority of benefits stay in the US.) If industry goes to China as a result, we still get the environmental benefits. That makes it easy to regulate on a national scale. With CO2, the harms are global. If we regulate CO2 and the industry moves to China and still emits, we get absolutely no benefit whatsoever. That's VERY different from toxic pollutants.If we limit our CO2, then we actually make it MORE valuable for China to NOT limit their own CO2, because we increase the potential flow of industry there if they don't. That would seem to make it less likely that they'd do so, not more. (Unless we use retaliatory tariffs.)

    “If we fail to do this now then it will be two or three decades before we get another chance.”

    Really? That's unbelievably unpersuasive. That's not how politics works either. I'd say it would be even more reasonable to argue that “if we do this wrong, it will be two or three decades before we get a chance to fix it.”

  22. Do you see this as a way forward from our current level of “dependency” on foreign oil – and our current level of “carbon dioxide” pollution?

  23. Democrats don't use logic because they don't need it.They have empathy and feelings.

  24. And Republicans, lacking empathy and feelings are sociopaths who have no fellow feeling about their fellow man.Come on… lets not descend to this sort of stupidity about democrats and republicans.Moreover, given Will and the liberaltarian movement, more than a few classical liberals are on the left of the spectrum and may have voted democratic in the recent elections.Besides Will is an ethical sentimentalist. nothing wrong with empathy and feelings there.

  25. As soon as democrats stop acting like stupid morons, then I'll stop calling them out on it.Greens are nothing but communists in drag.

  26. And republicans somehow act intelligently. Seriously? Electing Bush(II) twice is called acting intelligently. Newt Gingrich is acting intelligently, or Micheal steele? Stop being a partisan hack. Granted, there are stupid things that Democrats say. There are also a variety of stupidities by the republicans too. In fact, party politics in america is largely mucking around in stupidity. That you come up with lame attacks on the democrats just shows that you are nothing but a partisan hack. You should know better. Of course there's a touchy feely left. But thats not the worst of the lot. The most odious parts of the left are the unions, the buy local people, the anti GM crowd the Apple fan boys etc. And these guys aren't really touchy feely types either. Some just have poor priorities, Others need to learn more economics and yet others are just radical wannabes.Of ocurse on the right you have those theocrats just waiting to impose christianity on the rest of us. Say something interesting and meaningful. If not just piss off.

  27. Yes, because every Republican is a theocrat. Are you really that dense?I hate Republicans, but I really hate Democrats. With a few exceptions, Democrats are just as bad or significantly worse than Republicans on nearly everyone one of the issues I find most important.Thus, that is why I attack them more. My main issue with Republicans is that they too often act like Democrats. As for the 'theocrat' issues, where has that been trending? Much more freedom. Whereas the economic sphere is trending towards less freedom.

  28. I dont know why anyone lends any credibility to Henry Waxman. This is the same idiot who tried to indict Blackwater in Iraq…Yet he forgot to tell everyone is that he actually used Blackwater for his own protection when he TOURED Iraq.

  29. Question: How long would it take under Cap and Trade for the Government to get sticky fingers? I mean if I have a company that generates a million dollars worth of CO2 under this bill, and I transfer a million dollars to a company who plants flowers/grows grass/creates swamps, how long until the Government determines that the million dollars I transfer to them needs to be “transfer-taxed” And this tax will be done at *my* end of the transaction, as so not to reduce the number of planted flowers.

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