2/1/09: CATO critique

The CATO institute is a Libertarian Economic thinktank and they are brilliant and misled people. i wrote a critique of one of their papers on Climate Change. You can read the article and read my critique. The article from CATO is a very good analysis, but misleading at times.

Here is the article


And here is my critique:


Liberty is defined by freedom from constraint. Libertarians then want non-constraint and a free market with minimal government intervention. For this to function for the benefit of most people price needs to reflect cost. But, there have always been actors in markets creating negative externalities, and it takes constraint to internalize those externalities. I want liberty from bad actors skewing markets, and that takes government intervention. I write this critique to show how Libertarianism can be unrealistic in its quest for liberty.
In the article by CATO titled “What to do about Global Warming” the author, Indur Goklany, delivers an articulate argument for not immediately and rapidly decreasing carbon emissions. The author points out that if we compute the costs, according to his calculations and assumptions, it would be less costly to just continue on our course of carbon emissions and to just pay for the damage (considering the timeline of now until 2085). While I agree with considering the costs and benefits of a policy, some parts of the author’s analysis are shallow and incomplete.

First, there is no discussion of existence value. While existence value is difficult to quantify, the idea behind it is sound: people derive utility from knowing that the environment is of a certain quality. In the scenario of letting Global Warming (GW) continue as it has there is no valuing of the human anguish from letting the natural environment suffer just because “we can pay for it.” Furthermore, the author assumes that natural and physical capitals are interchangeable and misses this distinction by not accounting for non-extractive direct use or passive use value (existence value, option value and quasi-option value).

Second, the author does not include in his analysis the cost of unlikely, yet possible catastrophic events. The scary part about GW is not the chance of catastrophic occurrences but the number of potential catastrophic occurrences. If the mid-Atlantic current slowed, if large amounts of methane were suddenly released from the ocean floor or if a sudden collapse in the web of life occurred then the damage would be larger then we could fathom.

Third, the author admits that his conclusions should only be applied to the timeline of 2085. So, if we let concentrations build up and pay for the damages then we have only addressed problems that will occur by 2085. The author’s proposal could be the most cost effective as applied to the timeline of 2085, but if the cost of dealing with GW soar after 2085 then the entire plan will not have cost-effectively dealt with GW.

Fourth, the author assumes that a world of more wealth is a world where we will put more money towards Research & Development (R&D) of sustainable technologies (assuming that immediately eliminating carbon emissions would reduce greatly the wealth of the world). Markets work off doing what is profitable, and as long as price does not reflect cost markets will not provide for sustainable technologies. For R&D in sustainable technologies to occur in a significant amount it would take internalizing negative externalities which usually requires government intervention. To continue with business as usual without accurate pricing will not supply us with the technologies that are needed to reduce our negative impact on our environment. Technological development will proceed, but not for technologies that make possible substitutions for underpriced coal, wood, natural gas and oil.

Fifth, the author seems to be using the Pareto Criterion to justify the allowance for damage to occur from uncontrolled GW because those with “just claim” will be fully reimbursed for damages incurred. Attempting to get polluters to pay for these damages would be a very complex undertaking; perfect information would be needed on who is emitting carbon, how much they are emitting, and what damages were caused by what and by whom. This information collection system would be overwhelming, and convincing people to pay up for damages done would be a difficult struggle. The author’s policy recommendations hinge on this one, unrealistic plan.

Sixth, once again we are presented with another false choice between two options. We can do both what the author recommends and we can take action to immediately begin to reduce carbon emissions. It would be foolish for reasons that the author points out to just focus on abating GW through immediate carbon emission reductions, but it would also be foolish to not take any action to lower carbon emissions in the near future. We can and should do both.