Thursday, July 24, 2003 :::
This turned out long and wandering, but does not, I think, get incoherent. It is subject to future editting, especially if someone disagrees with that last judgment. (Or skip this post.)One thing the market does better, it seems, than a lot of people with whom I engage in political discussion is to weigh several factors at the same time. Milton Friedman begins Free to Choose by discussing a pencil, the production of which requires materials and subcontracted construction from throughout the world. The cost of the pencil is not just the cost of the rubber that goes into it, nor the wood, but the sum of everything, and if graphite were suddenly to become scarce, millions of people would move to pens without having to know why it made sense, on a grand scale, for them to do so. More to the point, the same would happen if rubber, wood, graphite, and yellow paint each became a little, but not a lot, more scarce; even if the little steel things holding the erasers onto the pencils became plentiful, it might make sense to move to pens because the steel things are not the only factor in the decision.
It seems that many people are incapable of even imagining several factors at once, let alone actually working with them. I have one friend who particularly annoys me on this count, fixating himself on one small point that to him is determinative of an issue. He also projects this thinking on others: having once argued that Hussein had an interest greater than zero in retaining weapons of mass destruction, for example, he insisted that there would thus be no deterring Hussein from maintaining such a program, no matter what consequences we created for it. (This, curiously, was an argument against the removal of the regime; I didn't follow that step, either.)
I imagined this was his own monomania, and that even when people rely on rules of thumb and single-factor arguments, they are doing so with the knowledge that the results are not exact, but are manageable; I perhaps come to this line of interpretation by projecting my own identity as a modeler. Any modeler with a mind on fundamentals is constantly aware that a good model is one that is complicated enough to grasp the essence of the problem*, but simple enough to be in turn grasped by the human mind, and I tend to assume that oversimplification in political discourse is done in that spirit. It may be that I'm not listening.
There are certain particularly hot-button issues that seem to foster an absolutist thinking; anything involving religion leads to it, as does war, as also does, perhaps curiously, the environment. This is why environmentalism is described by Rush Limbaugh, and perhaps more cogently by Steven Landsburg, as a religion; it is often pursued from a morally absolutist position, immune to reason. Thus does sense become nonsense.
Even within an absolutist environmentalism, though, I would imagine one could make certain tradeoffs, if not between carbon dioxide emissions and transportation, at least between carbon dioxide emissions and preservation of wilderness; typically, though, it is not pursued that way. More curious — and more illustrative — is the resistance of people in the movement to systems like cap-and-trade, in which emissions are reduced in one place and increased in another place where they are more valuable; this increase bothers more than the decrease, often larger,† can mollify, thus driving environmental policy in a "keep perfectly still and don't rock the boat" direction. I've talked to someone who is quite proud that she would not give up 2,000 acres in ANWR for any price, regardless of how much of the everglades and the rainforest she could preserve with the proceeds.
Recycling is a less clear issue, in that an energy cost associated with recycling anything except aluminum (for which extraction from bauxite is quite energy-intensive) is weighed against landfill usage; one then has to weigh one against the other, and find the ratio at which the tradeoff is appropriate. Scarcity is not relevant; all resources are scarce, which is why they cost money. The cost of scarcity of the item being thrown away is thus paid by the consumer; the cost of the land and other resources required by the landfill may or may not be. Environmental considerations, both at the mine and at the landfill, typically are not; if these are not considerable, then charging market costs for disposing of garbage is the complete solution. People will recycle when appropriate.
We often seem to forget that everything is scarce; labor does not seem scarce if we forget that labor tomorrow is something different from labor today, and a pop-up toaster next week is not a pop-up toaster today (in particular, the former cannot make tomorrow's breakfast). This is because goods now, deployed intelligently, produce more goods later, and people prefer to consume things sooner rather than later. It may well make productive sense for oil or land to be used, either permanently or for very long periods of time; the option of a clearing in the woods for the next many years may be less than foregoing forever the opportunity to build something there now instead of next year.
Because all these factors, so tedious for one to collate oneself for each decision to be made, are weighed against each other in this manner at each link in the chain, external costs should be internalized as close as possible to their entry points whenever there is not a clear market breakdown. If carbon dioxide emission has an uncaptured cost, it should be imposed on whoever's doing the emitting; if that's not sufficiently practical, it should be done in as nearly as possible in such a way as to fall on those whoevers. If building a building in one way causes more emissions than in another way, that extra cost will be passed along to the person buying the home, whether the emissions take place at the construction site itself or in the production of the construction equipment. All the costs of one procedure can be weighed against all the costs of the other, and against the benefit of building the building in the first place. In trying to take account of everything at some other level, something will invariably be missed, an opportunity to encourage the preservation of environmental goodness in one place instead of another will be missed, and, done comprehensively, a system will be built up where it's not clear what is subsidized or how much.
*The phrasing for this is, I believe, borrowed and reworked from Paul Krugman. Those of his writings not intended for the general public are much more interesting than his Times column, and are frequently little more condescending than this post — always less condescending than his Times column.
†In at least some of the cap-and-trade systems, an emissions franchise is reduced by 10% when traded.
::: posted by dWj at 4:45 PM
