The market’s own carbon tax

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Top and center of Page 1 today, the Boston Globe's Jenn Abelson writes about the people who have decided to sell their Rams and MDXs and Hummers and 4-Runners because they can no longer bear the $80 fill-ups that have resulted from gas-price increases.

I am really trying not to gleefully celebrate this development, because, truly, real people are hurting, and I hope that when I'm suffering financially for my stupid choices, others won't celebrate my struggles. But the best I can do, so far, is to add that wiener-ish disclaimer before saying: "that's what you get for insisting on having overly huge, piggishly wasteful vehicles when you could have done just fine with less."

Schadenfreude aside — and yes, I guess I'm courting my own — the far more important point to take from this is the solid evidence that prices pretty quickly lead people to drastic action — these SUV owners aren't selling for profit; they're just hoping the sale price will cover their leftover payments — where rational thought and/or rectitude never will, at least to the necessary degree.

And that, of course, is the thinking behind cap-and-trade schemes and carbon taxes: Put a price on carbon emissions, and people will change how they use it.

Conservatives would argue that government-imposed solutions differ from what's happening with SUVs, but that's just incomplete thought: Private enterprise has always sought to fob costs onto the public. Factory owners dumped waste in the river instead of paying for it to be disposed otherwise. People downstream lost water quality or could not longer eat the fish, and eventually taxpayer money had to be used to clean up the groundwater, or PCB-laced river sediment, or whatever. The term for these is "external costs."

That was the failure of the market: The factory's prices were artificially low, because they didn't include all the expenses of production. So now, rather than government meddling, it's really a case of the people assigning a price to expenses that industry has heretofore avoided. Only the militantly close-minded still maintain that burning fossil fuels doesn't incur public costs.

It's good to note, I think, that it will be you and me, not industry, who will be paying the fees created by cap-and-trade systems or carbon taxes — just as it has been you and me who historically haven't been asked to pay the external costs. Yes, it was the factory owner who decided to foul the river, but it was you and me who got to pay less for the product, and who wouldn't rather pay less?

But if the costs exist, someone's gotta pay them, no? Isn't that what the market teaches? Right now, of course, it's teaching SUV owners that they should have bought the Camry instead.

Comments

[...] hadn’t previously thought of it, but I see this as a parallel to this recent post about SUV owners bailing out of their cars, even if they have to eat some of the remaining [...]


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