Why pricing emissions is the least important policy
Last week, I documented that the public supports trains and auto efficiency standards and renewable requirements, along with other policies sometimes slandered as “command & control” over emissions pricing. This week: some historical perspective on why the public is right, and mainstream environmental groups are wrong.
Historically U.S. infrastructure, the basis on which this nation developed, was never some magical response to supply and demand.
The Erie Canal would not have been built without rights of way given away to the builders. Land given to homesteaders and farmers made us one of the world’s great farming nations. Railroads were built because the great railway companies were granted land a mile out from their tracks to compensate for construction costs. Or think of the telegraph, one of the first types of public infrastructure to receive not only grants of rights of way, but massive direct public cash subsidies. And it is worth remembering that none of this was built on empty land; American Indians were slaughtered or driven away for every one of these things. Much of the work on that stolen land was done by slaves. I can’t imagine a “green tax” that could have compensated for that.
And that is not something that ended in the 19th century. Airports and water ports are mostly built with public funds and mostly built on public land and water. Utilities use public rights of way. Water pipes and sewer pipes, electricity lines, gas lines, old school phone lines, broad band fiber optic lines, television, radio, cell phone, and other wireless spectra all use public resources and are often built with public money. Any transport more advanced than a deer path also depends on right of way grants. Not just trains, but automobiles, bikes. Even walking paths need some construction and maintenance.
Any society that needs infrastructure more complicated than that built by hunter-gatherers will need public involvement, whatever “public” means in that particular society. And there is no way for such public infrastructure to be technologically neutral. Let’s take the automobile as an example.
Modern zoning requirements pretty much forbid housing and retail and government services to mix together in the right ratios to a community truly walkable. Further, the requirement that housing developments supply a certain amount of parking, along with the requirement of setbacks from the streets, make it even more difficult to design communities that are really suitable to live in for people who don’t want to drive. A lot of the so-called new urbanism is simply relaxing some of the restrictions that forbid creating walkable developments. And all the rules about parking and setbacks and so on are also huge subsidies to automobiles. I’ve heard figures that various parking regulation provide subsidies in the form of free parking of about $5,000 per automobile per year. And that is just parking. I wonder how much developer built roads, and city built streets funded from property taxes add to this, not to mention street maintenance also funded from property taxes.
If you ever wonder why new urban neighborhoods are so seldom real neighborhoods, it is because that is not allowed. If you wonder whatever happened to small town main street, the answer is: they outlawed it.
If any right wing libertarians have made it this far, they probably are shouting “yes, yes, oh god yes, get big gubmint out of the way and everything will be fine!” Unfortunately it is not that simple.
Yes there have been some really bad choices in these regulations, but that does not mean we can leave development unregulated. Hate zoning? OK, but do you want to allow a toxic waste dump next door to your house? Would you be OK with an all night strip club, with loud music keeping you awake, and drunks who stagger out to vomit on your porch? And you’d probably prefer that any home you rent or own meet fire safety standards, have climate control and ventilation that works. I personally prefer the earthquake codes that saved lives in Chile to the lack of such regulations that killed hundreds of thousands in Haiti. And when it comes to appearance, if you have a block filled with lovely 19th century homes, you probably don’t want a glass pyramid plopped in the middle of them.
We can’t do without regulations. We can’t make such regulation “neutral”. The best we can do is explicitly choose what we want regulation and public investment to accomplish, and focus our rules and our public investments on those goals. The minimal state is not an option and never has been. Adam Smith, the inventor of the term “the invisible hand” favored fire regulations, free public education, building safety codes, and (in emergencies) wage and price controls. As someone concerned with supporting an infant capitalism, and overthrowing the remnants of feudalism, he would have laughed at the idea of capitalism without a strong state. And yes, Adam Smith was overoptimistic about the ability of such regulation to contain the dark side of capitalism. But, given when he wrote, he may be excused his errors, especially since even then he was a far clearer thinker than the fuzzy headed right wing libertarians who consider themselves his true heirs today.
I think he did invent (or at least promote) a fundamental error that explains why the role price can play in replacing other forms of regulation is often overlooked. He thought of price as reflecting a balance between supply and demand. To some extent price does reflect those things. But price also reflects power. In Adam Smith’s time, price often reflected the ability to kill people, seize their land by force, and then work that land with slaves. Today the price of a pound of rice reflects in part the Haitian market for that rice developed by applying financial pressure to a series of Haitian governments, and forcing them to destroy their domestic capacity to produce their own rice. The price of sugar in the United States reflects in part the embargo against Cuban competition. (Protecting the American sugar industry is not the only reason for that embargo. But it would be naïve to think that is not a serious motivation in U.S. Cuba policy.)
That is why we have to see “getting prices right”, whether through a carbon fee or other means as marginal in making change. It is not useless, is even necessary. But “getting prices right” can never be the main driver of change. It can never be of equal importance with other types of policy.
I know that in today’s world people often find historical arguments unconvincing. “Why you talking about old stuff?” So the next post will contain contemporary data showing that right now, at this very moment, price is a weak driver of change.