James Galbraith gets to the heart of the dilemma facing climate change economics:

The market’s real failure is that it allows for no signal from the future to the present, either from the conditions that will exist 30 years hence or from the people who will be alive and working then. The question becomes: Can we really create a market in which those far-off voices are effectively heard?

He ponders the solution offered by mainstream economists, mainly carbon taxes and cap-and-trade systems, noting that they all rely on markets and competition. Then he directly questions whether that’s the way to go:

“Planning” is a word that too many in this debate are trying to avoid, fearful, perhaps, of its Soviet overtones. But the reality of climate change is that central planning is essential, and on a grand scale. It would start with tens of billions of dollars in research to determine what is feasible, what is socially tolerable, and at what cost. A National Institute for Climate Engineering would be a good start. Departments of climate engineering at major universities would follow. Presidential candidates should take the lead by proposing a cabinet department of climate planning.

What then? Which new technologies would get taken up and how quickly? Part of the answer is public investment, big-time — in cities and the ways they use power, in transportation and the energy used for it. Mandatory changeovers in technology would follow. Fuel efficiency, building efficiency, urban density, transportation modes, and requirements for renewable energy must all be part of the mix. Cities from Austin to New York, and states–notably California–are already leading the way. But the laggards — Texas emits more carbon dioxide than California and New York state combined–will determine whether carbon emissions are sufficiently reduced.

So the real test will be whether national decisions are made and enforced. Mandates force the pace of technical change, lower unit costs, and help businesses with their own plans for technical transitions. Plans provide clarity and reduce risk, an essential step in making things happen. Of course, planning can be authoritarian, and planners make mistakes. Much of what goes into a national plan, especially at first, may be wasted. But so what? Waste and inefficiency are part of human endeavor, and markets do not protect against them.

What counts is not whether every single decision is wise. What counts is the possibility that we might prevent catastrophe and at the same time keep people employed and life tolerable, decades and centuries hence. What counts is not the economy we have, but a new economy that we, and future generations, can live with.

I’m not sure I’m ready to sign up, but I thought I’d pass it along since you so rarely see a noted economist directly questioning the assumption that markets can tackle this problem. Discuss.