emission rights

[kandrathe]

I agree with most of what you've proposed, but I still don't understand the role of the tariff. You've said the US should use more of its own resources. Why?

Your reason appears to be that the US shouldn't fight wars to keep foreign prices low. But that's the kind of absurd logic you get from half-baked (in both senses) anti-war protesters who don't understand economics. Oil sells at the market price. Unless you want to invade Iraq, Saudi Arabia, Iran, Venezuela, Canada, Norway, Russia, China, Mexico, Brazil, and strongarm US producers into selling at sub-market prices, you can't control oil prices with the military. US interest in oil is not about price, but strategy - in a wartime situation, militaries run on fossil fuels, and control of the supply is critical. But in peacetime? The price you pay is the world price.

One reason, yes. I think you need to re-examine the bigger picture. Our dependence on foreign oil was identified as a threat to national security soon after the end of WWII. US involvement in the middle east parallels the rise in power of OPEC nations (includes, Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, Qatar, Libya, the UAE, Algeria, Nigeria, Gabon and recently Angola). The US has worked arduously to curry favor with about half of them, and has also become equally ardent enemies with the other half. Their dominance of world oil production has waned to a mere 30%, but I believe maintaining price stability is THE strategic reason we must be present there at all. Much of our foreign policy, and military interventionism is directly related to maintaining access to strategic minerals (including oil). In currying favor with the regional despots, we must be intentionally blind, and hypocritical to our principles of human rights, justice, and liberty.

So, what then does an import tariff do? If it is to generate any revenue at all, it must change the price of imported oil upwards.

It would be revenue neutral at the pump, but rather than tax just the consumer, it pushes the taxation back to the importer.

US production would then undercut that price, and shift the US towards depleting local reserves.

If it is important for national security, then the US government should outright buy the oil reserves and then, as the owners, can do with it as they please.

Imports would decline, and therefore so would exports. Someone in the domestic oil industry would get rich, and someone in the export trade would go out of business. (So much for no harm.)

Government action, by definition, is a type of force. When the party acted upon has done nothing to deserve interference, then yes, the action is unjust. However, the commerce, along with proper and necessary clauses seem to apply here, if ever they would. It certainly is within Congresses power to levy a fair tariff on oil for the purposes of paying for the federal costs for transportation systems. I would think that for larger countries, like the US, the terms of trade would be better with a tariff. It would reduce the power of oil exporting nations, and if managed correctly would create incentive for the US to be more innovative now with the vast deposits of fossil fuels it does have (like coal, and oil shale).

Would this decrease consumption of oil? No, since prices would not change. Would this help make the US energy independent? Not really - the US already has plenty of friendly sources of oil, and the power of OPEC is barely a shadow of what it once was. You can buy today at market prices, and you can almost certainly buy tomorrow at market prices. So, I ask again: what is the point of this?

Again, you need to look at the greater scheme. We don't need to jack up the price of energy (fossil fuels in this case). The result would be a shock to the economy, as energy affects the entire supply chain, and the real wealth of the consumer (more money per gas fill means less disposable income). What I propose is to leave oil as it is, but drastically reduce the price for the energy production we do want to move toward. Over time, consumers will favor cars like the GM Volt, since the operation costs will be much, much less, and the supply of "fuel" will be freely available.

[Jester]

One reason, yes. I think you need to re-examine the bigger picture. Our dependence on foreign oil was identified as a threat to national security soon after the end of WWII. US involvement in the middle east parallels the rise in power of OPEC nations (includes, Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, Qatar, Libya, the UAE, Algeria, Nigeria, Gabon and recently Angola). The US has worked arduously to curry favor with about half of them, and has also become equally ardent enemies with the other half. Their dominance of world oil production has waned to a mere 30%, but I believe maintaining price stability is THE strategic reason we must be present there at all. Much of our foreign policy, and military interventionism is directly related to maintaining access to strategic minerals (including oil).

Of the list above, I get "ardent enemies" from Venzuela and Iran. Iraq, Kuwait, Saudi Arabia, Qatar, Libya, the UAE are all US allies. As best I know, Nigeria, Gabon, Angola and Algeria are all neutral. Not on the list are Mexico, Canada, Russia, Brazil, and of course the US itself, none of whom are in OPEC. Maybe, just maybe, OPEC has enough power left to twist prices enough to dent the US economy, at a massive cost to their own profits. But, as they try and twist the prices upwards, other countries will step in and undercut them, just as basic market economics predicts. The days of monopoly production are over, and it has little to do with US military intervention, and everything to do with expanding production across the world.

It would be revenue neutral at the pump, but rather than tax just the consumer, it pushes the taxation back to the importer.

Do you have something against importers? Their math is actually quite easy - if they can't compete with domestic producers, they will stop bringing oil into the country. Then, the government stops making any money at all from the tariff, and the resulting rents all accrue to domestic producers. Three cheers for protectionism!

If it is important for national security, then the US government should outright buy the oil reserves and then, as the owners, can do with it as they please.

If strategy was the only important factor, then yes, you could do worse than to buy up the entire US oil reserves, and preserve that capacity for times of need.

Government action, by definition, is a type of force. When the party acted upon has done nothing to deserve interference, then yes, the action is unjust. However, the commerce, along with proper and necessary clauses seem to apply here, if ever they would. It certainly is within Congresses power to levy a fair tariff on oil for the purposes of paying for the federal costs for transportation systems.

My argument is certainly not that the Congress lacks the power to do this. Much like you said about the Post Office, my argument is that they should not exercise that power - it would be self-defeating protectionism. What did oil importers do to "deserve interference," exactly? What did US exporters do?

I would think that for larger countries, like the US, the terms of trade would be better with a tariff.

Beggar thy neighbour does have the salutary effect of beggaring one's neighbours, thereby making oneself appear wealthier by comparison. It's an entirely illusory "gain," of course, as every sensible economist from Adam Smith onwards has pointed out.* People are not generally made better off by preventing them from making trades they would like to make. Surely a Libertarian does not need this most elementary principle of free exchange explained?

It would reduce the power of oil exporting nations, and if managed correctly would create incentive for the US to be more innovative now with the vast deposits of fossil fuels it does have (like coal, and oil shale).

Quite the contrary. One does not encourage innovation by discouraging competition. By removing the need for US producers to be internationally competitive, giving them a protected "backyard," they would have less reason than ever to be innovative, rather than merely extractive.

Again, you need to look at the greater scheme. We don't need to jack up the price of energy (fossil fuels in this case). The result would be a shock to the economy, as energy affects the entire supply chain, and the real wealth of the consumer (more money per gas fill means less disposable income). What I propose is to leave oil as it is, but drastically reduce the price for the energy production we do want to move toward. Over time, consumers will favor cars like the GM Volt, since the operation costs will be much, much less, and the supply of "fuel" will be freely available.

You seem to have this very strange blind spot for subsidies and protectionism. Taxation, you rail and rant about as if it were your own personal cross to bear to Calvary. And debt? Don't even get you started.

But, as soon as we're talking about the government providing incentives and tax breaks for XYZ, the notion that this all must be paid for with either taxes or debt does not seem to disturb you particularly. It's all the same stuff - take money from someone, give it to someone else - right?

There is a market-clearing price for these commodities. Holding a price for something as fundamental as energy below that level is tough. Government subsidizing the consumption of energy would be incredibly expensive, wasteful, and almost certainly self-defeating. Unlike a targeted carbon tax, which would discourage generating carbon and and encourage almost everything else, this plan would encourage non-carbon energy consumption, and discourage almost everything else (through taxation or debt). Seems inefficient to me.

-Jester

*With the possible exception of Raul Prebisch, who, IMO, was dead wrong, although for interesting reasons.

[kandrathe]

It would be revenue neutral at the pump, but rather than tax just the consumer, it pushes the taxation back to the importer.

Do you have something against importers? Their math is actually quite easy - if they can't compete with domestic producers, they will stop bringing oil into the country. Then, the government stops making any money at all from the tariff, and the resulting rents all accrue to domestic producers. Three cheers for protectionism!

We are doing this to transition the nation off of a commodity we want to discourage due to the environmental concerns. It is too bad that the oil industry needs to die, and we need to start killing it somewhere.

Government action, by definition, is a type of force. When the party acted upon has done nothing to deserve interference, then yes, the action is unjust. However, the commerce, along with proper and necessary clauses seem to apply here, if ever they would. It certainly is within Congresses power to levy a fair tariff on oil for the purposes of paying for the federal costs for transportation systems.

My argument is certainly not that the Congress lacks the power to do this. Much like you said about the Post Office, my argument is that they should not exercise that power - it would be self-defeating protectionism. What did oil importers do to "deserve interference," exactly? What did US exporters do?

Nothing. When we banned DDT, it wasn't done to punish the manufacturer, or distributors. In fact, many millions of people died due to increases of malaria and other vector-borne pathogens.

I would think that for larger countries, like the US, the terms of trade would be better with a tariff.

Beggar thy neighbour does have the salutary effect of beggaring one's neighbours, thereby making oneself appear wealthier by comparison. It's an entirely illusory "gain," of course, as every sensible economist from Adam Smith onwards has pointed out.* People are not generally made better off by preventing them from making trades they would like to make. Surely a Libertarian does not need this most elementary principle of free exchange explained?

Yes, yes, but... We are not doing this to punish oil importers, OPEC, or the OECD oil export nations. Like I said before, I'm not usually one for government intervention, but preserving the status quo of cheap and abundant energy is fundamental for preserving peace in the world. Running out of oil (not to mention those who seek to prevent man made climate change) is a national emergency.

It would reduce the power of oil exporting nations, and if managed correctly would create incentive for the US to be more innovative now with the vast deposits of fossil fuels it does have (like coal, and oil shale).

Quite the contrary. One does not encourage innovation by discouraging competition. By removing the need for US producers to be internationally competitive, giving them a protected "backyard," they would have less reason than ever to be innovative, rather than merely extractive.

Again, though, from a product price point of view, the change is neutral. The price per gallon would not change, although, non-fuel products, such as plastics might increase in price. It would give domestic providers a slight advantage, What if Canada and Mexico were excluded from the tariff? This would be a boon for North America, yes? But, yes, you are right in that it would work just as well to keep the existing regressive consumer tax in place.

Again, you need to look at the greater scheme. We don't need to jack up the price of energy (fossil fuels in this case). The result would be a shock to the economy, as energy affects the entire supply chain, and the real wealth of the consumer (more money per gas fill means less disposable income). What I propose is to leave oil as it is, but drastically reduce the price for the energy production we do want to move toward. Over time, consumers will favor cars like the GM Volt, since the operation costs will be much, much less, and the supply of "fuel" will be freely available.

You seem to have this very strange blind spot for subsidies and protectionism. Taxation, you rail and rant about as if it were your own personal cross to bear to Calvary. And debt? Don't even get you started.

But, as soon as we're talking about the government providing incentives and tax breaks for XYZ, the notion that this all must be paid for with either taxes or debt does not seem to disturb you particularly. It's all the same stuff - take money from someone, give it to someone else - right?

I'm not really advocating paying much for this. I'm advocating the government facilitating it through loans, and risk abatement (meaning that the government would allow new ventures to float through periods of insolvency). I don't really see "tax free" as a subsidy, and this would not be forever, but only until the market has fundamentally shifted. Much like the railroad act, which created incentives for the wannabe tycoons to lay track everywhere, this would be the governments way of "getting out of the way" and encouraging the building of a brand new energy infrastructure. One that will cost many billions of dollars. In order to take that risk, the investors need to know that the rewards are substantially worth it, and the risks are manageable.

There is a market-clearing price for these commodities. Holding a price for something as fundamental as energy below that level is tough. Government subsidizing the consumption of energy would be incredibly expensive, wasteful, and almost certainly self-defeating. Unlike a targeted carbon tax, which would discourage generating carbon and and encourage almost everything else, this plan would encourage non-carbon energy consumption, and discourage almost everything else (through taxation or debt). Seems inefficient to me.

The tricky part would be providing enough incentive to make the change, but not so much that we over heated the economy. I believe a carbon tax would just drag everything down, and wouldn't encourage much of anything. Maybe once you have 50 percent or more of the industry carbon free, then a carbon tax would be the kick in the pants needed to get people to shift more rapidly. But, to just engage in taxing carbon without having alternatives would be homicidal. Like taking the junkie off smack cold turkey, where we'd probably just die, or at least many of us would.

[Jester]

If you want to kill the oil industry, raise the price of oil. Lowering the price of every other kind of energy is like trying to fly a plane by lowering the sky.

Here's some back-of-the-envelope math on trying to undercut oil by making energy cheaper.

A KWh of energy costs about 12 cents. Each American uses about 14,000 of them a year, for a total of $1,680 per capita per year. There are 300,000,000 Americans. That's 504 billion dollars in energy costs. Want to shave off one measly cent per KWh, lowering the price by only 9%? That's a subsidy of 42 billion dollars a year. That gets damned expensive damned fast.

However you achieve this, through loans, or whatever, money is hydraulic, and there is no free lunch. For X effect, you have to pay Y dollars, and if you can fiddle with the margins, you can't change the magnitudes.

But, to just engage in taxing carbon without having alternatives would be homicidal. Like taking the junkie off smack cold turkey, where we'd probably just die, or at least many of us would.

The price of petrol in the UK is already over twice what it is in the US. No proposed carbon tax is that onerous. Yet, I don't hear of the mass deaths every year, not even up in Scotland where it's really cold. Must just be media bias, I guess.

-Jester

[kandrathe]

If you want to kill the oil industry, raise the price of oil. Lowering the price of every other kind of energy is like trying to fly a plane by lowering the sky.

Lowering the sky happens all the time. Check out the incredibly low prices for technology for the past 40 years, fueled by competition and innovation. Roughly, nuclear power generation can be as low as 3 cents per KWH. There is room to lower the sky here.

Here's some back-of-the-envelope math on trying to undercut oil by making energy cheaper.

A KWh of energy costs about 12 cents. Each American uses about 14,000 of them a year, for a total of $1,680 per capita per year. There are 300,000,000 Americans. That's 504 billion dollars in energy costs. Want to shave off one measly cent per KWh, lowering the price by only 9%? That's a subsidy of 42 billion dollars a year. That gets damned expensive damned fast.

Its not a subsidy. Reduce the cost of generation by 50 billion, and pass the savings on to the consumer.

But, to just engage in taxing carbon without having alternatives would be homicidal. Like taking the junkie off smack cold turkey, where we'd probably just die, or at least many of us would.

The price of petrol in the UK is already over twice what it is in the US. No proposed carbon tax is that onerous.

But it is. As I understand it, your "Fuel Price Escalator" only applies to retail fuels at the pump. A *real* carbon tax would hit everything, like a VAT on steroids. Heating oil, manufacturing, chemicals, food, etc. This tax ripples through all goods and services, making them too expensive for people to purchase. The result is that they don't buy them, or buy much less. You already have a significant portion of the population in rebellion over the limited implementation of the FPE.

Yet, I don't hear of the mass deaths every year, not even up in Scotland where it's really cold. Must just be media bias, I guess.

Yet. Did you quadruple the price of fossil fuels used for home heating? It's 30% of your GHG emissions.

[eppie]

Yet. Did you quadruple the price of fossil fuels used for home heating? It's 30% of your GHG emissions.

In europe we use heat insulation in our houses.

Most people will be able to decrease there energy consumption at home with 75 % without really harsh consequences.
Energy is just much too cheap for most people to really care. The thing is that we for some reason think we have some god given right to have cheap energy. Because of our consumption driven economy it is given to us like that, but that will change in the (near) future.

[NuurAbSaal]

The thing is that we for some reason think we have some god given right to have cheap energy.

Aha!

I think this is the crux of the matter.

Whenever unpopular change is required (curb your emissions, save the planet and whatnot), let the others do it.

take care
Tarabulus

[Jester]

Roughly, nuclear power generation can be as low as 3 cents per KWH.

There is a market clearing price for energy. You are talking about forcing the supply curve by producing more and more of it, until the price drops way down. That creates a Harberger's triangle proportionate to the size of the distortion. That energy isn't going to produce itself, and the further you take it from its equilibrium price, the less effective incentives will be, and the more subsidy will be required.

Its not a subsidy. Reduce the cost of generation by 50 billion, and pass the savings on to the consumer.

By what, waving your magic wand? If governments could lower the prices of commodities without subsidizing them, don't you think they maybe might have tried that already? The equilibrium price is the one that suppliers and consumers agree on. Every dollar you move that equation in favour of the consumer is a dollar the supplier has to be given somewhere else. That means subsidy, no matter what clothes you dress it up in. Either the government itself builds more plants than is efficient, which is an opportunity cost loss for the economy, or they pay entrepreneurs to do it, which is a subsidy.

But it is. As I understand it, your "Fuel Price Escalator" only applies to retail fuels at the pump. A *real* carbon tax would hit everything, like a VAT on steroids. Heating oil, manufacturing, chemicals, food, etc. This tax ripples through all goods and services, making them too expensive for people to purchase. The result is that they don't buy them, or buy much less.

Toughly speaking, a tax has an impact relative to the amount of revenue it generates. If you're taxing petrol for 100 dollars of revenue, or taxing carbon for 100 dollars of revenue, the burden on the economy is approximately equal, though the distribution may be different. There is no magic curse about a carbon tax that causes it to somehow multiply its inefficiency a thousandfold, "rippling through the economy" or making goods "too expensive to purchase". At least, not any more than an equivalent sales tax.

You already have a significant portion of the population in rebellion over the limited implementation of the FPE.

Gas taxes aren't popular. They hit people in a very visible way. Those who would design a tax should probably read Bastiat, but with a Machiavellian eye - people complain about taxes they see, and don't complain about taxes they don't see.

Yet. Did you quadruple the price of fossil fuels used for home heating? It's 30% of your GHG emissions.

Quadruple? Wow. That'd be a big honkin' carbon tax. It would certainly give people a good incentive to insulate their houses well! From whence did you summon up this terrifying number?

-Jester

[--Pete]

Hi,

The thing is that we for some reason think we have some god given right to have cheap energy.

But we do. What we can't do is have sufficient cheap energy and an unlimited population simultaneously. And energy isn't the only thing that applies to. We're seeing a shortage of water throughout the world. Many cannot get enough food.

But energy? Have you ever considered the amount of energy just in the sun light that strikes Earth? The energy in tides, in wind, in geo hot spots, in wind, in hydro? The energy available by intelligent usage of fission? And the huge potential in fusion?

The problem is not energy. It is how we generate that energy. The lack of development over the last fifty years. The suppression of nuclear power through ignorance and politics.

Of course, another aspect of the problem is portable energy. To date, there is no complete replacement for petroleum. But electricity will cover a lot of the commute and daily run around. It would also cover a lot of long distance transport and local public transportation by using electrically powered trains.

No, there is no shortage of energy, there is no reason to base the long term planning on freezing in the winter and sweating in the summer. But it is going to take development, deployment and intelligence to solve the problem. Not sacrifice.

--Pete

[eppie]

Hi,

No, there is no shortage of energy, there is no reason to base the long term planning on freezing in the winter and sweating in the summer. But it is going to take development, deployment and intelligence to solve the problem. Not sacrifice.

--Pete

Of course Pete, but the same people that complain loudest when car fule prices go up are usually the same that don't want to pay more taxes to fund research on new energy sources.

So of course it should take development, deployment and intelligence but for more likely it will take sacrifice because we are to stupid to anticipate what happens in the future. I don't know about in the US but in Holland the right wing parties (and voters) are to blame.

Besides that, most people on this earth don't even have the amount of energy to spend as we have.....so a bit of sacrifice is not so strange.

And.....using half the energy that we are using now, doesnot have to be a sacrifice.
Not being able to drive a car with a 4liter engine but having to settle for a 2l one should not be seen as a sacrifice.

[kandrathe]

Yet. Did you quadruple the price of fossil fuels used for home heating? It's 30% of your GHG emissions.

In europe we use heat insulation in our houses.

Um, we have that over here too. There are very few places with very moderate climates which have little insulation, like coastal California, where the temperature range is from the low 60's to the mid 80's.

Most people will be able to decrease there energy consumption at home with 75 % without really harsh consequences.

Not here. Most energy consumption is for needed heating or cooling.

Energy is just much too cheap for most people to really care. The thing is that we for some reason think we have some god given right to have cheap energy.

To echo Pete; There really is plenty of energy. It's the transformations that energy is used for that need to be examined (e.g. aluminum into pop cans filling landfills).

Because of our consumption driven economy it is given to us like that, but that will change in the (near) future.

Do you mean when we run out of energy? That will be a pleasant time, when we can once again bulldoze people into mass graves due to a lack of food, and heat. I don't like a "consumption driven economy" either, however the answer isn't to stop all consumption.

---

Not being able to drive a car with a 4 liter engine but having to settle for a 2l one should not be seen as a sacrifice.

I'm fully trained on harnessing horses, and driving a mule team as well. How far back shall we go? We don't need a 10,000 HP engine capable of breaking land speed records, or hauling freight car size loads to commute to work, but... Getting there at 60 mph, as opposed to 20 mph really is more productive (3x to be exact). If I telecommute two days a week, and organize all my face to face time on the other three days, I can reduce 40% of my fuel consumption.

[Jester]

The zen of the free market: there is no shortage, there is no surplus. There is only the market-clearing price.

"The time has come, Walras said, to talk of many things: the price of ships and sealing wax, of cabbages and kings..."

-Jester

---

There really is plenty of energy. It's the transformations that energy is used for that need to be examined (e.g. aluminum into pop cans filling landfills).

And who shall examine these transformations, that is not already examining them?

I don't like a "consumption driven economy" either, however the answer isn't to stop all consumption.

I'm now confused with both of you. What on earth is an economy for, if not consumption?

-Jester

[--Pete]

Hi,

The zen of the free market: there is no shortage, there is no surplus. There is only the market-clearing price.

And what is the market-clearing price for sand in Arabia or ice in Alaska. I have actually, through oversight, posted items in the AH (WoW) for less than the price a vendor would pay. And had those auctions fail.

Zen? How about: He who studies the economy does so because he does not understand it; he who does not study the economy does not because he does not understand it. Study. Or study not. There is no understanding.

BTW, remember to use your best Yoda voice.

--Pete

[kandrathe]

Roughly, nuclear power generation can be as low as 3 cents per KWH.

There is a market clearing price for energy. You are talking about forcing the supply curve by producing more and more of it, until the price drops way down. That creates a Harberger's triangle proportionate to the size of the distortion. That energy isn't going to produce itself, and the further you take it from its equilibrium price, the less effective incentives will be, and the more subsidy will be required.

Actually, no. I'm talking about creating X amount of clean energy at 3 or 4 cents per KWH, and causing X amount of fossil fuel energy to go away. The total amount of generation capacity would grow according to need, not by making it artificially cheap. The problem is that, say as a home owner, I would need to justify the capital expense of replacing a fossil fuel burning furnace. The savings need to be *real* for a homeowner to commit to changing their home to the clean energy supply. Earlier you said, "A KWh of energy costs about 12 cents. Each American uses about 14,000 of them a year, for a total of $1,680 per capita per year." If you offered them 12 cents for fossil fuel burning furnace, versus 6 cents for clean energy, then a family of four might save $3,360 per year, making the $10,000 to $20,000 conversion of their home to the clean source pay back in 4 to 8 years. As it stands now, other than nuclear, GHG free energy generation costs much more, and so there is a disincentive to convert.

Its not a subsidy. Reduce the cost of generation by 50 billion, and pass the savings on to the consumer.

By what, waving your magic wand? If governments could lower the prices of commodities without subsidizing them, don't you think they maybe might have tried that already?

It depends on what you want to call a "subsidy" -- I think of giving away money as a subsidy. That's not what I would do. I'm thinking of things that a government can do to fast track the building of a couple dozen 6 billion dollar clean energy generation plants. Things like; 1) loan guarantee, 2) temporary tax exemption, 3) eminent domain, 4) simplify the administrative red tape, 5) streamline any court challenges, 6) lease federal lands, etc.

The equilibrium price is the one that suppliers and consumers agree on. Every dollar you move that equation in favour of the consumer is a dollar the supplier has to be given somewhere else. That means subsidy, no matter what clothes you dress it up in. Either the government itself builds more plants than is efficient, which is an opportunity cost loss for the economy, or they pay entrepreneurs to do it, which is a subsidy.

I just don't see the items I listed above as either building it, or paying someone else to build it.

Roughly speaking, a tax has an impact relative to the amount of revenue it generates. If you're taxing petrol for 100 dollars of revenue, or taxing carbon for 100 dollars of revenue, the burden on the economy is approximately equal, though the distribution may be different. There is no magic curse about a carbon tax that causes it to somehow multiply its inefficiency a thousandfold, "rippling through the economy" or making goods "too expensive to purchase". At least, not any more than an equivalent sales tax.

I see what you are saying... What I mean is that if an employee needs to pay more for petrol to drive to work every day, it will reduce their perceived standard of living. If the lorry driver needs to pay an additional amount to deliver groceries to the market, that will be reflected in the price of groceries, further reducing our workers perceived income. Eventually our workers employer will need to raise the worker pay to deliver to them the same standard of living. Having done this, then the employer's company must charge more for their products or services to adjust for 1) increases to salaries, 2) increased prices for materials purchased, and 3) increased costs of operations (such as lighting, heating, and other energy expenditures used for operations (machinery, computers, etc.). So, by touching energy, you touch every part of the supply chain, increasing the costs for everything, which accumulates in driving up prices more. In other words, what we saw under the Carter administration here, stagflation. This is doubly so, since the taxes are not efficiently being redirected into any mechanism which offsets the inflationary spiral. Carbon free generation of sufficient capacity is decades away from being able to offset the artificially set increase in costs throughout the supply chain.

I think if we do this, economically, we are hosed.

Gas taxes aren't popular. They hit people in a very visible way. Those who would design a tax should probably read Bastiat, but with a Machiavellian eye - people complain about taxes they see, and don't complain about taxes they don't see.

I actually think sudden disruptions are what get people angry. If they can work, buy gas, buy groceries, make house payments or rent, and live their lives in the way they are accustomed, then there will be no protests. A good government policy is one that is planned well in advance, and eased into effect giving people, and the economy time to adjust to it. Our fuel tax began at a penny in like 1933, and in 1951 it raised temporarily to 2 cents. By the end of the 50's it was 4.5 cents, and it remained until Reagan raised it to 9 cents in 1982, then Bush I raised it by 5 cents in 1990, then Clinton raised it by 4.3 cents in 1993 bringing it to the current rate of 18.4 cents. I remember in that time that many people complained about the sharp rise from 1980 (4 cents) to 1993 (18.4 cents), and this was when the price per gallon was closer to a dollar. Since it hasn't changed in a decade now, and the percentage of the price is smaller, no one thinks twice about it.

Quadruple? Wow. That'd be a big honkin' carbon tax. It would certainly give people a good incentive to insulate their houses well! From whence did you summon up this terrifying number?

I maybe misunderstood the number, but I thought I read that 75% of the cost of your fuel was taxation. I may be mistaken.

[kandrathe]

There really is plenty of energy. It's the transformations that energy is used for that need to be examined (e.g. aluminum into pop cans filling landfills).

And who shall examine these transformations, that is not already examining them?

We do. We recycle, because it makes sense to conserve resources rather than throw them away. I get upset about programs such as, "cash for clunkers", which with the best of intentions, are actually worse for the economy, the deficit, and the environment. It's consumption driven. It would have been cheaper, and better for the environment to just pay people money for every mile they biked, or walked to work.

I don't like a "consumption driven economy" either, however the answer isn't to stop all consumption.

I'm now confused with both of you. What on earth is an economy for, if not consumption?

That is sort of what I meant. We produce and consume, but I think what eppie and I are talking about are wasteful production and consumption. Growth for the sake of growth, and getting the stock holders their 10% ROI.

[Jester]

And what is the market-clearing price for sand in Arabia or ice in Alaska. I have actually, through oversight, posted items in the AH (WoW) for less than the price a vendor would pay. And had those auctions fail.

And now we're into the fun world of transaction and information costs. It's not worth it to pick up a penny off the street, because you waste more than one cent of time and energy picking it up. I'm sure there's a 100 dollar bill lying around somewhere, but I don't know where it is, so I can't pick it up, and it wouldn't be worth the cost of finding out where it is. I can go farm more gold in 5 minutes of WoW than I could make trolling the AH for vendor trash - although I have made a few silvers here and there buying those up in the past.

As soon as there are transaction costs, we're no longer in an abstract Walrasian space, and market imperfections are inevitable. But still, I think electricity is a fairly well-behaved commodity, and the US is a gigantic market. (Though as Enron demonstrated, not an infinite one.)

-Jester

[Jester]

We produce and consume, but I think what eppie and I are talking about are wasteful production and consumption. Growth for the sake of growth, and getting the stock holders their 10% ROI.

Surely a libertarian should be sympathetic to the argument that people get to spend their money how they please, right? If a producer and a consumer agree upon a price, why shouldn't they trade? And if investors make money from investing in that process, isn't that good?

Now, one answer, maybe the only good answer, is - externalities. There are costs (pollution) that none of the producer, the consumer, nor the investor are paying. But, so long as the externalities are controlled, why not let people make and buy whatever they want?

That's why I love Pigovian taxes. People get to choose how to spend their money - but if they want to spend it in ways that cost society, they pay accordingly.

-Jester

[kandrathe]

We produce and consume, but I think what eppie and I are talking about are wasteful production and consumption. Growth for the sake of growth, and getting the stock holders their 10% ROI.

Surely a libertarian should be sympathetic to the argument that people get to spend their money how they please, right? If a producer and a consumer agree upon a price, why shouldn't they trade? And if investors make money from investing in that process, isn't that good?

I must admit a genetically inherited bias against junk and waste. For example, my wife tends to buy the cheapest priced items, and they tend to break or exhibit shoddy workmanship. I believe in buying based on product value, and if I cannot afford to get something of reasonable value, I will defer the purchase until I can afford to get what I want. She loves the Dollar store, and I want to burn it to the ground. But, this has little to do with my libertarian ideology. I really despise tossing away broken crap that we never should have paid any money for in the first place.

Now, one answer, maybe the only good answer, is - externalities. There are costs (pollution) that none of the producer, the consumer, nor the investor are paying. But, so long as the externalities are controlled, why not let people make and buy whatever they want?

Yes, conservation is my main motivation here. There is limited amounts of many things, and so I want to ensure they are being put to productive purposes.

That's why I love Pigovian taxes. People get to choose how to spend their money - but if they want to spend it in ways that cost society, they pay accordingly.

Well, that leads us full circle I think. This is where corruption, smuggling, and the black market intrude to reward the bandits who avoid the prohibition or taxation.