As you may have come to expect at this point, I am not entirely fond of the education I have received at Columbia University. One of the major reasons for this is because of the bias inherent in almost every class I have taken here, from the most seemingly apolitical math course to the inherently political social science course. An example of the type of indoctrination one receives at an Ivy League institution was center stage this week in one of my courses.
Having completed a discussion on torts, we moved on to its application in emissions regulation. Emissions prove highly relevant because one party may cause damage to another party’s property because of the pollution one gives off. However, according to my professor, there is a solution to this that is equitable for all sides. My professor proclaimed, “It is the job of future economists like yourselves to solve these types of problems…otherwise what’s the point of studying economics?”
What was my professor’s solution? Well, since the typical Pigouvian tax wouldn’t work, of course we could follow the “market-based” solution of tradable carbon credits. The logic that my teacher put forth seemed infallible – the government can set the emissions level they so choose, and by creating carbon credit shares tradable on an open market, firms could buy or sell off their right to emit based upon their polluting needs. At the aggregate level, pollution will be reduced. Regardless of the initial allocation of carbon shares, trading will allow companies to emit at the level they so choose. Not only this, but the government won’t even intervene in this free market, and there will be total transparency to boot. Even more remarkable to my professor was the fact that this market was able to set the price, without necessary fixing by the regulator. Hooray for the central planners!
To be fair, my teacher did say that it is not necessarily easy to figure out the optimal level of emissions. But leaving out the fact that of course no government official nor any person period can know the optimal level of emission (especially given that this differs for every single individual), there are myriad other reasons why this solution is not “market based,” or socially beneficial. First, the market for carbon credits is being determined by government fiat. The government determines how many shares should be initially allocated to companies, and enforces the market on private companies. To whom does the burden ultimately fall to either pay for producing pollution, or build new plants that emit less? Why the consumer of course. This was not mentioned in the lecture. The question then becomes, are the social benefits of an emissions cap and market imposed by the government greater than the cost consumers will bare as a result of these policies? This writer happens to think not. Not to mention, of course there are going to be certain businesses that will increase their profits off of the push to decrease emissions as well, meaning government intervention will divert the natural flow of capital to specific sectors in the market.
There is of course as always the philosophical issue as well. Why should the government be in the business of controlling emissions? Of course, I’m sure any good politician, or economist for that matter would make the argument that it is for the public good. However, as always, I would argue that the free market provides a better alternative. First, if people are outraged by the emissions in their communities, they can take their cases to the courts and seek compensation from the company. If one’s private property is damaged, it is their right to seek just compensation, and the job of the courts to arbitrate in these disputes. Second, if this proves insufficient, and the company truly is tearing a community apart, the people in the community can boycott the company, making it financially impossible for the company to operate, and thus forcing the company to change its production techniques to emit less pollution. In an age where information is more readily accessible and transmittable than ever before, it should be easier than ever to rally people against a company. For those who challenge this, even with multinational companies, if the consumers are so angry at the producers for their treatment of the environment, it should be worth the effort of citizens to take shots at the bottom line of the polluting producer, or to rally lawyers and interest groups against the firm, as the firm like any defendant is deemed innocent until proved guilty. Further, if there was ever a time that citizens could rally against corporations easily, given the speed at which information can be disseminated today, people are more easily able to rally behind their causes than ever before.
Unfortunately, the professor of this particular class believes that if a divine central planner could accomplish the aforementioned “elegant” solution, this would be perfectly acceptable as well. It is all about “efficiency,” and “optimal allocations” to university professors. But there is never the question of right and wrong. Simple morality, and respect for natural rights is not a factor. It is always the obligation of politicians and economists to solve our problems, not private individuals. The left is able to veil their interventionism in the cloak of the free market. As long as academia continues to pander about the virtues of government, our future leaders will continue to make the mistakes of their predecessors.