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The New Yorker’s Weird Climate Economics

David Owen’s talk of the town item in The New Yorker about climate change is about as erudite as we expect from “talk” items, but the policy content is so stunningly wrongheaded it almost sent me tumbling off my elliptical machine. Owen starts with the true observation that carbon emissions fall during economic downturns, and leaps to the wild conclusion that only mass impoverishment could reduce emissions. As Ryan Avent says, the possibility of efficiency is entirely left out of this picture. But it’s clear if you look around the world that within the set of rich countries there’s enormous variation in both the energy intensity of economic activity and the carbon intensity of the energy involved.

To spell this out a bit, I think one thing people miss is that when you price carbon (through a cap or a tax) you get something in return. If we eliminated all taxes on gasoline and instead put taxes on fruit, that would perhaps cause some economic problems as we adjusted, but in the long run people would just consume more gasoline and less fruit. That would be bad for the air and bad for public health, but the economy would plug along just as it always has. If we, as the administration’s budget proposes, make carbon-intensive energy more expensive and use the revenues thereby generated to reduce the rate at which we tax people’s labor you will, similarly, just see a shift away from one kind of economic activity toward another. But this shift would be good for the environment and for public health.

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