An Economic View of the Green New Deal


The Economist is not exactly a left-wing rag.  It is a very conservative and thoughtful journal. I love to read it for a different point of view. Sometimes, the point of view is not that different from my own.


I read an article in the Economist about the Green New Deal. It was not a ringing endorsement, but it was not a rabid diatribe against it either as I am accustomed to seeing in conservative journals.  The article talked about how climate change was really about market failure. In other words, it is a serious problem that the market has not figured out how to solve. This is how they described it,

“In economics, climate change is a big but straightforward example of a market failure, with a correspondingly straightforward solution. People take environmentally harmful decisions because the private benefits of doing so (using a car to get to work, say) outweigh the private costs (the price of the petrol to run the car). But emission-producing activities also impose social costs—deaths from pollution and collisions, the contribution of carbon emissions to climate change—that do not influence an individual’s decision to drive rather than walk or take public transport. To solve the climate problem, then, governments need only include the social cost of carbon in the prices people pay. The simplest approach is a levy on emissions corresponding to that social cost. Carbon-intensive activities become more expensive, and people efficiently reduce their emissions by responding to prices. It is an elegant approach favoured by this newspaper. In January a distinguished and bipartisan list of economists signed a letter that ran in the Wall Street Journal arguing in favour of a version that would refund carbon-tax revenue in the form of a flat, universal dividend.”


That is the problem we must address.  Once again, people like me who own and drive a car, tend to ignore the costs of driving that car which are born by the public. I count the fuel I must pay for as well as the costs of the vehicle, but the costs to the public at large, I largely ignore.   I shouldn’t. Neither should you.

A carbon tax fairly forces us to do the right thing whether we want to o not. We can still drive a gas guzzling car if we choose. But we have to pay the whole cost–the public as well as the private.


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