Economic catastrophe - Revised


Why global warming "solutions" are anti-free market
Wadard asked in a reply to this post about the catastrophic costs of fighting global warming. I wanted to deal with his points on the main site so Google and Technorati would pick up my answers.

For the purposes of this post, we'll assume that any existing global warming is human caused.

Most of the proposals so far have been focused on reducing the amount of carbon emissions through economic measures, taxes, fines, regulation, that sort of thing.

Try to find a single economic activity that does not depend on "carbon emissions."

Say a farmer is taxed for the fuel used to run his equipment. Does the farmer absorb that cost or pass that on?

It now goes to the shipper. Besides any costs that the farmer passed on to him, the shipper has additional costs of his own imposed by the new taxes. Absorb or pass on?

Distributor. Absorb or pass on?

Wholesaler. Absorb or pass on?

Grocer. Absorb or pass on?

But it didn't start with the farmer. The farmer has to buy supplies, seeds, fertilizer, chemicals, equipment. Every one of those now carries an extra price that is passed on to the farmer.

Now all this sounds good and easy. After all, if everyone is facing the same increased costs, no one person will have to bear them, right?

Well, it doesn't quite work that way.

Usually over time, a product or service gains value while going down in price. The classic example is the car. Adjusted for inflation, the price of a decent new car now is a fraction of what a car cost back in the 1930s. Today's cars are vastly more capable and safer than the cars then.

Or use computers. You can get a decent laptop for about a third of what I paid for my Amiga 1000, and that is before adjusting for inflation.

Any government fee or regulation drives the cost up while actually decreasing value, and that is if you are lucky.

If you are unlucky, there will be a shortage.

Now remember when I asked you to find a economic activity that does not depend on "carbon emissions?"

Every single action will be more expensive. The costs hit everyone, which means that there is no incentive to undersell the competition.

Some industries will get a "snowball" effect. Travel and delivery services will be especially hard hit.

Even industries that seemingly don't depend on carbon emissions will be hit, including FAX machines and computers.

Economies grow when value is added and shrink when value is taken away. The Western world depends on a growing economy.

All the trade with other nations depends on increasing cashflow.

All the foreign aid to other nations depends on increasing cashflow.

More cash with less value decreases cashflow.

— NeoWayland

Posted: Fri - July 7, 2006 at 06:09 PM  Tag


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