In a comment on Bryan Caplan’s latest post, “Climate Shock Bet: Daniel Reeves Responds,” November 10, 2021, co-blogger Scott Sumner writes: Revenue neutral carbon taxes are a low hanging fruit that we have foolishly declared impractical. Are they really low-hanging fruit? It’s not that clear. I wrote about this in “A Case Against the Carbon Tax For All Ideologies,” July 28, 2018.  The gist of my argument is this: If it turns out that the most efficient way to deal with global warming is a carbon tax, then, yes, the carbon tax is the best way to deal with global warming. But we don’t know that the most efficient way to deal with global warming is with a carbon tax. All we know is that the most efficient way to reduce carbon usage is with a carbon tax. But there are other alternatives for dealing with global warming that don’t involve reducing carbon usage. Most geo-engineering solutions are in this category. Take an extreme case. Let’s say that using the Nordhaus model, you conclude that the optimal carbon tax, given that your goal is to reduce carbon usage, is $40 per ton. This will cost hundreds of billions of dollars and even trillions of dollars over years. But what if a geo-engineering solution that doesn’t involve reducing carbon costs only $1 billion. You can’t argue that the carbon tax would reward the person or company–I’m looking at you, Nathan Myrhvold–that produces this solution. The reason: the geo-engineering solution didn’t reduce carbon one iota. So we will have chosen a very expensive solution when a cheaper one was available. In that case, the carbon tax is not low-hanging fruit at all. Now you might argue that there’s no harm done because a carbon tax could replace other taxes that cause even more deadweight loss. That could be true. But if you look at the various proposals, the most likely is a carbon tax that simply gives a rebate per family. So there is no reduction in deadweight loss. You also might argue that there is no harm done by a carbon tax because it’s internalizing an externality. But if you argue this, you’re begging the question. When we as economists observe an externality, we want the least-cost solution and that is not necessarily a tax solution.   (1 COMMENTS)

Daniel Reeves has written this reaction piece to my write-up of our bet.  I’m in blockquotes; he’s not. By the way, I will be in Guatemala from November 11-16.  I’ll be doing a bunch of events at Universidad Francisco Marroquín on Friday, and speaking for the Mont Pelerin Society on Monday.  I’ll be at Tikal over the weekend.  If you see me in any of these places, please say hi! Now here’s Daniel. Bryan seems to start by acknowledging that 6 degrees of warming (we’re approaching 1 degree so far, for those just tuning in) would be devastating and that a 10% chance of that by the end of the century warrants mitigation efforts. He even acknowledges that — warming being proportional to cumulative historical emissions — we can’t afford to wait. Assuming that that 10% is correct. And then the core of his argument is that that 10% must not be remotely correct because of how biased the authors of Climate Shock must be to be writing an alarmist climate change book, good as it is for an alarmist climate change book. This feels frustrating to me because it sounds like: “I disbelieve this book because the authors are so biased. How do I know they’re biased? They wrote an alarmist climate change book!” The whole point is to assess whether the alarmism is correct. If you dismiss the authors for the very fact that they think alarmism is correct then you are fundamentally closed-minded on this issue and probably shouldn’t have accepted the bet. (To be clear, I’ve paid up already.) My point-by-point replies follow: 1. Wagner and Weitzman place huge weight on the “fat tails” of climate disaster, and fixate on a 10% chance of hitting 6°C global warming. I mildly object to “fixate” here. I would call it bending over backwards to be as non-alarmist as possible, focusing on the unambiguously devastating tail risk and minimizing quibbling about the potentially confusing mix of costs and benefits of milder warming. a. I’m not remotely surprised that Wagner and Weitzman say there is a 10% chance of disaster. Given that they’re writing a book about climate change, I actually expected a higher probability. This sounds like assuming bad faith. My sense from the book was that the authors were incredibly conscientious and intellectually honest. But maybe I’m misunderstanding you and you’re agreeing that it’s impressive that the authors resisted the temptation to exaggerate the probability? b. I’m not qualified to assess the research underlying this probability, but I suspect that it is overestimated because (a) predictions of disaster are almost always wrong, and (b) climate experts have a strong and obvious left-wing bias. Yes, the politicization of this topic is infuriating. See Scott Alexander’s delightful alternate-universe synopsis of climate change being politicized in the opposite direction. But this is why I was so hopeful about you reading Wagner and Weitzman’s book. It doesn’t seem to me to have too much left-wing bias. (Also some of the bias is trying to counteract the other side’s bias, which is what turns the whole topic into an epistemic nightmare. I don’t think you can just pin all the bias on the left. Isn’t there even greater right-wing bias to rationalize business-as-usual?) But let’s rise above all that and just try to understand what’s true. In that spirit, it’s fair to do the Bayesian updating from your skeptical priors but maybe you could clarify how far the book shifts those priors? c. Furthermore, it is quite clear that climate experts were heavily left-wing long before they started studying climate. So it is hardly surprising that the smartest people working in this area are so pessimistic. They started with a more talented team of advocates. Counterpoint: The famous Exxon report from the 80s that perfectly predicted our current 1-degree warming. d. Wagner and Weitzman don’t consider the total disasters that might result from aggressive climate policy. Like what? Most obviously, their policies keep the world poor, hence war-prone, for many extra decades. Which in turn raises the probability of World War III before 2100 from say 10% to 15%. Some policy interventions — say, funding carbon capture — don’t have that possible failure mode. Side note: I think Pigouvian taxes should be philosophically fundamental to laissez faire capitalism (by maximizing how much faire we can laissez) and that we want a carbon tax even if — in light of geoengineering? — it’s lower than Wagner and Weitzman recommend. I also disagree that Pigouvian taxes are fundamentally impoverishing. I’m a fan of revenue-neutral carbon taxes. 2. Wagner and Weitzman are extremely optimistic about geoengineering, yet childishly reject it. […] Why childish? Because when they actually discuss the evidence on geoengineering, it’s far more solid than “an experimental lung cancer drug treatment that showed some promise in a lab.” Wait, can I still win this bet on a technicality if Wagner and Weitzman inadvertently convinced you that we should pursue stratospheric aerosol injection (what they mostly mean by geoengineering in the book)? I don’t know how serious I am with that question but I’d love to understand your thinking more! In the meantime, I’ve read a persuasive-sounding pitch for geoengineering by David Keith, which also explains why we should think of it as a last resort. From that plus my recollection from Climate Shock: Geoengineering doesn’t mitigate ocean acidification It worsens air pollution It increases climate variance and extreme weather events It damages the ozone layer Unknown unknowns It’s probably especially important to take #5 seriously. I definitely didn’t get the impression that Wagner and Weitzman were being childish about this, even if they’re ultimately wrong about geoengineering. Frankly, it looks like Wagner and Weitzman want to impoverish the world by many extra trillions of dollars to ensure that humanity’s savior is the United Nations instead of the United States or (horrors!) Elon Musk. This is Bulverism! 3. Wagner and Weitzman barely mention nuclear power or the absurd regulatory burden under which it labors. This fits with the Social Desirability Bias story, and makes me further distrust them. I may be more trusting than you but I’d only have distrusted them on those grounds if they’d argued against nuclear energy. Wagner and Weitzman think policy intervention should be limited to carbon taxes. Nuclear energy doesn’t emit carbon so they are implicitly pro-nuclear. I’m sure they’d agree about the absurd regulatory burden as well. They do spend a lot of time in the book on the absurdity of the current fossil fuel subsidies, which I’m sure you also despise. (1 COMMENTS)

In his well-deserved victory lap about his bet with Daniel Reeves, co-blogger Bryan Caplan points out that one major flaw in Gernot Wagner’s and Martin L. Weitzman’s book Climate Shock is its treatment or, rather, non-treatment of nuclear power. Bryan writes: Wagner and Weitzman barely mention nuclear power or the absurd regulatory burden under which it labors.  This fits with the Social Desirability Bias story, and makes me further distrust them. In a comment on Bryan’s post, bettor Daniel Reeves responds: I may be more trusting than you but I’d only have distrusted them on those grounds if they’d argued against nuclear energy. Wagner and Weitzman think policy intervention should be limited to carbon taxes. Nuclear energy doesn’t emit carbon so they are implicitly pro-nuclear. I’m sure they’d agree about the absurd regulatory burden as well. They do spend a lot of time in the book on the absurdity of the current fossil fuel subsidies, which I’m sure you also despise. I think Dan is way more trusting than Bryan and way more trusting that is justified. I reviewed the book for Regulation in 2015-16 and read every page and every footnote. Reeves is right that the authors don’t argue against nuclear energy. But they have an asymmetric treatment of alternative non-carbon energies. On pages 17 and 18, they praise solar energy. On page 34 they advocate subsidizing innovation in solar panels. On page 144, they write: “Wind, solar, and all sorts of low-carbon technologies win.” What goes unmentioned? The N-word: Nuclear. If authors consider alternatives to carbon-based fuels and mention some explicitly, it’s reasonable to conclude that they don’t favor the ones they don’t mention at all. You will find “nuclear” in the index, though. Here’s what you’ll find: nuclear weapons, 94, 156, 194. See also terrorism.   (0 COMMENTS)

As philosophy and theology departments have been eviscerated at American universities, what have we lost? Have our universities been transformed into trade schools, and if so, what’s wrong with that? In this episode, EconTalk host Russ Roberts welcomes philosopher Jennifer Frey to discuss just these sorts of questions. We hope you’ll use the prompts below to help us continue the conversation:     1- Why is Frey critical of psychological (versus philosophical) approaches to happiness? What sort of character components does she think must also be considered, and why? What’s the difference between happiness and morality?   2- Why should philosophers and theologians be part of public policy discussions?   3- How would you define liberal learning, and what sort of role do you think it should play in university curricula? Would you favor a liberal arts core curriculum? Why or why not?   4- In what ways ought universities be reformed, according to Frey? Why do you think universities are increasingly uncomfortable making claims about the pursuit of truth?   5- To what extent are you consumed by workism? Do you agree with Frey’s claim that if you’re consumed by it, you’re not really free? Explain.     P.S. If you find yourself interested in reading Joseph Pieper’s Leisure: The Basis of Culture, you can find a reading guide to accompany the text at #EconlibReads. (0 COMMENTS)

I have argued on this blog that the best practical definition of infrastructure is “whatever the government wants to pay for because it benefits from the expenditure.” The adoption by the House of a $1-trillion bipartisan infrastructure bill reinforces this argument. (See Gabriel T. Rubin and Eliza Collins, “What’s in the Bipartisan Infrastructure Bill? From Amtrack to Roads to Water Systems,” Wall Street Journal, November 6, 2021.) The standard argument for public infrastructure is that it is an investment that will yield a high rate of return in terms of future economic growth. But there are many caveats. The returns may be lower than those of the private investments displaced by government financing of infrastructure. (See Josh Mitchell, “Infrastructure Law Seen Having Small, Positive Impact on Growth,” Wall Street Journal, November 6, 2021.) More generally, if the government produces something, something else cannot be produced. And we have no credible theory showing that political and bureaucratic processes will choose the most productive investments. The standard concept of public infrastructure may also run into a logical paradox. As the term suggests, infrastructure is conceived as underlying the whole structure of the economy, that is, of exchange and trade. This seems to imply that nearly everything is infrastructure by association. Roads need to be paved, at least in an advanced and efficient economy. So asphalt must also be infrastructure (or infra-infrastructure?). What about asphalt rollers and the steel that goes into them? The steel, aluminum, and concrete in road safety barriers? The iron used in steel manufacturing? The steelworkers themselves? The infrastructure bill gives an idea of such infinite regress. It devotes $66 billion to rail maintenance, modernization, and expansion—mainly for Amtrak. Another $39 billion is scheduled for the modernization of public transit and its accessibility to the disabled and elderly. Energy is also part of infrastructure, at least when it is the sort favored by the government. The bill also promotes “environmental justice” and “good-paying union jobs”: is that infrastructure too? The $1.75-trillion “social” and environmental bill the Democratic Party is pushing is said to target “human infrastructure.” Certainly, it cannot be infrastructure “all the way down.” This intriguing and humorous expression has many reported origins revolving around some old mythological belief that the earth stands on the back of a humongous turtle. But what does the turtle rest on? On another turtle, of course. And what about that turtle? “Ah, Sahib, after that it is turtles all the way down.” (In some versions, elephants stood in the chain.) Note that, as is usually the case, much of government infrastructure propaganda is politicians’ smoke and mirrors. About half of the infrastructure bill is made of expenditures already planned, and the whole package is to be spread over the next five years. (See “Joe Biden Passes the Less Contentious Half of his Legislative Agenda,” The Economist, November 7, 2021.) Perhaps there are some activities that only the state or the government, in the general sense of political authority, can do to support any system of social cooperation including a free society. (That’s the one-million-dollar question in political philosophy and economics.) Perhaps then we could meaningfully limit the meaning of “infrastructure” to the production of “public goods.” But it is doubtful that such things include Amtrak, electric car chargers, or broadband service which is already produced by private businesses. Or perhaps we should say that “infrastructure” is limited to fundamental conditions of social cooperation such as abstract institutions (like the rule of law) that favor exchange and individual liberty? This sort of definition is normative as opposed to the descriptive one I suggested before and would provide a guide to what the state should do. (0 COMMENTS)

Two months ago, Daniel Reeves offered me a remarkable bet.  The terms: 1. Bryan reads Climate Shock.  But feel free to skip the parts about short-term extreme weather events — that’s probably least compelling and least relevant to the long-term cost/benefit analysis. 2. Danny puts up $500 to Bryan’s $250 on Bryan doing a 180 on some important policy question related to climate change, such as supporting carbon pricing or subsidizing clean energy or carbon capture tech.  (Merely increasing Bryan’s support for repeal of existing government policies doesn’t count). 3. Bryan automatically loses the bet if he doesn’t finish the book by January 1, 2022. I have now read Climate Shock, and I’m afraid that the book didn’t change my mind on any important policy question related to climate change.  I really did strive to be fair, and I did warn Reeves that he was overestimating my open-mindedness.  That said, I did win – and the noble Reeves has already paid me. My main thoughts on the book: 1. Wagner and Weitzman place huge weight on the “fat tails” of climate disaster, and fixate on a 10% chance of hitting 6°C global warming. Climate change belongs to a rare category of situations where it’s extraordinarily difficult to put meaningful bounds on the extent of possible planetary damages. Focusing on getting precise estimates of the damages associated with eventual global average warming of 4°C (7°F), 5°C (9°F), or 6°C (11°F) misses the point. The appropriate price on carbon is one that will make us comfortable enough to know that we will never get to anything close to 6°C (11°F) and certain eventual catastrophe. Never, of course, is a strong word, since we know the chance of any of these temperatures happening even based on today’s atmospheric concentrations can’t be brought to zero. One thing we know for sure is that a greater than 10 percent chance of eventual warming of 6°C (11°F) or more— the end of the human adventure on this planet as we now know it— is too high. And that’s the path the planet is on at the moment. With the immense longevity of atmospheric carbon dioxide, “wait and see” would amount to nothing other than willful blindness. Why doesn’t this change my mind? a. I’m not remotely surprised that Wagner and Weitzman say there is a 10% chance of disaster.  Given that they’re writing a book about climate change, I actually expected a higher probability. b. I’m not qualified to assess the research underlying this probability, but I suspect that it is overestimated because (a) predictions of disaster are almost always wrong, and (b) climate experts have a strong and obvious left-wing bias. c. Furthermore, it is quite clear that climate experts were heavily left-wing long before they started studying climate.  So it is hardly surprising that the smartest people working in this area are so pessimistic.  They started with a more talented team of advocates. d. Wagner and Weitzman don’t consider the total disasters that might result from aggressive climate policy.  Like what?  Most obviously, their policies keep the world poor, hence war-prone, for many extra decades.  Which in turn raises the probability of World War III before 2100 from say 10% to 15%. 2. Wagner and Weitzman are extremely optimistic about geoengineering, yet childishly reject it. This is where we’ll end up: with the specter of geoengineering. Everything we know about how humans behave, and how they don’t, leads us to believe that— unless political leaders muster the courage to act, decisively and soon— the world will inevitably be facing some painful choices. It may be folly to believe that technology (in the form of geoengineering) can, once again, bail out society and the planet from the worst of planetary emergencies. But that’s the world we are moving toward. Talk of geoengineering, much like uncertainty, isn’t very comforting. It shouldn’t be. It’s certainly not an excuse for inaction on sensible climate policy, just as we shouldn’t start smoking because an experimental lung cancer drug treatment showed some promise in a lab. The specter of geoengineering should be a clarion call for action. Decisive, and soon. Why childish?  Because when they actually discuss the evidence on geoengineering, it’s far more solid than “an experimental lung cancer drug treatment that showed some promise in a lab.” We may hate the idea of countering amazing amounts of pollution with yet more pollution of a different type. But the entire enterprise is simply too cheap to ignore. And it’s not like anyone would literally do as Mount Pinatubo did and dump 20 million tons of sulfur dioxide into the stratosphere. At the very least, given current technology and knowledge, the sulfur would likely be delivered in the form of sulfuric acid vapor. Sooner rather than later, we may be looking at particles specifically engineered to reflect as much solar radiation back into space with as little material as possible. That would mean less material to achieve the same impact. It may be a fleet of a few dozen planes flying around the clock. Some have gone as far as to calculate how many commercially available Gulfstream G650 jets it would take to haul the necessary materials. The specifics are indeed too specific. What matters is that the total costs are low, both compared to the damage carbon dioxide causes and the cost of avoiding that damage by reducing emissions. Actual numbers are all over the place, and all of them are based on estimates, but most put the direct engineering costs on the order of $1 to 10 billion a year. Those are the engineering costs of getting temperatures back down to preindustrial levels. It’s not nothing, but it’s well within the reach of many countries and maybe even the odd billionaire. If a ton of carbon dioxide emitted today costs $40 over its lifetime, we are talking pennies per equivalent ton. That’s three orders of magnitude lower, and it’s the exact parallel situation to the free-rider problem that has caused the problem in the first place. Instead of one person enjoying all the benefits of that cross-country round-trip and the other seven billion paying fractions of a penny each for the climate damages that one ton of carbon dioxide causes, now it’s one person or (more likely) one country being able to pay for the costs of geoengineering the entire planet — all potentially without consulting the other seven billion people. The final clause clearly freaks them out.  But why?  They reasonably predict that geoengineering will start slowly.  Are they really worried that “once the genie is out of the bottle,” some tropical countries will decide to freeze the rest of the planet to death?  Or what? Frankly, it looks like Wagner and Weitzman want to impoverish the world by many extra trillions of dollars to ensure that humanity’s savior is the United Nations instead of the United States or (horrors!) Elon Musk.  Indeed, their objections are so flimsy that you could accuse them of being Straussian proponents of geoengineering.  But that’s a stretch.  Wagner and Weitzman sound like typical smart people under the spell of Social Desirability Bias.  They care such more about solving climate change inoffensively than solving it cheaply. 3. Wagner and Weitzman barely mention nuclear power or the absurd regulatory burden under which it labors.  This fits with the Social Desirability Bias story, and makes me further distrust them.   I freely grant that Climate Change is one of the best alarmist books on its topic.  Maybe the best such book.  Alas, that’s not good enough to change my mind on climate policy.   (0 COMMENTS)

Maybe you “didn’t build that” entirely on your own, but if you act as if you did, you probably will build more. It is often contended that the belief that a person is solely responsible for his own fate is held only by the successful. This in itself is not so unacceptable as its underlying suggestion, which is that people hold this belief because they have been successful. I, for one, am inclined to think that the connection is the other way round and that people often are successful because they hold this belief. Though a man’s conviction that all he achieves is due solely to his exertions, skill, and intelligence may be largely false, it is apt to have the most beneficial effects on his energy and circumspection. And if the smug pride of the successful is often intolerable and offensive, the belief that success depends wholly on him is probably the pragmatically most effective incentive to successful action; whereas the more a man indulges in the propensity to blame others or circumstances for his failures, the more disgruntled and ineffective he tends to become. This is from Friedrich Hayek, The Constitution of Liberty, 1960, Chapter 5, “Responsibility and Freedom.” It’s one of my favorite passages. A related one is my justification for cheerfulness and optimism. Both John Stossel and Robert Higgs have asked me why I’m so cheery and optimistic. Part of my answer is that it helps me get out of bed every morning and motivates me to work toward my personal and political goals. My optimism probably is not entirely justified. But it motivates me and probably helps me make the world a slightly better place. Additional note: This is the other part of my answer to John Stossel. It doesn’t relate directly to the Hayek point though. HT2 Dan Klein. (0 COMMENTS)

Thanks to all our loyal listeners who take our EconTalk survey each year.   Here are your Top 10 Episodes of 2020. First, two honorable mentions: L.A. Paul on Vampires, Life Choices and Transformation, and Vinay Prasad on Cancer Drugs, Medical Ethics and Malignant. They would have been in the top 10 if we had limited voting to people who had heard every episode. Now, the Top 10. Number 10, a tie between Yuval Levin on A Time to Build and Tyler Cowen on the COVID-19 Pandemic. Number 9: Michael Blastland on The Hidden Half. Number 8: Jay Bhattacharya on the Pandemic. Number 7: Michael Munger on the Future of Higher Education. Number 6: Nassim Nicholas Taleb on the Pandemic. Number 5, Virginia Postrel on Textiles and the Fabric of Civilization. Number 4, Glenn Loury on Race, Inequality, and America. Number 3, Matt Ridley on How Innovation Works. [Number 2 and Number 1:] And your favorite episodes of 2020–we’re honoring two episodes this year as your favorites, kind of cheating:Steven Levitt on Freakonomics and the State of Economics, and Dwayne Betts on Reading, Prison and the Million Book Project. 11 episodes got the most votes. But, among people who heard every episode, Dwayne Betts was by far the biggest vote-getter. That split doesn’t usually happen. So, this year, we’re listing your favorite as a tie. (0 COMMENTS)

It is sometimes claimed that governments overspend due to pressure from the public. That may or may not be true, but in Hong Kong the reverse seems to be happening.  As it becomes less democratic, spending is rising: Hong Kong’s renowned fiscal reserves are at risk after the city’s opposition-free legislature approved record public expenditure over the past year, analysts have warned. . . . Following Beijing’s overhaul of the electoral system that barred “unpatriotic” candidates from running, opposition politicians are unlikely to make a return to the legislature. “Without proper checks and balances, the pressure on [fiscal reserves] will increase,” said Kevin Lai, chief economist for Asia excluding Japan at Daiwa Capital Markets. Andy Kwan, a director at ACE Centre for Business and Economic Research, agreed, saying the government could “easily no longer have fiscal discipline . . . especially when it comes to huge expenditures for upcoming large-scale projects”. Of all the European governments, Switzerland’s is the most directly accountable to voters.  Switzerland also has the lowest level of public spending in Western Europe (as a share of GDP.) I wonder.  Is it pressure from “the public”, or is it pressure from special interest groups? (0 COMMENTS)

Substacker Nathan Brooks thinks he has a shot at the Nobel prize.  In particular, he says that he can explain some puzzles about the U.S. labor market by appealing to employers’ demand for higher employee effort. I’m not convinced.  I don’t know whether he’s right or wrong.  But even if he were clearly correct, this doesn’t look close to a Nobel-prize-winning insight to me.  And even if it were, Brooks is not an economics professor, so the Nobel committee is highly unlikely to consider him regardless of the merits of his ideas.  Odds that he’s right multiplied by odds that his insight is Nobel worthy multiplied by the odds that the first non-professor wins look vanishingly small to me. Upshot: I have bet Brooks at 5:1 odds that he will not win the Nobel Prize in 2031 or earlier.  He has pre-paid $100.  If he wins, I will pay him $100 plus 5% per year interest, plus another $500. (0 COMMENTS)