Why is Greg Mankiw upset about cap and trade?

We may finally get meaningful climate policy in the form of a cap and trade bill limiting carbon emissions. Because the emerging legislation will give away (rather than auctioning) maybe half of the cap, this is a perfect illustration of Mankiw's (tongue in cheek) "first law of carbon taxation":

Cap-and-trade = Carbon tax + Corporate welfare

I have yet to meet major legislation that did not include substantial corporate welfare. And giving away big portions of the cap does not change any of the environmental benefits (e.g. acid rain regulation since 1990) Yet the efficiency loving Mankiw denounces the cap and trade bill as "highly flawed." What's the deal?

Climate policy chicken littles

Krugman writes this morning about the contradiction (or hypocrisy) of chicken littles. The claim is that doing anything about climate change will make us poor, because modern economies just can't develop substitutes to fossil fuels. But these are exactly the "market can solve anything" cheerleaders.

 

A related contradiction of these free market marketers : the biggest cheerleaders of foreign intervention to "secure" oil supplies are those who profess the greatest faith in markets. Bun market economies it doesn't matter who owns oil, because it will be traded to those who have the greatest interest in paying to use it. And for better or worse, that is still us.

Nanny State vers. 2

Thacher Park is the closest substantial chunk of public land near Albany. It's signature feature is an escarpment of hundred foot tall cliffs, with a walk that descends to the cliff base, before ascending back on the last 50 feet of the historically important Indain Ladder trail.

Despite being operated by the New York State Office of Parks Recreation and Historic Preservation, most of the Indian Ladder trail (the only other easy access below the cliffs), while on state park land, is closed off to the public.

And oh yes; the rest is closed six months of the year, including Easter weekend.

So go enjoy the view from the parking lot, but don't try walking to what is truly unique about this fabulous area.

Thoughts on freebies

Skiing last weekend I chanced into FREE lift tickets. I was very happy:

* I enjoyed myself much more than I'd been anticipating. While I was in a bad mood before coming into the freebies (there was also a teenager involved ...), I was immediately relaxed and carefree afterwards.

* I felt free to stop anytime, not needing to "get my money's worth."

Neither of these sentiments seems to make much sense under standard consumer choice theory. Or at least the latter. Maybe the former is some kind of positive feedback from the unanticipated gift and hence higher consumer surplus from the trip.

If my reactions are typical (and I believe they are), how do we exploit such behavior to make better policy?

About the GOP budget "plan"

All you need to know.

1. The key philosopy: "limits the federal budget from growing faster than the family budget." I guess that's a pretty clear rejection of fiscal policy.

2. Oh yes. The blueprint budget has lots of blue print, but alas, few proposed numbers.

3. Intriguingly, it apparently proposes that the laws of supply and demand be repealed. It complains about proposed energy (carbon) taxes but calls for increased development of wind and solar:

Keeps Energy and Fuel Costs Low
Instead of taxing all energy users with a new national energy tax ... Republicans want energy independence
with increased development of all our natural resources, including
renewable energy sources, such as wind and solar.

While we're at it let's just change some basic physics as well. That could create energy independence in a big hurry.

Oil demand will go up again

More and more cars will do their thing.

Small is beautiful

Or at least cheap. So says Amory Lovins, writing in Freakonomics, on the economics of scale in power production.

Maybe my furnace should really be an electrical generator.