Free markets, property rights and climate change

A spat has broken out between the IPA and government supporters on the carbon tax.* We have been following the argument quite closely here at the Cat. The latest instalment is here. The argument appears to be two-fold: what is a free market (relative to an artificial market) and what is the value of government created property rights?

So what is the role of government in a free market? Let’s have Ludwig von Mises explain (Human Action, p. 257) (emphasis added):

There is in the operation of the market no compulsion and coercion. The state, the social apparatus of coercion and compulsion, does not interfere with the market and with the citizens’ activities directed by the market. It employs its power to beat people into submission solely for the prevention of actions destructive to the preservation and the smooth operation of the market economy. It protects the individual’s life, health, and property against violent or fraudulent aggression on the part of domestic gangsters and external foes.

A carbon market does not fit into that definition – quite the contrary. In the carbon market the government has first nationalised and then privatised the atmosphere, creating the right to pollute, and then vesting those rights largely in the hands of foreigners (the EU). Australians are then required to purchase the right to pollute in Australia from those foreigners. This is not a voluntary exchange – it is driven entirely by government coercion and thus cannot be described as being a free market.

In addition these rights to pollute would never evolve naturally. This raises the issue of where do property rights come from? There are two broad theories in this regard: the efficiency theory (ala Harold Demsetz) and the legal-centric theory (ala Itai Sened). I’ve written about this before so here is an extract:

Property rights exist to facilitate the acquisition, control, and exchange of assets. While many definitions of property rights are similar, the literature shows disagreement as to the source and origin of property rights, particularly the role that the state plays in originating, specifying and developing these rights. Alchian (1965: 129) is emphatic, “If … I talk as if the property rights were enforced by formal state police power, let me here emphasize that such an interpretation … is a gross error.” Alchian, however, also recognizes that there are many counter-examples to his “gross error” and appeals for edification. Some authors (Barzel 1997, Ellickson 1989, 1991) differentiate between economic rights and legal rights. It would seem that not all economic rights are legal rights, but that a subset of legal rights will always be economic rights.

In short the relationship between the emergence of property rights and the state is the subject of debate and controversy. Early theories of the emergence of property rights did not envisage an active role for the state. Demsetz is the classic paper in this area that property rights emerge to internalize externalities in response to changes in technology and relative prices. Property rights in this model are endogenous. Eggertsson (1990) refers to this model as naïve, as Demsetz makes no attempt to model the social and political environment in which the rights arise.

The opposite view of the emergence of property rights is the “legal centralist” view. Sened provides a recent example of scholarship in this area arguing that property rights cannot exist without centralized law enforcement as well as the state having a monopoly in violence. In his model, property rights arise out of the interaction between political entrepreneurs who wish to internalize some opportunity and government officials. Sened (6, original emphasis) writes that, “governments must grant rights before they can protect them.” Further he writes, “[s]uch rights cannot emerge or persist unless they serve, directly or indirectly, the interests of the central authorities that pay a remarkable cost to protect and enforce them” (7). Sened argues that four conditions are necessary and sufficient for rights to emerge: the right must be valuable, right-holders must desire the right, rule-makers must desire to enforce the right, and some duty-bearers respect the right. In the legal centralist approach, property rights may be efficiency enhancing or not. Political entrepreneurs may lobby for property rights that increase output or for rights that monopolize some aspect of the economy (i.e. the political entrepreneur may represent an interest group).

So I’m happy to believe that the government can create property rights in the atmosphere and then to try force people to trade in those rights. But here we run into a hidden assumption in the whole “market-based” approach to public policy. That is, “any market is a good market”. But I’m not convinced anyone really believes that proposition. Consider, for example, slavery – as I understand it there is such a market; yet I’m not convinced anyone would publicly argue that property in human beings was acceptable even though the government had declared it to be so. Indeed government sanctioned slavery has a long history.

So let’s have a look at Sened’s four criteria:
1. The right must be valuable. Well, let’s be blunt, the right to pollute only becomes valuable when the government creates an artificial scarcity. To date despite their very best efforts governments around the world have failed in this regard.
2. Right-holders must desire the right. This one is tough – right-holders only desire the right because they are mandated by government to do so. As such the right is like any other impost (or tax) and will be characterised by sullen compliance, obfuscation and avoision.
3. Rule-makers must desire to enforce the right. Here is another problem – political support for carbon markets is weak. The Coalition doesn’t support it at all and the ALP is wavering.
4. Some duty-bearers respect the right. Well, no. Not really. Ask yourself this, if the government were to halt trading in carbon markets would a black market in carbon evolve? No? I don’t think so either. Yet there are many, many black markets in all sorts of products and services. Consider for example another government created property right; Copyright. Despite having the ability and opportunity many people do not pirate tv shows or photocopy books and the like. But would anyone voluntarily trade carbon if they didn’t have to?

To Sened’s list I would add:
5. Must have some (economic or social) value.** Now our Green friends tell us that carbon markets do have great value. Okay. Yet they have failed to convince on this score. Part of their problem was poor strategy. As Lord Stern said, “If you don’t care about future generations, you won’t care about climate change”. That is exactly right.

So government can create property rights but that isn’t saying government should create property rights nor does it guarantee that those rights would persist. To put it in terms lefties can understand, the social licence for carbon markets is about to be revoked.

* The latest article is written by John Daley – CEO of the Grattan Institute who makes the following disclosure:

John Daley does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

The Grattan Institute was founded by a $35 million grant from the Rudd government.

Update: A lurker emails to say that the Rudd government gave the Grattan Institute $10 million – not $35 million as I thought it had. That’s all okay then. 🙂

Update II: The disclosure statement has been modifed:

Grattan Institute began with a $15 million endowment from each of the Federal and Victorian Governments. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and Grattan uses the income to pursue its activities.

** This could be similar to Sened’s first point but I really want to hammer this point.

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58 Responses to Free markets, property rights and climate change

  1. johno says:

    Carbon dioxide is not a pollutant. It is one of the two most important gaes required to sustain life on this planet.

  2. Token says:

    This was the first and most obvious reason why each market exchange of the product has seen the value drop to zero. Like a buzz stock, once the marketing no longer defines attitudes, people get rational and look at the underlying value and bail.

    The only value I see is as political insurance against the Green Hucksters who will target people as in the pay of Big Oil or the Koch Bros.

  3. Driftforge says:

    The closest working analog I can see to the negCO2 market is a quota system for a natural resource – say fishing.

    A license has limited value until general scarcity occurs – at which point value may increase quickly. At the moment, there is simply no capacity to enact a general scarcity on the atmosphere. Consider fishing – if a local area enacts a quota, that quota will only displace activity and capture preference rent until the point where either quotas are in place everywhere, or the places in which those quotas are not in place become overfished or unattractive through some other means.

    The difficulty is that our atmosphere is a single resource, and the location of emission is largely irrelevant. There is no preference rent, so until the point at which the whole resource is able to be controlled, there is no value to a license, because activity will simply displace.

    1. When you are dealing with a worldwide resource, you deal with it world wide or not at all.

    2. There is no point setting up a system for licensing a resource until the cost of licensing the resource is substantially less than the revenue obtained.

    3. Unless you can quantify and verify the outcomes reliably and consistently at the national level, don’t bother. Realistically this means continual measurement of the change in CO2 levels as air masses transit each national airspace, allowing for a charge / credit to be placed nationally. (Side question – can we already do this from space? Would certainly seem the best option.)

    4. Don’t make the land mistake. You can’t treat a license as an asset, it must be charged continuously at the current value, not transformed into a prepaid (or perpetual) license to produce CO2 into the future.

    A market in licenses for the use of a common resource is possible. But the preconditions for a working market aren’t even close to being met currently.

  4. Pragmatic says:

    A right can’t be placed on an intangible. Property rights have always been defined and accepted as something that is tangible, describable and quantifiable, e.g, a section of land defined by survey (accurate description) or a physical item that meet all criteria and is moveable, e.g, a vehicle. Atmosphere and a trace gas within the composition cannot meet any of the above as it is constantly changing in composition, shifting location and unable to be quantified with any degree of consistent and agreeable accuracy.

    CO2 is shared beyond any and all national boundaries, constanty used and re-used in the same global commons and not subject to a singular legal jurisdiction of a nation state or person. It is not the same concept of commons described by Garrett Hardin, to which inumerable laws have been applied and upheld.

    A trace component occurring in atmosphere (liquids or solids) cannot be claimed simply by decree to be a “pollutant”, and such claim would not stand a test of legal challenge that requires proof beyond doubt. Without it all life ceases to exist, literally. It’s as ludicrous as declaring oxygen or sunlight to be a pollutant and a property right. CO2 is constantly being created and destroyed (cycled) by natural processes.

    Where is the empirical evidence a trace component of the atmosphere, i.e. a describable quantity (volume) belongs to any particular person or State, and therefore claimable as a “right”? And what about all the rest? CO2, or the atmosphere, as a complex mix of gases, is not “owned” by anyone or everyone. All other aerobic organisms (which we are 100% dependent on) have a far greater “claim” to CO2 than mere politicians, technocrats, lawyers or the like. Assigning a “property value” to CO2 is the ultimate farce. It’s a construct, not a reality.

  5. eb says:

    Driftee and Pragmatic have already given two thought-out responses to Sinc’s post.

    Over at the Conversation all they have is abuse. Typical lefties!

  6. Bruce of Newcastle says:

    In the carbon market the government has first nationalised and then privatised the atmosphere, creating the right to pollute

    Sinc – You are falling into the maw of the Government’s thought control program.

    It is not a right to pollute. CO2 release cannot be defined as a form of pollution in the same way that releasing distilled water into the ocean is not polluting it.

    And seriously, in science terms, the empirical equilibrium sensitivity of the climate to CO2 convincingly appears to be below 1 C/doubling. If so, and this is something I have very good evidence for, then no amount of CO2 produced by humans can do harm. Instead it can do help by improving uptake by plants. Biosphere productivity appears to have risen by about 10% in the age of humankind.

    Therefore it is not even neutral it is a positive. Like taxing farmers for using fertilizer.

    (And a note to people who wish to challenge the work reported at the link, I have lots of additional evidence and data. Bring it on.)

  7. Aynsley Kellow says:

    Thank you Sinclair – a good exposition of both sides of the argument.

    I think the problem with CO2 or any other pollutant derives from the extension to it of the term ‘right’, a word that inevitably takes on a normative meaning. It would be more accurate to refer to these as ‘tradable permits’, since the government simply makes it illegal to discharge without a permit and then, rather than charging a fixed price (tax) issues them at some price from zero upwards and allows the permit to be traded and the price of the trade to be determined by supply and demand. This is certainly not a free market in anything resembling property rights, especially because the sovereign risk is immense: the government can restrict permits or issue more.

    The reason the guys who invented tradable permits for SO2 opposed it for climate change because: 1. There are enormous (insurmountable?) problems of verification in an international trading system; 2. there is too much uncertainty as to how many permits should be issued. There is enormous uncertainty over the sensitivity of the global climate system to CO2 (1.2°C for doubling CO2 from pre-industrial revolution levels, the ‘laboratory’ result, of which there is little controversy — and much of which we have already had; or something from positive feedback from water vapour, for which evidence is weak). Then there is the question of the damage function of this ‘pollution’ (which, like the word ‘weed’ is inherently a value judgment), and whether it is a net positive or negative.

  8. Sinclair Davidson says:

    At the expense of being hanged, drawn, and quartered and not withstanding the positive benefits of CO2 emissions (makes plants grow, annoys Al Gore, reduces Greenies to tears etc.) I have no problem describing CO2 emissions as “pollution”. Pollution here has a definition – the unwanted by-product of some or other production process that gets abandoned into the commons. Now the argument that CO2 makes plants grow does not detract from it being a pollutant – all you’re saying is that the cost of the pollutant isn’t as high as some other pollutant. Okay. So to use an example from the thread, I suspect dumping distilled water into a stream will do less damage than dumping acid. Is that distilled water pollution? Yes. Should we worry about it? Maybe not.

  9. Eddystone says:

    I have no problem describing CO2 emissions as “pollution”. Pollution here has a definition

    The reason it is called “pollution” has no basis on any theoretical definition. It is to mislead the electorate. You shouldn’t be a party to it.

  10. Pedro says:

    That seems a long essay to come to an essentially simple answer. If the govt creates carbon permits and makes them tradable then it has created something that is property (I think an untradable licence is not property). If the supply is restricted then that property might have some value.

    The market for carbon permits does not need to be any more or less free than the market for particular books or movie DVDs. At the heart of each market is a govt created right, but the creation can be distinguished from the trading. The difference is that the creation of original works and publishing them as books or DVDs is (largely) unrestricted and only then does the govt right attach. While the creation of carbon permits requires the govt to act.

    I think Daley gets a bit confused about some things, but in the main he is correct to say that the argument about the existence of a free market in carbon permits is pointless. All the arguments against the carbon tax relate to the stupidity of restricting the production of CO2 .

  11. Pedro says:

    “Pollution here has a definition – the unwanted by-product of some or other production process that gets abandoned into the commons.”

    A quick google search shows that pretty much everyone thinks pollution has to be harmful.

  12. Eddystone says:

    no amount of CO2 produced by humans can do harm. Instead it can do help by improving uptake by plants. Biosphere productivity appears to have risen by about 10% in the age of humankind.

    Exactly.

    Industrial nations are providing a free gift to the world.

    The whole discussion about “carbon” taxes/trading and the pros and cons thereof is real “emperor’s new clothes” stuff.

  13. Jim Rose says:

    a range of property rights presuppose a statutory framework. fishing quotas and strata title are examples. corporate ownership requires a companies act.

  14. Bruce says:

    Sinc – I am quite serious about the misuse of the word pollution. We should all use the work ’emit’, and ’emission rights’.

    The point is that ‘pollution’ has connotations of immorality. ‘Emitting’ is neutral word. It is quite moral to charge for emission rights for emitting CO2. I can prove it is immoral to charge for pollution rights to pollute with CO2, since I can scientifically show that CO2 is not a pollutant (when discharged in the way we are discussing, ie well diluted).

    But the rub is that no popular vote will allow a government to charge a tax on emitting a harmless substance. Governments can as we saw achieve at least a plurality of support for taxing pollution because voters rightly consider polluting as bad. Which is why I say that applying this term to CO2 is immoral and should not be done. Do not aid and abet the ALP and Green propaganda.

    I have no moral objection to taxing CO2 if a political party goes to an election and wins it with this as policy. What I object to is lying about CO2 or any substance to make it sound bad when it isn’t.

    Furthermore if you accept CO2 emission is pollution then we are polluting the world with every breath we take. Which is stupid…or if regulated, evil. Taxing our own intrinsic life is abhorrent.

  15. Aynsley Kellow says:

    I’m with Bruce – and Sinclair’s definition essentially agrees — by the inclusion of the word ‘unwanted’ (just as a weed is an unwanted plant). The late Mary Douglas wrote the definitive work on the point that pollution is a moral category which has been extended to environmental pollution. And, of course, CO2 – and many other pollutants – can also have positive aspects. Aside from the point of Paracelsus that the does makes the poison, even distilled water can be a pollutant: if, for example, it was discharged in to the Dead Sea in sufficient quantities it would have a detrimental effect on the (saline) ecology of that water body. There is not really any difference with CO2 – it might have beneficial and detrimental effects (a commercial product and a pollutant); it is society’s net valuation that is central.

  16. thefrollickingmole says:

    And lets not even get started on how those intangible “assets” are created and managed.

    It was (and may still be) possible to propose a coal fired power plant in China (which was never feasible) and “shut it down” on paper and pocket the “credits” for doing so.

    To deliberately produce greenhouse gases as a “byproduct” and destroy them for credits as well.

    All overseen by that paragon of incorruptibility, the UN.

    http://www.smh.com.au/environment/climate-change/chinese-firms-blamed-in-huge-greenhouse-gas-scam-20101027-173yh.html

  17. Sinclair Davidson says:

    A quick google search shows that pretty much everyone thinks pollution has to be harmful.

    Yes, I know. Including the Chancellor of my employer.

    The point is that ‘pollution’ has connotations of immorality.

    Yes, I know. We need to abstract from emotional argument and concentrate on the actual phenomenon.

    I’m not changing my mind on this. Pollution is a by-product of an otherwise useful good. As such it is a factor of production. If co2 is produced but on-sold then it is not pollution. If it is dumped into the atmosphere it is pollution – whether it is good or bad doesn’t change the fact that it is ‘pollution’. Think of Aynsley’s weed example.

    Furthermore if you accept CO2 emission is pollution then we are polluting the world with every breath we take.

    I think we can draw a distinction between naturally occurring activity and other activity. CO2 emitted into the atmosphere is pollution – the question is what are we going to do about it? That in turn depends on costs and benefits of action and inaction.

    Now I haven’t been taken over by greenies – this sort of analysis was in second year micro long before the greenies invented global warming as a clear and present threat to human civilisation.

  18. JC says:

    as a clear and present threat to human civilisation.

    and the biggest morla issue and threat to humanity and the universe in our lifetimes.

    Here’s a point.

    I’d rather see the developing world attain developed world living standards before I’d be worrying about 2 degs in 100 years.

    I’d also like to see the human garbage (greens) attain present day developing world living standards voluntarily.

    Anyone know if Tubbsie Milne, Sarah Handsome&Young, Lee Stalin-Rhiannon keep all their after tax comp?

  19. cohenite says:

    I

    have no problem describing CO2 emissions as “pollution”. Pollution here has a definition – the unwanted by-product of some or other production process that gets abandoned into the commons.

    Nah, that’s bullshit. What has happened as part of the AGW lie is that the definition of what is a pollutant has changed from something which has a negative impact on humanity to anything which compromises pristine nature.

    The import of this subtle but profound change in meaning has missed all of the msm and most of academia and the political elite.

    The consequence of the change is, since humans change nature to produce a civilized lifestyle which is based on cheap, plentiful energy and technology, all activity by humans can be classified as polluting and or it’s even more insidious sibling, unsustainable.

    Every school, hospital, road, dam, power plant [except, ironically the landscape destroying fucking wind towers and solar ‘farms’], house built by humans is a pollutant on nature.

    This view informs the misanthropic basis of AGW and the green ideology generally.

    CO2 is not a BY-PRODUCT of some production process; it is a marker of civilization and indeed life.

    Discussing esoteric methodologies for taxing CO2 merely gives an imprimatur of legitimacy to the whole edifice of green ideology and AGW.

  20. Louis Hissink says:

    CO2 is not a byproduct.

    If we cannot remove the CO2 out of our lungs, we die. It is the principal product of a carbon based biosphere.

    It might definitionally “pollution” but that is also quite a nonsense and those who were not paying attention when CO2 was so defined have to assume the position of responsibility. Accepting CO2 as pollution is basically accepting its definition coined by whom? The political left.

    So until we regain control of the language, we will not make any headway in this issue. Remember until Marx coined the word capitalists, that word did not exist. Our tacit assumption of its usage is another example of ceding the moral position to the left.

  21. GRP says:

    So steam from a boiling kettle I pollution? When it comes to science, Sinclair knows a lot about economics.

  22. JC says:

    So steam from a boiling kettle I pollution?

    But if you boiling a dirty great big cauldron and the steam was upsetting the neighbood in a material way, that would be pollution.

    I don’t get why sinc’s aren’t being understood. There’s nothing particularly controversial about what he’s said.

  23. Arnost says:

    I have no problem describing CO2 emissions as “pollution”. Pollution here has a definition

    Ah yes – definitions are the key here!

    Each human exhales something like 1/2 ton of CO2 per year and that means the human species contributes something like 3 bio tons of CO2 to the Atmosphere anually… Not an insignificant sum – at least a tenth of the total fossil fuel generated emissions ( ~30bio tons).

    Therefore – if you define the emission of CO2 as pollution, and seek to restrict it in some way, then there is a quandry. [i.e. if my emission of CO2 (driving a car) is pollution, then definitionally my emission (breathing) of that very same CO2 must also be the very same pollution.]

    Therefore if you seek to restrict (any of) my CO2 emissions (as it is pollution), you are also restricting my right to breathe (as is that very same pollution). And breathing is a natural right and that cannot be restricted (definitionally or otherwise)… And therefore (definitionally) I can’t pollute by emitting CO2 – QED 🙂

  24. GRP says:

    Plants emitting oxygen?

  25. manalive says:

    Pollution here has a definition – the unwanted by-product of some or other production process that gets abandoned into the commons …

    That must be the Macquarie definition.
    The normal orthodox dictionary definition has always specified that the introduced substance or thing must adulterate, defile, debase, corrupt, taint, infect, foul, spoil, soil, stain, sully, poison etc. etc.

  26. Sinclair Davidson says:

    When it comes to science, Sinclair knows a lot about economics.

    that is the economic definition.

  27. GRP says:

    Sorry, I come from the other direction. Interesting nonetheless.

  28. Bruce says:

    I think we can draw a distinction between naturally occurring activity and other activity.

    That is why I seeded my first post with this easter egg:

    releasing distilled water into the ocean is not polluting it

    Y’see this is called ‘rainfall’. It has exactly the same effect as if I run my RO effluent treatment plant and release the permeate into the ocean. As a chemist who has been doing pollution and emission control for much of my 30+ years in the business I have been in this position. Pollution? Hardly.

    Why is it so hard to neutrally call it ’emitting’ and ’emission’?

    Because permits to emit are nothing more than an arbitrary value imposed by elected government. Permits to pollute are imposed to control the tragedy of the commons. In this case there is no tragedy of the commons, so forcing emitters of CO2 to pay to emit it is morally the same as forcing them to purchase snake oil. If it is a tax to raise revenue, call it a tax and put it to the voters. Fat chance! There are no property rights associated with a tax, it is just eminent domain by the high and low justice (sic).

    Sinc, the whole edifice is built on one great question: is CO2 climatically harmful? The IPCC consensus maintains it is. I can show it is not, as can many of my colleagues in science. If you maintain something is harmful when it is not, in the face of evidence, you are called a liar and anything you try to sell on that basis is fraudulent. This is why snake oil purveyors got their name – snake oil is a fine liniment, it is not a cure-all. CO2 is a gas with limited warming effect, it is not Satan

  29. entropy says:

    Plants emitting oxygen?

    To the anaerobic lifeforms that existed before the invention of chlorophyl, yes. Yes, pollution indeed.

  30. entropy says:

    releasing distilled water into the ocean is not polluting it

    yes it is. There are significant coal seam gas developments that spend a lot of time and money to make sure that pure water that is the product of reverse osmosis to treat CSG water does not dilute river water (loaded as it is with a host of sediment, chemical, other trace elements, frog piss, fish sperm and dead cow) when it is mixed in, thus harming the natural water ecology.

  31. Sinclair Davidson says:

    Bruce – we are arguing at each other. I am making a point about pollution being a factor of production. You are talking about a political campaign. Irrespective of the IPCC and its claims, the argument that CO2 from a factory or power station being emitted into the atmosphere is pollution remains true. How good or bad that pollution is depends on what the damage, if any, that pollution does and the costs and benefits of doing anything about it.

  32. GRP says:

    What isn’t pollution?

  33. Bruce says:

    Sinc – I am making a point that emission is a factor of production. In my business we do mass balances. What comes in will go out in one form or another. (Indeed in the 1990’s metallic cadmium went from a product to an environmental liability overnight when the price collapsed). If you burn hydrogen and emit water vapour in such a way that it creates no harm to anyone (JC – I’m looking in your direction) is it pollution?

    No. Nor is CO2, because it isn’t harmful.

    Try it. Say where responsible emission of CO2 is ‘harmful’ and I can give you watertight science to show its not. There is no excuse. CO2 is not harmful.

    You can tax it if you like. Why not tax breathing? Nothing wrong with that if the electorate is silly enough to allow it.

    We are getting to the philosophical question ‘what are property rights’. Air is not a property it is a common. CO2 emission is similar. H2O emission is similar. N2 and argon emission likewise. Use of the common can be regulated and taxed. This is a political question. If any politician wants to try that on, be my guest. I will bring popcorn.

  34. Louis Hissink says:

    I support Bruce’s argument – it’s emission that’s the factor, and branding CO2 as pollution is an admission of profound stupidity.

  35. Eddystone says:

    CO2 emissions are “pollution” like the RSPT is an “elegant” tax.

  36. Jim Rose says:

    Terry ANDERSON: What most people mean by market failure is a case where, for one reason or another, people either aren’t bearing the full costs of their actions, or aren’t receiving the full benefits of them. This is the accepted definition. But the question should then be–how bad is this?

    Probably the most incontrovertible example of market failure is air pollution. It is hard to come up with a market solution because market solutions depend on definitions of property rights, which in regards to air pollution are tough to define.

    There are ways to improve, however, even in this difficult case. For example, we can at the very least decide to use tradable permits–at least this is better than the arbitrary regulation that now takes place.

    The other way of helping in these tough cases is to better understand how the common law might have helped solve such problems. Me suing you to collect for damages you inflict on my air space with your power plant might take care of many of the problems we have with things like air pollution without the government regulation we now have.

    See more at: http://perc.org/articles/terry-anderson-explains-free-market-environmentalism#sthash.iDmPJMXm.dpuf

    Make up you mind whether free market environmentalism is free market environmentalism or a prize captured by entryism by libertarians?

  37. Eddystone says:

    Meant to add;

    That may be true in a technical sense, but only when eggheads* economists are talking amongst themselves.

    *In the boffin sense, not a reference to alopecia. 🙂

  38. Sinclair Davidson says:

    Bruce – I’m not defining pollution by whether it is harmful or not. So consider the following example – you plant beautiful flowers in my garden. I hate them – so they are weeds. You and I both live next door to Meatloaf and can hear him singing in the shower. I think this is a positive externality and you a negative externality ( I’m assuming here that you don’t love Meatloaf).

    Whether a by-product is pollution or not isn’t a function of harm, it is a function of it being abandoned into the public domain.

  39. Bruce says:

    You and I both live next door to Meatloaf and can hear him singing in the shower. I think this is a positive externality and you a negative externality

    Sinc – But you are defining the term relatively! How can you do policy when you do that? That sanctifies nimbyism and empowers anyone anywhere to stop anything they don’t like!

    (An aside – a guy I used to work for introduced me to the word banana. He had been media pointman for a certain well known shale oil company in the last iteration of this new industry before anyone had invented fracking. He had scars. Unfortunately while that company’s technology worked as advertised it stank. Literally. Don’t ever try and get a process up which stinks. Nothing stops an industry in the present day and age faster than something which smells bad.)

    The problem is that the IPCC side of the argument chooses to define the argument in terms of science, which is absolute. It works or it doesn’t.

    The problem for them is that on this field of conflict the right and strength is with sceptics because science is with us. Which is why IPCC consensus people refuse to debate scientifically since they always lose.

    If you define this policy area in terms of science then the implication is solid: CO2 is not harmful therefore you cannot invoke harm as a criteria to regulate it or impose property rights upon it (since it has no impact on those).

    But if you define the space as you have done Sinc, relatively, then you have the same problem that afflicted Bolt in the Finkelstein case. Offense is in the eye of the beholder. If you try to do that in a commons question then you have defined the ownership of the commons in favour of the one most outraged. This cannot work in our civilization.

    Relativism is fine for religion. I have my religion. Greens have theirs. I do not insist that Greens pay tithes to my church nor entry fees to my much loved Meatloaf concert. They should likewise not impose tithes upon me for their relativist religion.

  40. cohenite says:

    Whether a by-product is pollution or not isn’t a function of harm, it is a function of it being abandoned into the public domain.

    Excellent; boat people and homeless people are pollutants.

  41. Bruce says:

    I should go a bit further and say Sinc you are trying to say there are only two outputs of any physical process: product and waste.

    I am saying there are three: product, harmless materials and waste.

    I have worked for decades in an industry where the state of the art has been regarded as the ‘zero discharge’ site. Where no effluent is produced. It has always suited industry to accede to this because there are ways to do this without too much cost, and companies wish a quiet life (ie not afflicted by Greenpeace or the state EPA).

    But if you take matter onto your site it must leave in some form (excluding nuclear processes). So zero-effluent sites usually meet this by evaporating the water they bring onto site. Why, philosophically, is evaporating water and discharging it to the atmosphere any different to cleaning it by RO or thermal desalination and discharging it as pure H2O? No difference. None. But Greens hate ‘effluent’ and accept evaporation. Its religion not science.

    CO2 is no different. You either do it scientifically or you accept their theocracy.

  42. manalive says:

    Stern, Garnault and the rest have been busy calculating the costs of future CO2 emissions.
    Emissions have been rising in Western countries since WW2.
    What have been the opportunity costs of those emissions — how much richer would we be now if ‘carbon taxes’ or ETSs had been introduced in say 1950?

  43. Aynsley Kellow says:

    I have been reading quite a bit on property lately, and found the discussion by an old and recently-departed friend, Jim Hite (an ag economist, and colleague of Bruce Yandle’s at Clemson) who wrote a book, Room and Situation, 30 years ago that includes a chapter on the historical evolution of property rights.

    It seems the ‘rights’ to land were essentially usufructary (the right to use land for various purposes), by counterbalanced by obligations by the land user to to contribute to the defence of the tribe. The position of the chief strengthened over time, so the obligation (and effective ownership) passed from the tribe collectively to its ruler. Presumably because peace became more widespread, the duty of assisting with defence became relatively redundant, and these obligations were replaced by the payment of ‘quit rents’. Specialisation led to commercial agriculture as goods increasingly were traded. With expanding markets and rising prices came enclosures (between 1400 and 1650) — not always forceful, and sometimes involving purchase — to convert commons to exclusive ownership and land became a tradable commodity.

    Moveable property (chattels, derived from cattle) was, of course, different. But the evolution of property, law, government and property was largely a process of co-evolution. The theorising came later. (One is reminded of the joke: Germans say ‘That’s fine in theory, but will it work in practice?’; in France, they ask ‘That might work, but how does it make sense in theory?’)

  44. cohenite says:

    I

    am saying there are three: product, harmless materials and waste.

    I think there are many more factors floating around. Manalive for instance mentions opportunity cost; the point here is, even if you define CO2 as a pollutant, what would have been the alternative [pollutant] without fossils producing the societies we enjoy today? If none then does a comparison of how society would have developed without fossils and therefore CO2 with our fossil society with CO2 establish a positive cost/benefit ratio in favour of either. Such a comparison, while essential, would be hopelessly speculative and inevitably tainted by ideology.

    Equally cogent is the issue of whether there is even a measurable by-product of the use of fossils in the form of CO2. Sure we can estimate emissions from the amount of fossils being used but do those emissions actually contribute to the increase in atmospheric CO2, if so by how much and how long do they stay around.

    Professor Gösta Pettersson looks at the bomb-test data and concludes that the contribution of human emissions is much less than assumed by the IPCC Bern model.

    So if CO2 is a by-product of the fossils and therefore pollutant but is neither responsible for the increase in CO2 or being retained for any meaningful period in the atmosphere is it fair to describe it as a
    pollutant even if it can be measured at the source but it effectively disappears when in the “commons”?

  45. Pragmatic says:

    Definitions are critical to enable a commonly used, acceptable, understood, applied, coherent meaning and application of a word or term. The term pollution, by dictionary definitions, means either harm or impairment and is well defined in science and social constructs.

    Re-defining a universally acceptable definition to “fit” an economic or theory, is akin to all manner of experts on “AGW”, ranging from sociologists to chimneyologist’s (don’t laugh, I saw a chimney sweep with that definition painted on his van) re-defining terms and definitions to suit their own particular narrative.

    Sinc, with respect to your argument, your application of CO2 as a pollutant is, I suggest, an unhelpful distraction from the primary, commonly understood (and defined) definition, and only serves only to confuse, not clarify the argument.

    What do you mean and define by: “Whether a by-product is pollution or not isn’t a function of harm, it is a function of it being abandoned into the public domain“. My emphasis added. In order: of what, by whom or what, and the limits thereof? “Ask” any plant with chlorophyll and it will take all either you or the microbes respiring CO2 below it’s foliage can supply. At no cost or value. No economics involved. Without that specfic “by-product”, life as we know it would simply not exist. On that basis alone, I suggest CO2 could/should be called a primary, essential product, as O2 and N2 are to life.

    Just as “climate change” is an inappropriate an ill-defined re-definition of “catastrophic anthropogenic global warming”, re-defining pollution from a scientific and social use to an obscure, ill-defined economic use is unhelpful. If we all don’t all understand and agree on definitions, the argument all become a bit too circular. And isn’t that a core part of our universal problem: effective communication?

  46. Driftforge says:

    Atmosphere and a trace gas within the composition cannot meet any of the above as it is constantly changing in composition, shifting location and unable to be quantified with any degree of consistent and agreeable accuracy.

    I’m not certain that is the case even today, let alone if somebody sets their mind to the problem. All that has to be done is measure the variation in CO2 throughput occurring at national boundaries. It strikes me as a problem with a satellite based solution that can measure that variation continuously and accurately.

    Internally, nations can do as they please, as long as the international trade and scarcity is managed.

    Just because it is a hypothetical problem is no reason not to come up with a viable solution.

  47. cohenite says:

    I’m not certain that is the case even today, let alone if somebody sets their mind to the problem. All that has to be done is measure the variation in CO2 throughput occurring at national boundaries. It strikes me as a problem with a satellite based solution that can measure that variation continuously and accurately.

    Good luck with that, although this is a start.

  48. The Consigliere says:

    “rights to pollute would never evolve naturally’

    What does this mean? If a democratically elected government responds to an informed electorate who want costs to be associated with polluting, then you can say that the right evolved naturally.

    This is the same with intellectual rights. Just because the right is over something non-tangible doesn’t make something ‘unnatural’, whatever that word means.

    However as a mechanism to stop destructive carbon emissions I agree that the ETS is probably not going to work in the short run.

  49. Stan says:

    Sinc, the main problem is that everyone is now distracted from the very important issues in your post because you stubbornly stick to your preferred definition of “pollute” when everyone else uses a different definition. Even with your original definition of “unwanted byproduct”, there is much to be said for the proposition that CO2 is wanted (as plant food etc). Also, I definitely “want” CO2 to be emitted from my lungs, otherwise I die (as someone else pointed out above).

    You have been sucked in by the warmists on this point and you are only doing your main arguments harm. Your use of “pollute” is polluting your arguments. Move on.

  50. cohenite says:

    If a democratically elected government responds to an informed electorate who want costs to be associated with polluting, then you can say that the right evolved naturally.

    Complete and utter bullshit. The electorate is not informed about AGW because alarmism has dominated the media, academic and political sections of Western society.

    However, it is a testament to the good sense and natural intelligence of the punters that despite the barrage of agitprop about AGW from the alarmists the majority of the punters know that AGW is crap.

  51. DMS says:

    Putting aside the issue of definition of pollution (I’m closer to Bruce here) or property rights, and getting back OT. Isn’t the only thing you need to realise that this is not a real market is that when the criticism of the low EU price is discussed (and hence future revenues are likely low) I have heard the response (from govt I believe) that “the EU won’t allow the price to stay low long term”, or similar.
    .
    If you are relying on a government taking action to ensure a high price for something it’s not a free market. Period.

  52. DMS says:

    cohenite
    +1

  53. Pedro says:

    “Isn’t the only thing you need to realise that this is not a real market is that when the criticism of the low EU price is discussed (and hence future revenues are likely low) I have heard the response (from govt I believe) that “the EU won’t allow the price to stay low long term”, or similar.”

    Are you saying that there cannot be a market for a monopoly or cartelised product? Okey dokey.

    “If a democratically elected government responds to an informed electorate who want costs to be associated with polluting, then you can say that the right evolved naturally.”

    Leaving aside the bit about being informed, sure. Rights only exist to the extent they are recognised by others. In our society, most rights exist because they are recognised by the law.

    ” The electorate is not informed about AGW because alarmism has dominated the media, academic and political sections of Western society.”

    Irrelevant, the electorate does not have to be informed about anything for the relevant laws to be properly made. What’s more, nobody can ever really say the extent to which the electorate is informed about anything or that a particular govt policy is truly the will of their electors.

  54. The Consigliere says:

    “the EU won’t allow the price to stay low long term”

    Yes the cost price of license to pollute should be increased with increased need to reduce emissions and reduction in technological barriers to do so.

    It’s still the most market-based solution to the problem though, unlike ‘direct action’ or a straight tax.

    As for AGW merits, I’m not an expert so I just have to trust the scientific consensus. Kinda like we do for every other decision.

    I work in the medical industry as a physical scientist and the clinicians use treatments that that are backed with far less evidence/study than which has gone into climate science. These treatments are what you’d rightfully consider to be mainstream and established.

    That’s not saying anything bad about the medical sciences, but rather it speaks to the high degree of confidence we can have in the consensus result re: AGW.

  55. Pedro says:

    Nice trolling, now let’s see how long it takes for someone’s head to explode.

  56. The Consigliere says:

    Pedro

    What’s more, nobody can ever really say the extent to which the electorate is informed about anything or that a particular govt policy is truly the will of their electors

    Ok that’s a good point. But I think it goes back to the difficulty in trying to define what a ‘naturally’ evolving market actually is.

  57. DMS says:

    pedro – context is everything. I think it’s clear from my final comment I’m specifically referring to the topic of the thread; “free markets”.
    .
    I’ll leave others to have the argument about whether a controlled or regulated market is even a real market – obviously energy trading is heavily distorted but is still a market. Not a free market though.
    .
    Consigliere – I have a PhD in a physical science as well, and believe I do understand climate science. CAGW as a panic fails falsifiability at the first hurdle, and simple AGW fails also because of the apparent low sensitivity of climate to CO2, contrary to the models. You don’t need to look much further than that.
    .
    Then there’s the awesome quote “I’ll believe climate change is a problem when the people who say climate change is a problem start behaving like climate change is a problem” or similar.

  58. Pedro says:

    DMS, ok, but it’s not really very relevant whether it is a market or a free market. Whatever the difference is.

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