More on Carbon Taxes

The unvieling of BC's carbon tax plan last week has been echoing through the blogosphere. Here's Tyler Cowen:

I haven't figured this out yet, but I'm experiencing ongoing worries. Let me try to articulate them, maybe one of you can cure me. One story I hear is that the new, carbon-friendly energy technology will be subject to decreasing costs, or alternatively increasing returns to scale. In other words, there are high start-up costs, but once it is underway it will be pretty cheap and lots of countries will adopt it. So: 1) the U.S. levies a carbon tax, 2) the U.S. incurs the start-up costs and invents or improves the decreasing cost technology, and 3) lots of countries make the switch. Voila!

It was reading about the new $2500 car, from India, that got me worried. Let's say the new technology is more carbon-friendly than what we do now, but still generates some carbon. (That sounds reasonable, no?) The new energy technology is really cheap, so lots more people -- most of all in China and India and Africa -- enter carbon-using sectors of the economy. Even if the new technology is three times as carbon-efficient, if the world as a whole uses three times more energy, carbon emissions do not go down. The basic problem is the combination of low costs and many people standing on the verge of the carbon-using sector of the economy.

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--I haven't heard the argument that new technology could increase emissions in developing countries before. For me this magnifies that need for a strong international agreement. I've said before that nations have came together when faced with a common threat, and that we could do it again. China and India have incentives to implement environmental regulations as their dense countries become more polluted. The EU and North America have reached (I think) levels where it is politically acceptable for the government to implement real reforms.

Despite this, we don't seem close to getting an EFFECTIVE international agreement. A bummer. It seems we are heading in the direction though. Just think of where the debate about climate change was ten years ago. I think we have reason to be optimistic about the next ten years.

StatsCan report on economic conditions

Here is it. You're not going to learn anything new if you've been following the economic news (who doesn't?), but it's a good summary nonetheless:

While the economy continued to expand in October and November, there were numerous signs in the leading indicators of an impending slowdown. Auto output fell nearly one-third in December; together with the spin-off effects on other industries, this will shave 0.2 percentage points off of gross domestic product (GDP), according to simulations using Input/Output tables. Severe winter weather curtailed business activity, notably housing starts and total hours worked. Fourth-quarter economic growth was anemic in the US, reflecting a deepening slump in housing and a drop in inventories. Finally, stock markets around the world tumbled early in 2008.

Several factors make the assessment of current economic conditions the most complex in years. The multiplying signs of a cyclical slowdown in North America are occurring without many of the imbalances typical of a cyclical peak, notably as inflation and inventories remain under control. The bursting of the bubble in the US housing market has already sent starts to near their lowest level since 1970, and triggered much of the turmoil in global financial markets since mid-August that has raised some interest rates even as central banks lowered their rates. As well, the surge of the Canadian dollar to parity with the US dollar has depressed the prices and earnings of many exporters, although output volume has remained steady.

However, many of the indicators of cyclical slowdowns in the past may be less reliable in the current environment. GDP growth in recent years has been less volatile because of better inventory management. In the US, housing and autos contracted over the last two years without precipitating a cyclical slowdown in real GDP—a development without precedent in recent decades. By comparison, Canada's housing market and auto sales remained strong. Finally, the stock market fell precipitously in 1987, 1998 and 2001, without a subsequent recession in Canada.

Other cyclical indicators remained robust. Commodity prices stayed high, even rising in January despite weaker growth in the US. Real incomes of households have been bolstered by steady job growth and rising real wages into January. As well, governments and corporations have large financial surpluses to absorb unexpected shortfalls in incomes. And, of course, the Federal Reserve Board has moved rapidly to lower interest rates, culminating in a two-step drop of 125 basis points in January that helped stabilize financial markets.

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Every lefty should read this

Castro resigned his power, here's Brad DeLong:

Ah. The Fidel Castro fans are out in force, I see:

Bloix: Let's do a thought experiment: Imagine that the year is 1960 and that you are a soul about to be inspirited into a foetus about to be born. God gives you a choice: you may become the son or daughter of a poor rural woman in either Cuba, Guatemala, Haiti, or the Dominican Republic. What would you choose?

Reply #1: That is the wrong comparison: Cuba in 1960 is like Costa Rica, northern Mexico, Puerto Rico, or Portugal. The fact that you today think of Cuba as to be plaed in the same basket as Guatemala, Haiti, or the Dominican Republic is Castro's doing, and is worth thinking about. The normal course of development should have given Cuba today the wealth, freedom, and health that Costa Rica, northern Mexico, Puerto Rico, and Portugal possess. It has only the health--and perhaps not even that. The only excuse for breaking eggs is if you manage to make a tasty omelette.

prov: Too bad for an academic like you using such a language. you clearly depict the other side of the communist coin that of brutal capitalism, of dictatorships in Latin America etc.. Too bad taking an extreme position in an issue that must always be addressed in a more serious way. Too bad that you used Rosa's words to support you anti communist feelings

Reply #2: So it's forbidden to use Rosa Luxemburg's words to support her anti-Leninist feelings?

Ken Houghton: Model that one up and show me the results. Your major local trading partner when you were run by a Mob-backed dictator unilaterally refuses to buy your goods, or to import anything to you...

Reply #3: You know, there is something very wrong with an argument that goes (a) Leninist centrally-planned communism is necessary because market exchange is inherently exploitative an destructive, and (b) it's not Castro's fault Cuba's economy is in the toilet--America won't trade with it. That simply does not compute.

dsquared: I'm not getting this Brad. At precisely which point after the Cuban revolution would it have made sense for Cuba to decide to switch allegiances, throw itself open to American capitalism and step onto the development path of Honduras, Haiti, the Dominican Republic and other Caribbean and Central American quasi-colonies? Or is the idea that Castro should have tried to start a revolution in a banana republic in the backyard of a superpower without any support from the other superpower? Or that all things considered, life under Batista wasn't so bad and the Cubans ought to have toughed it out for another forty years?...

Reply #4: Stepping, at any point, onto a eurocommunist development path would have been fine. Stepping back onto the development path Cuba had been on--Costa Rica, Puerto Rico, etc.--would have been even better. Stepping onto the southern European Italian, Portuguese, or post-Franco Spanish development path would have really good. But any of those would have rapidly meant an end to the dictatorship of the Castro brothers.

One Salient Oversight: Was Castro good or bad? He was both. Forget for a moment the brutality of his regime, especially in the early days. Instead focus upon what the nation has achieved since he took power. The United Nations Human Development Index has Cuba at a respectable 0.838 - a number higher than Mexico and can be defined as a nation with "High Human Development". If this increase in standards of living continues for another 10-20 years, Cuba will be considered a "First World Nation". I'm not going to defend Castro's sins. He did, however, prove to the world that Communism could improve the living standards of its citizens

See Reply #1

Jessica: Cuba is certainly something there are intensely felt emotions about on all sides. I would not put Castro in a class with Stalin at all. Nor with Mother Theresa. Best comparisons would be Muhammed Ali of 19th century Egypt. Some elements of Menachim Begin/Ariel Sharon.... Castro's choice for the Soviet economic model turned out very poorly. But this was not at all obvious back when he was making that choice (and making it under severe pressure). Back then, North Korea was economically in far better shape than South Korea. (I know it's hard to believe, but that was the world in which Castro made his choices.) And once that die was cast, I don't see where Castro ever had a chance to switch directions without risking not only US invasion, but vindictive and brutal US invasion...

Reply #5: Muhammed Ali of Egypt did not know that democracy was possible, and so cannot be blamed for not instituting it. Menachim Begin and Ariel Sharon held elections. History will judge Fidel Castro much more harshly than them, I think--most of all because he made the choice of political strategy, he did not let the people of Cuba make that choice. As to when Fidel could have switched to a eurocommunist or social-democratic model without immediately losing his head--well, 1968 with Dubcek, or 1975 with Sadat, or anytime in the Carter administration, certainly.

Neal: Freedom and elections are fine sentiments for the comfortable--as long as you have enough to eat.

No reponse seems possible

James Killus: The last time I calculated the difference between infant mortality in Cuba vs the average in Latin America, it amounted to something like 3,000 per year infants that did not die in Cuba, but would have had they been born elsewhere in Latin America. Apparently the "stupidest man alive" contender thinks that this amounts to something. Apparently, smarter men do not believe it does.

See Reply #1

Here's the link

Tonight!

Thousands of people in lower BC will wait to see if the clouds will uncover the moon long enough for us to see the earth cover the moon....what is the point of this activity again?

This is what I get for jumping the gun

A couple days ago I speculated that the BC government would not offset their new carbon tax with a new tax cut. They did. That being said, I don't think that this take will have an earth shattering effect. British Columbia has very clean electricity (hydro) and heating (natural gas). Therefore, most of the reduction will have to come out of transportation, and 7.24 cents a litre isn't going to get us there. If BC meets their stated fantasy goal of 33 percent carbon emissions reduction by 2020, it will be because of technologies that created outside of BC.

Pig War

I am puzzled that more Canadians don't know the history of the pig war. Especially residents of Vancouver and Victoria, considering it happened right in their back yard. Anyway, everyone should know the history of what amounted to the 19th century's version of the Cuban missile crises. So check it out

Provincial Carbon Taxes

The BC Liberal government is expected to propose a carbon tax sometime this week. I have to admit, my views on this topic have shifted a bit recently. The burden of a carbon tax falls mostly onto the poor, and BC's plan will probably not include tax cuts for low-income residents to offset this increase. British Columbia is also very limited in its ability to effect global warming. Even a huge reduction in carbon emissions would have no effect on global warming.

I am not advocating free-riding, I believe that BC and the federal government should be doing all they can to make a binding international agreement. Such an agreement is not impossible, nations have bound together to solve problems before, and we could do it again. However, I fear that all BC's plan will do is place burden on a lot of people without delivering any benefit.

Definition of Media Spin....

I don't know if this was done out of ignorance or opportunity, but it's really funny. An article in the economist this week said this:

Abandoned and trampled upon: that has been the story of Mrs Clinton's week. Since her successes on Super Tuesday, Barack Obama has won eight primaries and caucuses by wide—sometimes astonishing—margins. He won the Washington state caucus by 37 points. In Garfield County 100% of voters plumped for him. He won Maine by 19 points, Louisiana by 21 and Nebraska by 36.

WOW, he won Garfield County by 100%! That's Impressive! Not really, if they had bothered to check the map, they would have seen that only one person voted in Garfield county. Makes the accomplishment seem a bit less impressive doesn't it?