Friday, April 16, 2010

"Nationalize the American Energy Industry"

I'm not quoting Chairman Mao, believe it or not, but rather Brad Delong's blog. It's possible that this is hyperbole, but I'll take this literally for now, since he has a paragraph that elaborates this idea.

What bothers me is not so much that he is suggesting something economically harmful, though he may be doing that, but more that his justification for this policy is authoritarian in the extreme. He sums up his view thus: "So nationalize—not to expropriate or to penalize the shareholders, but to get this particular selfish and destructive political voice out of American governance." Let that marinate for a little while. If you can justify doing that, imagine all the other things you could justify. What voice is not selfish? Any political voice will eventually be considered destructive by someone, somewhere. Isn't one of the central tenets of liberalism that we tolerate opposing viewpoints in the political sphere even if we vehemently disagree with them? How can Delong continue to claim to be a liberal in any non-Orwellian sense of the word?

This is one of the things that bothers me about the environmentalist movement. They seem to see an existential threat around every corner, and so they can justify just about anything, no matter how extreme. And this didn't start with global warming. Fears of overpopulation have led people to advocate some absolutely unconscionable policies over the years. I hope that one day textbooks will refer to the period we live in as the Green Scare.

This is not to say that global warming isn't real or that there's no reason to do anything to fight it. But there has clearly been an enormous amount of exaggeration. I'm actually quite open to a carbon tax, but it might be nice to see some sort of demonstration first that warming does more harm on net than good. Or at least do a back-of-the-envelope calculation about this, somebody.


  1. This is an old article but it explains a plan that is gaining support as Cap and Trade is being pronounced dead, the "Cap and Dividend" / Cantwell-Collins plan:


  3. This is worth quoting, as it sounds a little more moderate: " In general I am opposed to state-run nationalized industries: that is definitely the private sector’s place, not the government. But the interaction of rent-seeking politics with the flaws of America’s political system have made me willing to make an exception in the case of America’s oil industry..."
    I.e., nationalization is an exception due to special circumstances. I assume you disagree that the circumstances warrant nationalization.

    One point to consider, against DeLong, is that nationalization doesn't always give you as much control as you might like over the influence of the industry in politics. Even in government-run industries (think public schools, for example) you have to contend with the political influence of labor unions.

  4. Thanks for the comments and links, guys.

    Dineen: The cap and dividend idea sounds tolerable to me. One thing I wonder about is at what level do we cap the emissions? Maybe we should give out a huge number and the permits will be close to free. I wouldn't be surprised if the decision ends up being based on almost pure speculation. Who really knows what the social cost of emitting CO2?

    This scheme is not so different from the policy that Mankiw and others support of using the revenue to lower other taxes. Arguably that's better, because lower taxes would incentivize people to work, save, and invest more. Whereas, just handing out money to people regardless of their behavior is not optimal from an economic perspective. But maybe cap and dividend is more politically doable.

    Matt: Yeah, there might be circumstances under which this might be appropriate, but I just haven't seen it justified in any kind of public manner. Maybe there's some calculation somewhere that shows that this makes sense, but I haven't seen it. It might even be cheaper to do nothing and clean up if something bad happens in 100 years. But instead of empirical arguments, we hear about horrible scenarios and we here all sorts of analogies, such as the analogy between WWII and climate change.

    Also, if it's politically difficult to pass cap and trade, how would be politically possible to nationalize Exxon-Mobile and the coal mines et al.

    It's not hard to find scientists, even prominent ones, who are skeptical of the global warming hysteria. Who is Delong not to be skeptical? He's just an economist. Does he know much more about this issue than we do?


  5. A few more comments:

    dineen: If we want to base the policy on some sort of "cosmic justice", maybe we should use the revenue to reduce the deficit. Think about it: Why are we being compensated for CO2 emissions? It doesn't hurt us much as far as I can tell. It might hurt the people living 50 or 100 years hence. Maybe we can compensate them by lower the deficits and preventing them from having a crushing tax burden.

    There might also be a political economy argument against cap and dividend. What if it turns out that a very large % of CO2 emissions come from a small number of people, say people working in manufacturing. There might then be an incentive for the rest of us to vote for pushing the price of carbon up to very high levels: past the "socially optimal" level. Then we get dividends and the emitters pay the bulk of the price.


  6. merc: It may be that it makes sense not to spend a lot of resources solving this problem. I'm not persuaded that we are too dumb to fix this.