Markets and global warming: some heresies, Libertarian and otherwise

OK, I have formally identified myself as a pragmatic libertarian, and I have stated here and elsewhere that my difference with the scientific consensus on global warming is that I think there is adequate evidence to suggest that we are past the "tipping point," and need to become more concerned with adaptations than prevention.

I also pointed out in a comment response elsewhere that "the market" in the larger sense was already moving on to the adaptation phase faster than the government. This was misinterpreted by some as me stating that the market was moving to fix the problem and that we didn't need any governmental or international polcies, interventions, etc.

So let's clear up a few things. First, Nicholas Stern, in The Economics of Climate Change, The Stern Review makes it quite clear why "the market" has not done anything to halt or slow down global warming:

In common with many other environmental problems, human-induced climate change is at its most basic level an externality. Those who produce greenhouse-gas emissions are bringing about climate change, thereby imposing costs on the world and on future generations, but they do not face directly, neither via markets nor in other ways, the full consequences of the costs of their actions.

Much economic activity involves the mession of greenhouse gases (GHGs). As GHGs accumulate in the atmosphere, temperatures increase, and the climatic changes that result impose costs (and some benefits) on society. However, the full costs of GHG emissions, in terms of climate change, are not immediately--indeed they are unlikely ever to be--borne by the emitter, so they face little or no economic incentive to reduce emissions. Similarly, emitters do not have to compensate those who lose out because of climate change. In this sense, human-induced climate change is an externality, one that is not 'corrected' through any institution or market, unless policy intervenes.

The climate is a public good: those who fail to pay for it cannot be excluded from enjoying its benefits and one person's enjoyment of the climate does not diminish the capacity of others to enjoy it too. Markets do not automatically provide the right type and quantity of public goods, because in the absence of public policy there are limited or no returns to private investors for doing so: in this case, markets for relevant goods and services (energy, land use, innovation, etc) do not reflect the consequences of different consumption and investment choices for the climate. Thus, climate change is an example of market failure involving externalities and public goods.

Markets are nothing more and nothing less than complex economic adapting systems that individuals and groups attempt to manipulate to serve their purposes. For many purposes--a great many more than your average liberal or progressive would care to admit--markets work just fine. On the other hand, markets don't stop ethnic cleansing in Kossovo, end starvation or genocide in Darfur, or halt the Chinese invasion/destruction of Tibet.

And on a global scale with a wide mixture of industrialization and development; free market economies and command economies; cultural and religious differences severe enough to overcome all rational thought; and a lot of other issues you could name as well as I, here's an often overlooked truth:

Even if "the market" could solve problems on a global scale, THERE IS NO MARKET OPERATING AT THAT SCALE.

Some other process--some other complex adapting system--has to function at that scale for large changes to be made. The problem is, nobody really knows what that system would be, and even those who visualize stopping global warming through activist government and international action see that process in terms of governmental intervention in, and regulation of markets.

I don't think we have the theory for that yet, which scares the hell out of me.

But I do know some things about what such a theory would look like (in sort of the same way cosmologists who don't have a Grand Unifying Theory at least know the questions it must answer).

A global complex adapting economic/political system will have to take into account the following:

1. Political and economic manipulations will always create at least as many externalities (unanticipated consequences) as they resolve, and some (if not many) of these externalities will rival the original problem in terms of potential danger.

2. Predictive models that DO NOT allow for a huge factor of such emerging externalities in terms of higher costs, lower success rates, managerial crises, or unanticipated changes in technology will be WORSE THAN USELESS because they will provide false comfort.

3. Either policies or predictive models that DO NOT take into account that the vast majority of social, political, and economic activity is DRIVEN FROM BELOW regardless of the formal rules of the system will INEVITABLY FAIL.

4. No climate change mediation policy or program, no matter how draconian it is in execution, can succeed in mitigating the impact of global climate change unless and until such policies or programs take into account unrestricted population growth. (If industrialized nations are culpable for their GHG emissions, the developing world is equally culpable for failure to take action on population control.)

5. Any predictive model or policy that purports to operate on a global scale will necessarily violate the fundamental rights and freedoms of millions and millions of people in exact proportion to its effectiveness.


In other words, what I am saying is that we are facing a global problem of unprecedented proportions, and nobody has a functioning political/economic model for meeting that challenge. Worse, nobody seems that interested in developing one; at best you find hucksters dusting off their old solutions to smaller problems and hawking them as the utopian savior.

The scientists who have described and verified global warming have no more clue how to actually manage a political/ecnomic solution to it than anyone else.

What can you do about this?

In a book that I have recently lost my copy of--Larry Niven's N-Space--there is an article called something like "How wars are stopped and what you can do about it." Niven's thesis is that while most wars are fought amidst great suffering and dying, most peace talks and negotiations take place in placid, neutral surroundings, conducted on all sides by men who have never missed a meal. Therefore, while those in the trenches feel a great deal of urgency about stopping the war, these men (like the US and Vietnam in Paris) think nothing of spending a number of hours arguing over the shape of the conference table. They don't have any great impetus to actually end a war until it starts to exact a personal or political price on them (Which, if you think about it, is Stern's point above), and that will necessarily take a long time.

Then Niven closes by saying, that's the way it is, and:

"What you can do about it: nothing!"

Global warming prevention strategies will come from above, and not being driven by any sound political/economic theoretical basis, the unfortunate fact is that they'll probably fail (not, I emphasize, a reason NOT to try).

Global warming adaptations will come from below, and will be primarily technology and market-driven, and will largely be independent of those larger strategies.

That's where you and I can truly make a difference.

So buy flourescents (I started four years ago) and high MPG cars (two years ago), but realize that your children if not you are going to inhabit a fundamentally different world.

Start preparing them now.