Series: What Would Hayek Really Say About Carbon Pricing?

Mainstream economic theory holds that when a good becomes scarce, its price will rise. People will use less of it, or they’ll find a cheaper alternative. But when it comes to carbon — and the possibility of a carbon tax — what does scarcity really mean? A new debate in the forthcoming issue of the Breakthrough Journal tackles this question head-on.

Mark Sagoff, retired professor of philosophy and Distinguished Senior Fellow of the Institute for Philosophy and Public Policy at George Mason University, points out that “climate change presents a problem not of scarcities but of consequences.” In fact, he writes, “there is plenty of coal, gas, and oil, and the atmosphere will soak up as much CO₂ as we wish to produce — and a great deal more. Future generations, however hot and miserable, will have lots of coal, gas, and petrol.” Given that, a tax on carbon really represents nothing other than fiat price calculated by top-down planners.

For Ed Dolan, a Senior Fellow at the Niskanen Center, scarcity in economics is not based on physical abundance but, “whether we can have more of something without trading away the opportunity to have less of something else.” And on that score, he argues, the atmosphere’s ability to harmlessly absorb CO₂ really is scarce; more CO₂ emissions means a hotter planet. And yet, “right now, we have markets without prices. Consumers pay no more — and often much less — for carbon-intensive goods than for green alternatives. Entrepreneurs see no more profits in finding low-carbon alternatives than in continuing business-as-usual pollution.” Given all that, “assigning a price for carbon — even one set by government rather than by supply and demand — would be a clear improvement.”

For his part, Sagoff counters that “what we know about free markets is that they promote social prosperity and peace better than centralized economies: this is a historical fact.” Read the whole debate here, and come back next week for the rest of the print issue.

Essay

What Would Hayek Do About Climate Change? Mark Sagoff

Responses

Why Hayek Would Endorse a Carbon Tax, Ed Dolan

Conjuring Scarcity from Lenin's Commanding Heights, Mark Sagoff