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The company we keep
Tony Noerpel
“Truly important and significant hypotheses will be found to have assumptions that are wildly inaccurate
descriptive representations of reality and, in general, the more significant the theory, the more
unrealistic the assumptions.” – Milton Freidman [1]
“I am increasingly convinced that the path to climate action is through the Republican Party.” – Yoram
Bauman cited by N. Gregory Mankiw [2]
The logical process of ideology begins with conclusions and reasons backwards to assumptions. Those
assumptions, even if wildly inaccurate descriptive representations of reality, are used to justify the
desired conclusions. That a market based economy efficiently distributes scarce resources is the neoliberal economist’s conclusion. If one assumes that all economic transactions are voluntary and all
voluntary transactions leave both parties better off with no messy consequences one magically arrives
at the desired result. In my last article I showed that economist N. Gregory Mankiw engages in just this
sort of logical folly in his justification of extreme wealth inequality. He ignores the physics of
randomness and inequality, the positive feedback between wealth and power accumulation, the
dynamical nature of society and economics and in fact all of human history.
An example of the messy consequences of free markets is shown in figure 1. One might call this the face
of capitalism. In the elephant ivory trade every transaction is voluntary and everybody from the
entrepreneurial poacher to the happy consumer of carved ivory figurines is “better off” having
maximized their utility. By Mankiw’s calculus the result is efficient. Except clearly it is not. There were
20 million elephants in Africa before European colonization, 10 million elephants in 1900, an estimated 1
million remained by 1970 and today there are only 352,000 [3]. In the last 7 years poachers murdered
144,000 of these magnificent creatures. Soon there will be no more elephants and the Republican Party
will have to choose another mascot from whatever’s left; maybe cockroaches or jellyfish.
As a courtesy I sent a copy of my last article to Mankiw, inviting him to comment. To my surprise he
wrote back: “Thanks. I am puzzled about your comment on climate change. I have never denied it.”
He left my criticism of his economics unchallenged but appears unusually sensitive to my observation
that he is climate change denier? I replied that he was a Republican and it is reasonable to judge him by
the company he keeps. All Republicans from George Will, James Inhofe, Lamar Smith, Donald Trump,
Marco Rubio, Rush Limbaugh, Charles Krauthammer, Ted Cruz, Jeb Bush, to the party rank and file deny
physical reality. The Republican Party platform denies human-caused climate change. He was Bush’s
chief economic advisor between 2003 and 2005 and was Romney’s chief economic advisor during his
2012 election campaign. Of course he is a denier. But I do appreciate why he would want to put some
space between himself and the rest of his party. I also sent him figure 2 which we will get to in a
moment.
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He replied a second time with links to three opinion pieces he published in the New York Times, in 2007
[4], 2013 [5] and 2015 [2] acknowledging climate change and recommending a revenue neutral carbon
tax, so isn’t it a bit unfair to label him a denier? Since his policy recommendation will not work, is
politically infeasible, is regressive and would make the underlying problem worse, I suggest it is not
unfair at all. A carbon tax penalizes the middle class and poor and doesn’t impact the extremely wealthy
much at all. Mankiw acknowledges this and suggests we can use the revenue to offset other regressive
taxes which already hurt the middle class and poor. Great but this denies the reality of power in our
country [6]. Assuming politicians, even Republicans, agree to a carbon tax they would negotiate what to
do with the money with the same people they negotiate every policy, the plutocrats and corporate
oligarchs who pay them, the overly pampered people Mankiw feels a need to defend. The wealthy, who
deny climate change [7] anyway, would not approve the new tax unless they were the beneficiaries.
Thus Mankiw’s carbon tax might be used to offset another steep cut in corporate taxes or capital gains
taxes or even ironically to increase subsidies for further fossil fuel development. And regardless of
which current taxes were offset, a revenue neutral tax does not raise the necessary funds to build out
non carbon-based infrastructure. Where does that money come from?
A friend, reading a draft of this article commented “but Tony you have to accept what is politically
viable.” David Gordon Wilson first proposed a carbon tax in 1973 [8] so frankly, how politically viable is
a proposal which has failed to become policy for 46 years? Mankiw admits that his carbon tax has
already been proposed in Congress by four Democrats and received no Republican sponsorship and yet
he believes Republicans are going to solve a problem they refuse to concede exists by adopting a
“solution” they’ve signed a pledge never to adopt [9].
Figure 2 shows the more serious problem with inadequate policy proposals. The figure shows how fast
we need to reduce fossil fuel based carbon dioxide emissions in order to have a 66% probability of
staying under 2 degrees of eventual global warming. Each curve is annual emissions and the area under
each curve is the cumulative amount of total carbon we can emit. The longer we put off addressing this
problem the steeper the curves become or the more dramatically we have to cut emissions. Soon, it
becomes impossible. According to the best science, we have to cut our emissions of carbon by about
10% per year starting right now just for the possibility of staying under 2 degrees, not the certainty. And
it is not that 1.9 degrees of warming is that much better.
The red curve in figure 2 is my estimate of carbon emissions reductions had we begun in 1980 when
dangerous human-caused climate change had already been determined to be a near certainty. We
would only have had to cut emissions by about 0.5% per year which is actually quite doable with exactly
the solutions President Carter had proposed and the government had begun to encourage. If we had
introduced a carbon tax when it was first proposed and invested the revenue into build out of mass
transportation and other low carbon infrastructure we would not have an economy as heavily
dependent on fossil fuels as it is today.
Then there is this harsh reality, if addressing physical reality is not politically feasible continued human
survivability itself may not be feasible. Figure 2 reminds us that we have to listen to the scientists
describing the problem and heed the engineers describing the solution. If policy wonks like Mankiw
wish to contribute to the sustainability of humanity, our economy and the biosphere upon which
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human survival depends they would develop policy consistent with physical reality. But even viable
policy to address human-caused climate change will not save the elephants who are being butchered
not by climate but by free market entrepreneurs guided as it were by an invisible hand.
[1] Milton Friedman, The Methodology of Positive Economics, in Essays in Positive Economics, Chicago:
University of Chicago Press, 1953, pp. 3-43.
[2] http://www.nytimes.com/2015/09/06/upshot/the-key-role-of-conservatives-in-taxing-carbon.html
[3] https://peerj.com/articles/2354/
[4] http://www.nytimes.com/2007/09/16/business/16view.html
[5] http://www.nytimes.com/2013/09/01/business/a-carbon-tax-that-america-could-live-with.html
[6] Martin Gilens and Benjamin I. Page, Testing Theories of American Politics: Elites, Interest Groups, and
Average Citizens, Perspectives on Politics / Volume 12 / Issue 03 / September 2014, pp 564-581 DOI:
http://dx.doi.org/10.1017/S1537592714001595
[7] https://www.theguardian.com/sustainable-business/2015/jan/20/global-warming-business-risksgovernment-regulation-taxes
[8] https://en.wikipedia.org/wiki/Carbon_tax
[9] http://www.atr.org/about-grover
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Figure 1. Elephant ecologist Mike Chase examines an elephant whose face was hacked off by
poachers in Botswana. http://edition.cnn.com/2016/08/31/africa/great-elephant-census/index.html
Figure 2. Mitigation curves given cumulative emissions.