Download On the Catallactics of Global Warming and Environmental Futurism

Catallactics of Warming
September 15, 2013
Carl Menger Essay
Sean Hernandez
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Glendora, CA 91741
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University of Southern California
Economics, Environmental Studies
On the Catallactics of Global Warming and Environmental Futurism
Keywords: Austrian school of economics, climate change, mitigation policy, climate adaptation,
civilization, economic calculation, international environment
Abstract: Drawing upon the political philosophies of the economists Mises, Hayek, and Hoppe,
the paper advances a critique of climate mitigation policy. It contends that a rigorous cost-benefit
analysis for a global policy is impossible to compute due to (1) the uncertainty and extent of
climate change and (2) a lack of predictive power over human, market, and national adaptations
to a warmer planet. Subsequently, the costs of wholesale subsidies to alternative energy are
highlighted in the context of a hypothetically concerted effort on the part of all national
governments. I propose the opposite of the conventional wisdom to address specific climate
changes: more energy production for the operation of more advanced technological methods
including desalinization and genetically engineered agriculture. Nikolai Kardashev’s civilization
scale is proposed as an alternative context for generating ideological and political legitimacy for
such a strategy.
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“The various kinds of collectivism, communism, fascism, etc. differ among themselves in the nature of the
goal toward which they want to direct the efforts of society. But they all differ from liberalism and
individualism in wanting to organize the whole of society and all its resources for this unitary end and in
refusing to recognize autonomous spheres in which the ends of the individuals are supreme.”
F.A. Hayek
One need not be a climatologist or economist to recognize the oversimplification and
ideologicalization of climate change within the United States’s political sphere. While support
for carbon mitigation policies strongly diverges across the party line, technical dimensions of
global stock externalities (carbon “pollution”) and their consequences are often concealed. To
justify the classical environmentalists’ prescription of decreased fossil fuel consumption, four
discrete premises need be proven: (1) that global average temperature is increasing; (2) that a
relevant portion of heating is anthropogenic; (3) that we are reaching a crunch point; and (4) that
only a dose of carbon austerity can avert it. In the course of the following arguments, it will be
demonstrated the affirmations of premises 1 and 2 are entirely consistent with, and in fact
powerfully beneficial to, the laissez-faire case against government controls on climate and
energy.
Although rational citizens could believe a variety of combinations of these premises, the
convergences of opinion in the United States fall into two relatively simplistic and extrinsically
motivated campaigns. Staunch Republicans ride the anti-science discourse of their constituents to
exaggerate skepticism that average global temperature is rising while strategically marshaling for
new oil wells (i.e. all the premises are false). Meanwhile, discourses among liberal citizens are
producing a new energy Keynesianism by synthesizing ideas ranging from environmentalism to
de-growth ideologies (all the premises are true). As such, the search for solutions is oddly onesided; everyone interested in discussing climate change maintains that the relevant question is
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what the government should do to ‘stop’ it. Unfortunately, even Austrian economists have
occasionally failed to distinguish their climate policy attitudes from the GOP’s form of denial.
This has weakened the association between free market principles and science and hightechnology (if only in the minds of a particularly indolent segment of the public). Contrary to the
GOP’s scientific intransigence, premises 1 and 2 are helpful in understanding catallactic
competition on an unhampered free enterprise system. Further conclusions aside from the state,
extent, and causality of global climate change are necessary to conclude that a massive
mitigation effort must be undertaken. The government must assume it has reliable information on
the present value of future losses. It must also make highly accurate estimates of future growth
under a variety of speculative conditions. Justifying efficient “climate stabilization” policies
requires the government to demonstrate that a warming, restructuring economy would be
substantially less vibrant - in terms of real wealth - than one whose energy inputs are highly
restricted and subsidized (or nationalized). Due to the current institutional and ideological
environment surrounding this clash of ideas, current discourses are much more likely to make the
economic and environmental challenges presented by climate change more difficult to address by
creating resource allocations that are irrational, impossible to predict, and more difficult to react
to. In order to maintain a thriving population by any measure of social health, re-enlivening the
free market context for climate change will help reflect its status as a higher order challenge that
demands creative solutions, not another government permitting scheme.
The argument presented in the paper is divided as follows: Section I constructs an
institutional thought experiment as the ideal set of conditions under which the various national
governments might arrive at full mitigation of climate change. Section II analyzes the literature
concerning the cost of climate change, emphasizing inherent complexities and uncertainties.
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Section III contrasts the realities of economic and international politics with the aforementioned
idealized solution. In Section IV, I argue that democratic societies are particularly vulnerable to
incurring the disadvantages of energy planning. Finally, Section V draws on Nikolai Kardashev’s
civilization scale as a framework for analyzing the catallactic nature of climate adaptation to
inspire a forward-looking paradigm to frame the interaction between energy production and
environmental management.
I. The Efficient Solution
Given both technical and political ambiguities of President Obama’s emerging climate
change plan, even modest predictions of a U.S. carbon-control regime are difficult to discern at
best. The possibility that no new climate regimes are created is not out of the question. Prior to
exposing the variety of unintended consequences that might be expected from CO2 reduction
policies, an economist might prefer to begin with an imaginary construction of achieved ends
and highly idealized means. Implementation and enforcement mechanisms always serve as a two
thousand pound weight restraining to the regulatory magic wand. For the sake of testing the
theoretical desirability of conventional wisdom on climate change, an institutional thought
experiment is required.
Imagine a super-national agency charged with mandating, monitoring, and enforcing a
carbon-limitation regime. Let it be assumed that the nations of the world have mutually agreed to
institute the most efficient of mitigation options: a cap-and-trade system (Palmer). Cap-and-trade
requires only one major policy choice – that of the socially optimum level of carbon dioxide. In
current United Nations documents, this target has been described as the one leading to no more
than 2 degrees Celsius warming (Spiegel). Two of the most challenging institutional dilemmas
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are simulated away by the introduction of this Global Carbon Authority (henceforth, GCA).
First, a universal cap-and-trade reduces the computational complexity of the GCA’s task. Pricing
carbon emissions by fluctuating taxation would require extensive demand modeling to describe
how consumers and firms would respond to higher costs and prices. Instead, cap-and-trade
allows individual property owners in the global energy market to trade the “stabilized” number
of permits based on their current and future-expected production costs and demand. Second, by
assuming the super-national authority of GCA mandates, compliance issues can be forestalled.
One might imagine that GCA engages in a WTO partnership enforcing credible trade restrictions
on non-compliers – although the effectiveness of even this approach would be dubious (Barrett).
Whereas insurmountable international coordination problems are inherent in addressing warming
by government intervention, this simulation makes assumptions that enable debates about the
feasibility of economic calculations to move forward
In this imaginary construction of a fully effective and knowledgeable Global Carbon
Authority, a global clean-energy economy will evolve. The added production cost of carbon
permits will cause fossil fuel companies to experience a comparative disadvantage vis-à-vis
‘alternative’ energy harvesting methods. Because, the GCA’s scope is fully global, society’s
reaction will not be characterized by widespread evasion as it might under a patchwork of
national policies (this is known as “carbon leakage”). The economy’s utilization of coal,
petroleum, and natural gas resources will be phased out for replacement by a heretofore
unpredictable framework of renewable-harvesting technologies, nuclear reactors, and carbon
sequestration projects. At the higher price of carbon-based fuels, entrepreneurs will be
incentivized to move their privately owned investments into project which can, for the lowest
possible cost, produce the greatest possible electrical and thermal energy. Unlike the unilateral
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climate projects of democratic states, the cap-and-trade scheme established by the GCA will
have been calibrated under conditions so ideal that no additional economic interventions are
necessary to arrive at the chosen future stock of carbon dioxide with the corresponding level of
warming. This is a climate mitigation advocates’ utopia; the ideal means of achieving the stated
goal of averting climate change damages. The inefficiencies from disharmony between national
policies are completely averted and the world comes together in a feat of collective action
reminiscent of the Montreal Protocol for the ozone. Finally, economic growth will proceed
unhindered because the costs of reacting to the GCA’s mandate exactly equal the present value
of damages that would have been incurred in the number of alternatively ensuing “climate
emergencies.”
Figure 1: The effect of the global cap-and-trade policy is to increase the cost of fossil fuel energy. Ceteris
paribus the supply curve will shift upward to a higher price and lower quantity.
Utopia is the most extreme version of success for a political paradigm that speaks
exclusively of reducing carbon dioxide emissions (i.e. mitigation). Although aware of the global
institutional obstacles to mitigation, reasonable coalitionists are careful to obfuscate the necessity
of a world governing institution. Nonetheless many do appeal to the necessity of a “global
transition” to establish a carbon-neutral mode of social operation. From transparently anti6
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capitalistic organizations such as the Zeitgeist Movement – which hopes to install a fully
automated economic dictatorship – to ‘feasibility studies’ concerning whether renewable sources
provide enough power to sustain global energy output (Jacobson), there is intense interest in
assuring that carbon neutral technologies are disseminated to the entire world.
These sentiments logically come forth from the basic fact that carbon dioxide is a
globally-circulating stock pollutant. One person’s carbon emission in New Delhi traps heat that
affects the climate system of Central America for centuries (Solomon). A unique political
consequence is that the proposed solutions take to overemphasizing the effectiveness of
collective action at establishing efficient resource allocations. It becomes an assumption of
mitigation advocates that the largest organizational units of society are equipped to make the
necessary calculations and put the necessary incentives in place. The essence of this collective
planning problem was most famously addressed by F.A. Hayek in 1944:
“Most planners who have seriously considered the practical aspects of
their task have little doubt that a directed economy must be run on more
or less dictatorial lines. That a complex system of interrelated activities, if
it is to be consciously directed at all, must be directed by a single staff of
experts, and that ultimate responsibility and power must rest in the hands
of a commander-in-chief whose actions must not be fettered by democratic
procedure…On this ground people who abhor the idea of a political
dictatorship often clamor for a dictator in the economic field” (Hayek).
Although a beautiful story of social cohesion comes forth from such hopes, “seriously
considering the practical aspects” of climate stabilization would demonstrate to anyone that what
must happen in between the establishment of the GCA and the arrival at utopia will leave Earthly
civilization fantastically impoverished and potentially snuffed out.
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II. The Environmental Calculation Debate
Upon its magical coming-into-being within this simulated paradigm, three important
tasks remain for the Global Carbon Authority: (1) to decide the maximum, target stock of
atmospheric carbon dioxide, (2) to amortize this stock as carbon dioxide emissions per year
throughout the twenty first century, and (3) distribute the carbon permits to nations or producers
globally. Most importantly, all of these decisions must be completed, announced, and
implemented in time to avert the ensuing climate catastrophe. Decisions must incorporate
information of emissions and economic movements during the course of their decision making
process. If the authority cannot gather reliable economic data on the number of variables fast
enough to extend its projection, the decision it makes will not adequately reflect real economic
conditions.
Arriving at a solution to these calculations in a global context would require knowledge
of almost every aspect of economic activity. To begin, GCA must count and determine the
present value of global warming damages. Aside from the immense difficulties of estimating
when and where a climate disaster might occur, assumptions of future economic activity, income
distribution, demographic changes, and technological progress would be essential to calculating
that value of the damage for comparison against the costs of mitigation. This will include the
land values of low-laying island nations and beachfront property, changes in the productivity of
arable land, added costs for transporting water, and the economic value of soon-to-be-extinct
species, to name a few. Of significant difficulty still are future structures and input requirements
for the now emerging and developing economies (Ben-Ami).
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These considerations make up an ongoing academic debate on the price of climate
change; its most famous contributors being Sir Nicholas Stern and Yale’s Robert Mendelsohn.
Both economists employ complex macroeconomic models. But their results produce radically
different numbers and radically different opinions of the proper course of action. The primary
point of contestation concerns the appropriate social discount rate. The Stern Review utilized a
discount rate of zero percent, meaning that the speculative climate damages to the civilization of
year 2200 are weighted equally (in monetary terms) with the costs incurred today. Mendelsohn
rejects this methodological choice and uses a 1 percent discount rate in his own models. The
numerical distinction is incredibly small yet its impacts on their damages models are large. The
discount rate is the chief explanation for an order of magnitude difference in climate damage
valuations. Stern estimates global damages over the next two centuries warranting $28 trillion
worth of mitigation whereas Mendelsohn’s 1 percent discount rate model functionally terminates
in 2100 with the level of damages at $2 trillion (Mendelsohn, Cato). By this discrepancy alone,
international agreements seem unlikely to be effectuated in the near future.
The issue of discounting is central to nearly all environmental valuations. For an
extensive evaluation of discounting in climate change assessments, see (Baum, 2012). The
present paper will relegate the discounting issue both because of its extensive evaluation in other
publications as well as its tenuousness within the framework of methodological individualism.
For the advancement of an Austrian perspective on climate policy, evaluating the catallactic
consequences of climate change is vital and productive.
In the realm of catallactics, the Stern-Mendelsohn debate underscores that a decision to
mitigate involves making the same theoretical comparison between an economy evolving to
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adapt to climate change with one whose “alternative” energy supply experiences an initial price
shock before adopting an equally unprecedented configuration. Whether mitigation is worth
undertaking is therefore not at all an environmental question but rather an entirely economic one.
The mitigation-centric perspective fails to acknowledge that all available options - mitigating or
adapting - inflict costs on society. This is an information-neutral statement from the perspective
of catallactics, however. To say that a cost is incurred in the abstract sense does little to go
beyond the observation that a change occurs. Unless man is completely invulnerable to said
change and no ameliorative action is needed for adjustment, all changes incur costs in the sense
that they require men to take actions which necessarily prevent them from taking other actions
which they might otherwise have preferred in a given moment.
Rightfully, one of Mendelsohn’s chief techniques of rebuttal is to highlight where the
Stern Review fails at anticipating adaptations to climate change. His examples aptly demonstrate
that accuracy in this type of economic-climate modeling over long time scales would requires
economic omniscience. Stern prescribes expanding the solar and biofuel sectors. However, he
does not include methods to account for the increase in land prices that would be driven by the
suggestion. Similarly, concerning damage to agriculture, the Review does not assume that the
prices of relatively worse-off crops increase to reflect damage costs and insurance rates. The
market prices of these foods will automatically rise, triggering consumer optimization, including
substitution. The GCA’s planning task is especially difficult considering the unimaginably large
number of causal-relationships that compromise the market economy; each being intertemporally affected by changing states of information as conveyed by the price mechanism.
Many hidden price-information mechanisms ripple throughout the climate or regulationmodified economy.
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One of the main failures of Stern’s mitigation-friendly model is thus attributable to its
reasonable failure to incorporate the complete set of human behavioral-adaptation mechanisms.
Frequently, environmentalists criticize that economics removes the human element from the
study of scarcity within human society (Schumacher). However, it is precisely the complexity of
this human component that makes damage costs impossible to reasonably estimate and thus
mitigation an unjustifiable solution. Green ideology fails at understanding that economics is not
about materials but human actions; the laws of supply and demand do not capture how resources
organize themselves but rather how humans choose to organize resources (Human Action). And,
unfortunate to the desire to predict and control, long-term projections for climate damages only
incorporate presently existing information about the employments of resources. They cannot
reveal very much about how society will react on a large-scale over a long period.
The result is a dangerous assumption of individual passivity within the Stern Review’s model:
“Although there are several chapters in the report that talk about the
importance of human adaptation to climate change, the damage estimates
in the analysis do not take adaptation into account. For instance, the
report’s estimates of flood damage costs from earlier spring thaws do not
consider the probability that people will build dams to control the
flooding. Farmers are envisioned as continuing to grow crops that are ill
suited for new climates. People do not adjust to the warmer temperatures
they experience year after year, and they thus die from heat stroke.
Protective structures are not built along the coasts to stop rising sea levels
from flooding cities. No public health measures are taken to stop
infectious diseases from spreading” (Mendelsohn, Cato).
Thus, in the climate change discourse, the problem of socialist calculation has returned in
full force. Hayek detested the idea of central planning precisely because it is ineffective at
coordinating the collection of human observations, thoughts, valuations, ideas, and solutions. In
the process of striving for collectivist aims in spite of this reality, deficiencies inevitably require
that the social planner begin to purposefully subvert this set of information. In order to simplify
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the task, it is much more feasible to implement programs that replace the consumers unhampered
market wants with a single ideologically-motivated vision of society, e.g. the GCA’s zerowarming plan, the Zeitgeist’s Movement’s resource based economy, and Jacobson’s wind-watersolar utopia. Manifestations of this phenomenon are visible as green energy education programs
that encourage customers to behave “sustainably” (LADWP). These measures – now
synonymous with “energy efficiency and “demand side management” – are a political necessity
when a plethora of laws act to increase the price of electricity. Policies such as renewable
portfolio standards, direct carbon taxes, or renewable energy subsidies do not hit the carbon
dioxide targets in the same way that GCA’s policy is designed to. Energy demand reductions,
therefore, are engineered to soften economic side effects. But the impacts to human time and
utility remain – for example in wasted efforts of recycling plastic grocery bags or suffering
through heat waves on behalf of environmental guilt. The frightening end-result is that the state
of knowledge on the matter becomes suspect, for politics to a large extent begins to inform the
process of knowledge production within firms, universities, and popular media. This, too, is
beginning to emerge as more and more products shamelessly cling for the social approval now
attached to the term “sustainability,” entrenching a sense of existential guilt among the populace
(Rogers).
It is of no consequence that a political movement of this type is confined to one issue
(e.g. “environmental protection” as a political platform). Twentieth century socialism was
comfortable parading their solutions as “holistic,” but due to their disastrous outcomes the
collectivist tendencies of the human mind have forced the identification with wholesale anticapitalism under the surface. Von Mises wrote of the three essential political philosophies as
liberalism, socialism, and interventionism yet today it is as though every political agent (voters
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included) can reasonably be considered interventionist. Yet the status of energy as one of the
most basic factors of production (i.e. “master resource”) renders the distinction between
environmental interventionism and socialism much less than relevant. The mitigationists’
philosophy extends control to every sector of the economy. The central plan is framed as an
environmental and energy issue. But the guise that is this narrow political identification falls
away with even a cursory analysis of its implementation. In the following section it is shown that
the environmentalist frame conceals repercussive effects of planetary mitigation on the global
economy.
III. Energy Policy Proliferation
The essential failure of the GCA simulation is an overstatement of directness. Rather than
affording market actors the relative simplicity of carbon permits as a sort of internationalindustrial currency mechanism, under unilateral action or transnational negotiation, individual
states will concoct a stew of direct subsidies, loan subsidies, tax subsidies, monitoring charges,
and even socialized projects in order to hit their emissions targets. For example, the California
state government has adopted a portfolio of climate policies that include all of cap-and-trade,
renewable energy quotas, electric car subsidies, electricity transmission expansions, and a host of
others. Each incentive program produces a unique set of economic ripple-effects that only further
muddy the problems of calculation and prediction that underpin socialist planning.
Even under a Global Carbon Authority, national energy policies would proliferate
fantastically – even if the cap-and-trade program were expected to redress all climate damages.
The institutionalization of international confidence in a new energy regime will functionally
subsidize “sustainable” investment with significant risk reductions. Nations may artificially
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prop-up or protect their alternative energy industries using obstructive trade barriers. Early
adopters gain a competitive economic advantage, assured to them for as long as the global
climate consensus underpinning GCA remains intact. Trade disagreements between the United
States and China are already taking place along these lines (WSJ). Moreover, under imperfectly
coordinated national or transnational policies, trade distortions will be produced by differentially
aggressive carbon legislation and become the subjects of an unforeseeably large number of
World Trade Organization disputes (Hufbauer and Reinsch). These disagreements will gravely
heighten international tensions, inhibiting the global cooperation needed to address global
challenges. Von Mises explained the inevitability of conflict under these conditions at a pivotal
time in history.
“What generates war is the economic philosophy almost universally
espoused today by governments and political parties…There can be no
doubt that protectionism aims at damaging the interests of foreign peoples
and really does damage them. It is an illusion to assume that those injured
will tolerate other nations' protectionism if they believe that they are
strong enough to brush it away by the use of arms. The philosophy of
protectionism is a philosophy of war. The wars of our age are not at
variance with popular economic doctrines; they are, on the contrary, the
inescapable result of a consistent application of these doctrines” (Human
Action, 1949).
As mentioned, not only national trade policy but also fiscal policy is implicated in these
destructive incentive feedbacks. The unpredictable, indirect effects of carbon limitations within a
country will encourage the connected industries to marshal their resources into lobbying for
institutional relief. For example, GCA policy subsidizes the solar power industry. Therefore, in
markets for refined silicon, a price increase will result because the solar company’s bids will
reflect more than their market revenue would otherwise permit. A relatively disadvantaged
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company – for example IBM which uses semiconductors to produce computer hardware – will
have a strong incentive to secure compensatory tax breaks or the like.
The number of industries affected is every one of them. With electricity and other carbon
inputs constituting Adam Smith’s original definition of “basic commodities” (i.e. being involved
in the production of every other commodity), all-encompassing climate policies put society
definitely on Hayek’s road to serfdom.
“Although the state controls directly the use of only a large part of the
available resources, the effects of its decisions on the remaining part of
the economic system become so great that indirectly it controls almost
everything” (Hayek).
Developed economies do not make output without the use of energy to power cars for workers to
arrive on site, nor without the electricity to power office buildings and factories. One of the
strongest examples of these unaccounted for social deficits is the U.S. steel industry – whose
production employs on-site coal to heat ore to thousands of degrees (AISI). The ripple effects
from this node alone are magnificently impactful. Steel is crucial to the construction of home
appliances, automobiles, aircraft, buildings, and even alternative energy technologies themselves
(e.g. wind turbines and their support structures). That the incentive to produce alternative energy
infrastructure renders itself more expensive resoundingly proves the inherent contradiction and
ideological bankruptcy of the planning methodology which mitigation necessitates.
Cycles of price adjustment (miscalculation with respect to subjective exchange values)
will permeate the economy ad infinitum. As all industries adjust to changes in energy costs,
constituents of the U.S. economy will lobby Congress and the President for additional forms of
aid that will further direct the capital infrastructure of the century. A whole new variety of future
interventions will be adopted in the next decades to account for the losses from early 2000’s
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environmentalism. Economists and social planners can only understand the beginnings of these
emerging harms. Until information about the cost effects of global mitigation are communicated
through prices, the aggressiveness with which a given industry pursues a set of compensatory
subsidies is highly uncertain. These future adjustments also problematize the cost scenarios
proposed by Stern and Mendelsohn.
IV: Democratic Amplification
Free market economists might argue that these political reactions are themselves
social problems. Like the original establishment of the GCA’s carbon quota, national
energy policies do not create wealth by subsidizing a particular industry. Rather, those
resources (metals, silicon, water, industrial processing chemicals, effort, and time)
allocated by policy are expropriated from a private owner who was more able to give
them an efficient use under the unhampered price mechanism. Von Mises is again
informative of this point:
“The characteristic mark of restrictive interference with production is that
the diversion of production is not merely an unavoidable and
unintentional secondary effect, but precisely what the authority wants to
bring about…On the unhampered market there prevails an irresistible
tendency to employ every factor of production for the best possible
satisfaction of the most urgent needs of the consumers. If the government
interferes with this process, it can only impair satisfaction it can never
improve it” (Human Action).
It might be argued that democratic decision making is designed to implement policies of
this type responsibly. But the assertion would miss the essential point that the political influence
of private property owners under democracy is precisely what facilitates the motivations to find
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compensation from ‘society’s’ (the state’s) pocketbook (Hoppe). It need not be the case that
what is determined by the one-man-one-vote rule is at all a preferable state of economic affairs.
Because alternative energy projects are not set up by entrepreneurs with privately owned
investment, the required resources do not exchange hands in a way that puts them into more
productive use (that is, they do not constitute wealth generation). Quite the opposite is true, in
fact: using resources taken by force, government unilaterally mandates a situation preferable for
one set of producers at the expense of another. When citizens democratically agree to a regime of
central planning, it produces a regime of central planning.
“[Democracy] cannot prevent majorities from falling victim to erroneous
ideas and from adopting inappropriate policies which not only fail to
realize the ends aimed at but result in disaster. Majorities too may err and
destroy our civilization” (Human Action).
The confusion of environmentalist ideology shows that foregone improvements and
imposed disadvantages are not the only, nor the most frightening, consequences of traveling too
far down the road to planning. There are emergent sociological phenomena which begin to
pollute the population’s assumptions and valuations (Hoppe). In a directed economy some
people’s livelihoods are sustained by market interventions and some are not. A predictable set of
antagonisms begins to emerge among disparate groups. For Hoppe, the observations that other
members of society acquire more by producing less harbors such feelings as contempt, hatred,
and spite. Whereas under the unhampered market system the desire to attain a neighbor’s
material status (pejoratively known as “jealousy”) manifests in mutually beneficial market
transactions, social relations in a directed economy begin under pretenses of institutionalized
division between economic, industrial, ethnic, racial, or religious classes that characterize the
state’s set of socioeconomic policies.
“Dissatisfaction of everybody with his lot will inevitably grow with the
consciousness that it is the result of deliberate human decision…In a
planned society we shall all know that we are better or worse off than
others, not because of circumstances which nobody controls, and which it
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is impossible to foresee with certainty, but because some authority wills
it…the only power worth having will be a share in the exercise of this
directing power” (Hayek).
Misguided anti-capitalist angst emanates from these sociological mechanisms. Although
the case for the unhampered market economy appears to play to the interests of fossil fuel
industries, its firms have received billions in subsidies for many decades. It is because of
privileges to the “dirty” industries that a socio-economic analysis of environmentalism could
accuse it of particularly acute political virulence. There is the pervasive false dichotomy between
economic progress and environmental health. The productive sector has become characterized as
selfish and overly exploitative while the public sector casts itself as the voice of justice, equality,
fairness, and ‘cleanliness.’
By similar and broader mechanisms, income tax inefficiencies and endless corporate
subsidies are fueling a set of class conflicts in the United States – best summarized by the clash
between “the top 1%” and Occupy Wall Street and its spectrum of ‘liberal’ sympathizers. In
these discourses, the externality theory that justifies application of carbon taxes has been used to
refer to a general “social cost of capitalism” – which can include not only air pollution but also
aesthetic damage to land, antibiotic resistant disease strains, nuclear radiation, third world labor
exploitation, financial collapses and others (Intrepid Report). These sentiments will intensify
dramatically as economic actors scramble to determine their losses and gains from rising energy
costs. Political opportunities inevitably become a platform for expressing one group’s hatred for
another by demanding that the state expropriate more of their property. Far from safeguarding
society from authoritarian takeover, democracy in this case becomes a form of authoritarianism
that is easily coopt-able by every group.
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“In every society, as long as mankind is what it is, people who covet
another man’s property will exist. Some people are more afflicted with this
sentiment than others. But people usually learn not to act on such feelings
or feel ashamed for entertaining them…By freeing up entry into
government, everyone is permitted to openly express his desire for other
men’s property…Everyone may openly covet everyone else’s property, as
long as he appeals to democracy; and everyone may act on his desire for
another man’s property, provided that he finds entrance into government.
Hence, under democracy everyone becomes a threat” (Hoppe).
Some extenuating variants of Hoppe’s antagonism theory exist in the realm of climate
change. Effects have been demonstrated using the Right Wing Authoritarianism Scale (Fritsche
et al., 2012). In three separate sampling populations, university students were given a treatment
of climate change consequences and asked to indicate whether they knew or did not know of the
consequence prior to the study. Analysis showed that respondents who received the treatment
gave significantly lower approval ratings to social outsiders including vegetarians, homosexuals,
anti-nuclear activists, and various types of criminals. In students who strongly identified with
their nation (whether the UK or Germany), approval ratings for groups such as police and judges
increased. The extent and severity of the climate change threat, therefore, constitutes a social
powder keg whereby citizens of all types may be set against citizens of every other type with
incredibly dangerous consequences to life, property, and state.
Group infighting perpetuates the idea that economic progress must come under conscious
direction. The logic holds that society, free to be controlled by the market influence of the evil
groups, can only come to disaster. This story holds true in the realm of climate and traces its
Malthusian-nightmarish imagery to Paul and Anne Ehrlich’s The Population Bomb in 1968. The
best-selling book redeployed the argument of Thomas Malthus in a transparent frontal assault on
the world economy itself by suggesting that too many humans are alive. Like Malthus, the
Ehrlichs predicted the starvation of hundreds of millions by the 1980’s. Although radical, the
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differences between neo-Malthusianism and environmentalism are largely political tactics. It is
irrelevant whether the problem is identified as “too many people” or “not enough resources”
because the conclusion is the same: the market system left to its devices results in chaos, thus a
‘rational’ economic plan that takes ‘environmental constraints’ into account is required to
produce a ‘sustainable’ society. Environmentalism reveals itself as its own unique form of
fascism. Insofar as the government is the instrument and the limitlessness of the ambient
environment is the policy target, ‘incentives’ may extend into every part of society.
The abysmal failure of centrally planned economies in the twentieth century has provided
a historical scar to caution all politicians from prescribing reforms of this explicit ideological
color (Portes). Therefore the planners’ implements have become more subtle. Enter cap-andtrade: it is argued that entrepreneurs under cap-and-trade would have just as much economic
freedom, but would be internalizing the true environmental cost of production. This argument
contends that restrictions cannot be as such simply because their coercive nature lies under the
surface. Cap-and-trade is not a board-directed rationing policy. But neither does permit trading
take place on an unhampered market. Fixing the quantity of carbon permits on the market
constitutes a quota system (Murphy). Trades of the permits are predetermined by the allowed
quantity of carbon per year.
The environmental-political spectrum has been characterized as a color gradient from
“Bright Green” to “Dark Green.” The former consists of melioristic solutions like adaptation and
technological change whereas the latter supports radical subversion of civilization such as anticapitalist tactics or “eco-tage.” But the characterization need not make reference to any political
ideology. So strong is the propaganda of “job creation” that many otherwise enterprising
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individuals come to believe that alternative energy subsidies are necessary for the support of
melioristic technological change. For example, there is the ubiquitous yet unsubstantiated claim
that renewable energy facilities will match fossil power productivity at scale. Conversely, some
alternative energy advocates like E.F. Schumacher’s plead for wholesale nationalization of
energy production (Small is Beautiful). These differences remind of the separate patterns of
planning that Mises identified.
“The first pattern (we may call it the Lenin of the Russian pattern) is
purely bureaucratic. All plants, shops, and farms are formally
nationalized; they are departments of the government operated by civil
servants. Every unit of the apparatus of production stands in the same
relation to the superior central organization as does a post office to the
office of the postmaster general. The second patter (we may call it the
Hindenburg or German pattern) nominally and seemingly preserves
private ownership of the means of production and keeps the appearance
ordinary markets, prices, wages, and interest rates. There are, however,
no entrepreneurs, only shop mangers…In all their activities they are
bound to obey unconditionally the orders issue by the government’s
supreme office of production management...Some labels of the capitalistic
market economy are retained, but they signify something entirely different
from what they mean in the market economy” (Human Action).
Tactically, reference to climate policy as explicitly “socialist” is more likely selfdefeating for laissez-faire advocates. In Human Action, Von Mises argued that the term
“socialism” should only refer to the imaginary constitution of the socialist commonwealth and
never to the actual state of an economy. He reasoned that because of the impossibility of socialist
calculation, such a society could never come into existence and therefore, to the extent that any
society existed or operated at all it must maintain remnants of the market economy. For him, this
was equally the case in Soviet Russia as it would be in the GCA’s climate-stabilized idealization.
However, it is still important to decry the totalizing nature of environmental-energy planning. As
previously argued, this realization of significant economic disadvantage is likely for both
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moderate as well as radical climate proposals. At the extreme, Zeitgeist’s Resource Based
Economy confesses to necessitating a computerized dictatorship to calculate the positioning of
its 100% renewable supply (Venus Project).The varieties of carbon-taxation policy purported by
moderates have negatively repercussive effects that become the functional equivalent of total
planning over time. It is not unreasonable to contend that the environmental moderates fail to
comprehend their policies’ full consequences insofar as they do not recognize their proposals as
instituting a new economic order.
Despite the consequences, referencing energy planning as socialism might do more harm
than good, particularly by drawing attention from the academics that are already primed to
debunk the anti-science Right. Simultaneously, it is easy for them to deflect the association
between planning and socialism by distancing themselves from the socialist policies that citizens
are conditioned to be afraid of (i.e. their preference for “incentives” and “market-based
solutions” over energy nationalization). A uniquely unpalatable environmentally-inspired
prescription is taken from The Population Bomb: the Ehrlich’s were adamant in suggesting that
the U.S. take a leadership role in controlling global population by adding sterilants to the water
and food supplies. Conversely, in areas of uncharted policy – monitoring invisible pollution, for
example – the threats of flooded metropolises and transitions of forests to deserts frighten wellintentioned citizens into submission and conventionality as long as they are not well-versed in
the history of the economic philosophy of totalitarianism. For democratic environmentalism to
move forward, people of a particular emotional sentiment are targeted for conversion so that they
can join the fight to increase society’s collective sympathy. Enough must be persuaded to
concern themselves with the laundry list of abstract ecological principles such as ‘aesthetic
value’, ‘biodiversity’, ‘precautionary principle’, and ‘sustainable development.’
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This emotional element of environmentalism is becoming ubiquitous; there are
advertisements playing off of a victimization of personified polar bears as well as representations
of energy corporations as “greedy,” “dirty,” “polluting,” and thus evil. The sentiments are neither
inexplicable nor irrational. The convergence of discourses after America’s financial debacle in
2008 identifies ‘corporations’ in general as targets whose compliance with ‘social goals’ should
be coerced. Especially during hard economic times, the political incentive structure in a
democracy makes it extremely palatable to increase governmental expropriations, especially
from those who are perceived as undeserving. By joining the social commentary on the
American economy post-2008, environmentalism will inevitably reveal itself as the nexus of
anti-civilization.
The problem is intrinsic to the politicization of the economy in any direction - liberal and
conservative equally. Discourse becomes entangled within a web of economic moralization;
Republicans become agents allowing status quo energy corporations to over-extend their harmful
influences for the sake of individual profiteering at the expense of “society as a whole.” Subtly
moralistic viewpoints are incorporated into contexts of a New Energy Deal. This should be
expected to leave nothing more than a mash of intellectually bankrupt name-calling:
“It often happens that concern for the future of self, family, friends, the nation,
and/or the world becomes tightly bound with one or more moral claims. For
example, ‘The North American Free Trade Agreement will allow greedy
capitalists to get richer by exploiting Mexican labor,’ or, ‘The environmental
movement is just another excuse for socialists to further abridge the right to
private property.’ When this happens an "us versus them" dimension is
introduced into the debate. Because it is entangled with the moral claim, "us
versus them" can easily take on overtones of ‘good versus evil.’ One effect of this
is that a person presenting a proposition bearing on immediate human concerns,
such as the principle of comparative advantage or Marx's theory of the extraction
of surplus value, could possibly be seen as an agent of ‘them’ (or ‘us’). If this
occurs, economic propositions can come to be classified ‘ad hominem.’ They
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either originate from the ‘good guys’ or the ‘bad guys.’ Such classification can
serve as a substitute for evaluating the argument on its own merits, particularly
when the argument is difficult to evaluate. Even worse, the perception that
scholarly discourse is essentially a battle of good versus evil might have a
dampening effect on free inquiry itself” (Weston).
Today, dramatically inflated ranks of environmental sympathizers characterize
conservative energy reform (increased domestic drilling for oil and natural gas) as a barbaric act
of selfishness with respect to the increasingly popular “oneness of nature.” Given alleged
collective ignorance, nature must be saved from the evils of “overconsumption” by government
carbon taxes, offset by a massive undertaking of subsidized energy projects. The assumption that
expected future warming constitutes a substantial threat to human society intensifies feelings of
animosity between members of these factions (Fritsche et al., 2012). For “liberals,” opinions of
conservative “climate deniers” are wholly irrelevant – including when they coincide with free
market principles. Both viewpoints contain methodological failures that render climate policy
particularly contentious.
This particularly dangerous form of political antagonism concerns democracy
intrinsically. Rather than enabling rational calculation of resource scarcity, democratic discourses
produce a set of policies that have zero quantitative relationship either to material resource
realities or subjective human valuations. Similarly, the aforementioned political phenomena cast
doubt on the ability of democracy to properly reflect the state of scientific and technical
knowledge quickly enough to keep up with the perceived need for market regulation. When
political ideologies do not line up with the physical realities of resource availability, democratic
societies will experience a new type of economic recession – characterized by resource collapse
rather than a regulatory financial malady.
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V: More, Not Less
Given the intellectual bankruptcy both in climate denial and central planning, the need for
a new, free enterprise-centered environmental paradigm is clear. Climate change remains an
essential issue requiring human action of some kind. Yet, the planetary nature of climate change
is conventionally appealed to as justification for state action. It has been shown that global
complexity is precisely what makes the requisite economic calculations impossible to compute.
Not only is a scenario for Global Carbon Authority impossible and concerted transnational effort
extremely unlikely, but even if undertaken the state of civilization could only decline. If society’s
traditional coping mechanism can only intensify resource deficiencies, how is it to move
forward?
The impossibility of rational calculation under socialism has a readily available and
historically proven alternative in market competition. Through a fantastically intricate and timeconsuming process, the decentralized mechanisms of interest rate formation, insurance rate
determination, wealth transfer, capital accumulation, and technological progress converge to
produce mutually beneficial outcomes without the need for conscious direction. The marketplace
is always promoting resource distribution in light of changing productivity.
To begin, it is wholly unnecessary for free market advocated to reject mitigation outright.
Countless opportunities for liberalization policies could be expected to result in lower carbon
dioxide outputs. The Organization for Economic Cooperation and Development released an
attempt to inventory the direct and indirect government contributions to fossil fuel sectors in
2011. In the United States, industry supports tend to take the form of various tax breaks. These
include a severance tax exemption for crude oil, oil recovery and exploration credits, and
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assistance and tax breaks for various consumer segments such as farmers and Alaskans (OECD).
In general, the status of energy production as the most profitable of global industries affords it
significant political advantages across the entire docket (Wiseman).
The best decisions for society are those made by individuals when calculating their own
economic affairs under the unhampered price mechanism. Forced mitigation should be rebutted
in light of the plethora of entrepreneurial solutions (adaptation) that will accompany changes in
climate. Such has been the research focus of many economists including Robert Mendelsohn.
Property threatened by climate change can be protected with insurance. If the proper plans are
made, economic losses can be mitigated. In some areas, long-term insurance policies for coastal
public and private infrastructures could provide funds for sea-levies that protect vital assets.
Premiums are already rising and insurance is becoming less available to regions threatened by
sea level rise and extreme weather events, signaling to consumers that it is time to think about
moving (Reuters).
Additionally, many advanced technologies already promise to insulate production from
climate. Genetic engineering allows for direct control over agricultural traits. Desalinization and
industrial irrigation afford water access irrespective of location given enough energy. Various
‘smart’ city projects demonstrate that costs of new city construction may be declining (Salon).
Against predictions of sudden climate-related disasters, Mendelsohn proposes a technique called
geo-engineering that would seed the stratosphere with sulfur dioxide to increase Earth’s
reflectivity, and thus affording much more flexibility than a fifty-years-too-early mitigation
policy (Mendelson, World Bank). These technologies have in common that they will require
more energy, not less.
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Technological improvements underpin the failure of alarmist environmental predictions
such as those of Malthusians like the Ehrlichs or mitigationists like Schumacher. Capitalism does
more with less; not only does civilization use more resources but it also produces more netbenefits per unit resource over time. If more efficient technologies enable consumers to have
ever more benefits per unit resource, the capital movements that embody climate adaptation will
facilitate economic growth. These will not be government-subsidized ‘green jobs’ but
construction of new computerized cities, more efficiently burning fossil fuel plants (especially
natural gas), healthier and heartier GM crops, new and larger energy research facilities, robust
water distribution projects, and unimpeded consumer sovereignty over their gardens at the same
time. Restated simply, the goal of markets and investments is to create wealth over time by
lowering prices of goods and services. The goal of government interventionism in this case is the
converse: it creates a large bureaucratic infrastructure charged with making energy (and thereby
all commodities) less affordable. This is already taking place in environmentalism’s American
homeland – California (Bloomenergy).
When confronted with these adaptive possibilities, the true nature of environmentalists’
fixation on mitigation is revealed to be fear of uncertainty - idealized by the precautionary
principle (Ben-Ami). Rather than wait to react to climate changes, “uncertain” conditions
allegedly warrant action now. These motifs are exemplified by the activists groups Climate
Justice Now! and 350.org. Adherents are sufficiently uncomfortable with the thought of global
climate effects that they become motivated to create a social insurance policy. In opposition,
Mendelsohn’s rebuttal to Stern’s relatively alarmist damage estimate corroborates the collective
decision of the market society: most actors are not confident in predictions of impending
destruction. By this logic, mitigationism can be accurately characterized as overly risk averse. In
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line with the failure to account for long term investment and technological trends,
environmentalists do not recognize the status of risk aversion as an epistemically individual
characteristic nor the implication that their marshaling for mitigation is nothing more than the
infliction of their personal preferences on others (Morehouse).
Although the capitalistic criticism of environmentalism is scathing and seemingly
uncompromising, the outlook that flows from it is considerably more optimistic than the dismal
view promoted by “carbon footprint calculators” that individual betterment is necessarily
harmful to others (Ben-Ami). For the bourgeoisie, thinking as far ahead as the end of the century
necessitates a large dose of futurism. Optimistic predictions may be just as likely as
eschatological ones. For example, John Maynard Keynes dealt with a similar set of social
circumstances in 1930 when he wrote an essay entitled “Economic Possibilities for our
Grandchildren.” Before predicting the abolition of scarcity and rise of leisure society by 2030,
his preface described the economic discourse of his time. Then as now, many contended that
resources are running out and the collapse of civilization was upon them.
“We are suffering just now from a bad attack of economic pessimism. It is
common to hear people say that the epoch of enormous economic progress which
characterized the nineteenth century is over; that the rapid improvement in the
standard of life is now going to slow down --at any rate in Great Britain; that a
decline in prosperity is more likely than an improvement in the decade which lies
ahead of us” (Keynes).
At the same time, the original economic calculation debate concerning the feasibility of
socialism was still ongoing around the world. This was a pivotal time in economic history and its
discourses and insights rightfully resonate today.
We have seen though that scarcity persists in a variety of markets but society is of a
radically different strain than in Keynes’ time. Again some influential thinkers are spreading talk
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of rapid technological change producing variants even more different (Diamandis). Exponential
growth of output under capitalism makes every successive year even more exciting than the
previous. That this was the case during the twentieth century cannot be reasonably contested,
barring where national central plans erected obstacles. Along the same lines, optimists like Ray
Kurzweil predict a disruptive role for computers that will suddenly accelerate the rate of progress
of technological civilization (The Singularity is Near).
Meanwhile, many environmentalists are prescribing to deemphasize the role of economic
goods in advancing human betterment, including valuing so-called ‘natural capital’ as though
nonuse of resources contributes to development by its mere fact of existence (Ben-Ami). In
response to measurements that make us look better off than we really are, economically minded
individuals should propose a standard that gives some idea of how far we can go. Russian
astrophysicist Nikolai Kardashev identified that high energy output would characterize all
technologically advanced civilizations in the universe. He devised a barometer for expressing
evolutions that should accompany rising access to energy: the Kardashev scale pegs energy
consumption to a cosmic perspective, marking civilizations as Type I (planetary energy), Type II
(solar energy), or Type III (galactic energy) (On the Inevitability and the Possible Structures of
Supercivilizations). In the climate debate, our Type 0.7 global civilization may inadvertently
decide whether it will ever achieve the harvesting equivalent of Earth’s total solar insolation at
Type I status (10^17 Watts).
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Figure 2: Kardashev scale projections for human civilization ranging from years 1900 to 2030, based on data
from the International Energy Agency World Energy Outlook (Tragnark, 2008)
The civilization scale brings to discussion the infinite possibilities that knowledge,
technology, and economic cooperation could yield should we become bored or limited with
respect to a planet composed of a finite number of atoms. It fosters an ideological bridge
between the authoritarian eco-socialists and free market environmentalists. Kardashev also
points to the sun for the next generation of energy production: hypothetically, a Type II
civilization could build a satellite constellation known as Dyson spheres around its home star to
harvest and beam energy around the entire solar system (Kaku). Although the idea of the Dyson
sphere began as a utopian dream achievable under the abundant bliss of pure communism, it
highlights that both socialistic and capitalistic thinkers alike reject the anti-civilization or “back
to the forest” mentality of many environmental radical groups (Flemming). The concept of
‘space based solar power’ has already been stamped as technologically feasible by the U.S.
government before we have become even a Type I civilization (NSSO). Pro-capitalistic
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environmental discourses are thus able to define a role of renewables in expanding our energy
production toward conceptual frontiers. Within fifty to one hundred years, fossil fuel scarcity
(reflected in prices) and technological progress may provide a much more persuasive argument
in favor of investments for energy retooling in trillions of dollars (Hendersen). This optimistic
re-characterization of energy issues can thus be highly effective at coopting ideas like naturalism
and sustainability.
Environmental discourses typically claim a moral high-ground alleging that concern for
natural systems constitutes care for “future generations.” This can be reversed by employing the
specific vision of sustainability espoused by the Kardashev scale. Indeed, many more future
generations are accounted for with a civilizational vision which extends past the lifetime of our
home star. Only by becoming a space-faring civilization can humanity be considered
‘sustainable’ in the sense of indefinite persistence. Further, it is attainable under unadulterated
economic conditions by means of increasing economic output as fast as possible, particularly in
developing countries where marginal increases in output correspond to large increases in energy
consumption.
Whereas the models utilized to make economic-climate policy calculations assume the
epistemological status of national central plans, the price mechanism allows for the increased
scarcity of fossil fuel, land, food, and water to be counteracted by targeted increases in
investment and conservation. Status quo discourse makes climate change appear much more
difficult to address than need be because it conceives of it as a single issue; it is ‘global warming’
instead of ‘sea level rise threatening A or B coastal city’ or ‘decreased rainfall over X or Y
equatorial region’. Command and control measures under any guise should be discouraged by
anyone concerned with a discontinuity between economics and natural resources. A final
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solution to global warming does not exist. The only method of rational economic calculation is
information transmission through exchange values on a market. An essential strategic difference
results as well. Rather than ending the climate policy discussion in one stroke as might the GCA
or the already-proposed World Environmental Organization, a free market variant of
environmentalism opens the door to a renewed conversation over the efficiencies of respective
adaptation options, mechanisms governing geoengineering, as well as areas for strategic
liberalization that foster carbon dioxide reductions – including phase outs of coal and refinery
subsidies, privatization of roads, and abolition of electricity monopolies (Why We Need A
World Environmental Organization).
When illuminated by economics, the basic mechanisms that address the essential problem
of resource scarcity are brought to bear. In contrast, institutionalized supports for alternative
energy industries – national or global – make a new era of economic nationalism inevitable. By
giving preferential treatments to some members of society over others, statism will intensify
animosities between nations, economic classes, and all other group dichotomies established by
democratic rule-making. The end-result of such a cascade of adjustments can only be a new,
radical form of “Green” corporatism under which all prices are decreed indirectly.
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Hopefully, policies based on logical gaps can be delayed long enough to propagate
preferable solutions. For example, improved access to Earth’s orbit will enable a new era of geoengineering and energy collection techniques. Global climate adaptation projects like these are
feasible under the time scales in question – decades and centuries and even millennia. As
humanity advances its techniques for rendering the natural environment more conducive to its
benefit, it should expect to move forward on Nikolai Kardashev’s civilization scale. If utilization
of resources by more advanced means succeeds at avoiding taxes on energy, then opportunities
for future expansion to planetary engineering and solar-scale energy harvesting will present
themselves much sooner for the mutual benefit of all living humans.
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