tag:blogger.com,1999:blog-1740670447258719504.post3071937535257456528..comments2024-03-27T03:00:27.024-04:00Comments on Facts & other stubborn things: Murphy on Carbon TaxesEvanhttp://www.blogger.com/profile/12259004160963531720noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-1740670447258719504.post-45854431011083105482012-10-01T20:44:44.321-04:002012-10-01T20:44:44.321-04:00This was one of the interesting results we went ov...This was one of the interesting results we went over in my environmental section. And while in the case of the carbon tax I agree with Murphy, by the same token, you could use the very same argument for a larger tax (on X) if the markets that it affects are overwhelmingly subsidized. Living in a "second-best" world can go against or for unaffected market prices.<br /><br />More than anything, my skepticism of something like a carbon tax comes from the unimaginably complex general equilibrium effects (both in the sense above and w.r.t other externalities), our lack of knowledge regarding how far/near the current tax/subsidy nexus is to an equilibrium arrangement, the complete ambiguity of the Damage Function, the ineptness and inflexibility of policy that has been demonstrated in the past (if it were anything near rational we'd have gone nuclear by now), and the increased mobility of factors (in the global sense).<br /><br />For all of these reasons, I favor less than more action. And yes, as others have recently pointed out elsewhere, and it should be obvious, there is a distinction between "doing nothing" and "doing something" in the face of ignorance. The principal is applied in computer science all of the time - if you're not entirely sure what's the best, use an evolutionary algorithm to get an idea.... edarniwnoreply@blogger.comtag:blogger.com,1999:blog-1740670447258719504.post-49259320465909501592012-10-01T15:24:14.381-04:002012-10-01T15:24:14.381-04:00Thanks. FWIW, I actually didn't believe the re...Thanks. FWIW, I actually didn't believe the result when I first saw it--and I'm of course a foe of carbon taxes. It took me a while to even understand what they're saying.<br /><br />Here's the surprising thing: The prior existence of distortionary taxes can actually REDUCE the case for imposing a revenue-neutral carbon tax (of a given magnitude). That is an incredibly counterinuitive claim--you would think it would be the opposite, necessariiy--and took me a few days to believe.Bob Murphyhttps://www.blogger.com/profile/04001108408649311528noreply@blogger.com