Becker and Posner offer a stimulating discussion on gasoline taxes and comment the article by Harrington, Parry, and Walls, “Automobile Externalities and Policies” published in the Journal of Economic Literature, 2007, pp 374-400 (abstract, an earlier version as a RFF Discussion Paper can be downloaded here).
4th Ruhr Graduate Summer School in Economics “Energy and Climate Policy Modeling with GAMS/MPSGE” September, 8th-12th, 2008, University of Duisburg-Essen, Essen, Germany. The registration deadline is August 15, 2008.
The workshop provides an introduction into partial and general equilibrium models for the state-of-the-art impact assessment of energy and climate policies. Drawing on basic microeconomic theory, the course will follow model-based peer-reviewed publications in international journals to cover contemporary issues in energy and climate policy such as the promotion of renewable energies, the phase-out of nuclear power, the implementation of environmental tax reforms or the design of international emissions trading schemes.
The primary target audience is professional economists and PhD students who want to do energy and climate policy analysis with real data based on microeconomic theory. However, the concepts, tools and data sets can be used for the analysis of a wide range of economic issues such as for example in public finance of the evaluation of trade liberalization policies.
In What Was I Thinking, the New Yorker reviews two books on behavioral economics: “Predictably Irrational: The Hidden Forces That Shape Our Decisions” by Dan Ariely and “Nudge: Improving Decisions About Health, Wealth, and Happiness” by Richard H. Thaler and Cass R. Sunstein.
The New York Times also discusses Nudge and the idea of soft paternalism the book supports in A Nudge (or Is it a Shove?) To the Unwise: “For the case against nudges, see “Paternalism and Psychology,” (PDF) an essay by the Harvard economist Edward Glaeser. For the case in favor, see “Nudge” or this essay by Mr. Sunstein and Dr. Thaler.”
Another article in the New York Times, Are We Ready to Track Carbon Footprints?, discusses Nudge in relation to climate change. Here is an extract:
“The authors of “Nudge,” Cass Sunstein and Richard Thaler of the University of Chicago, agree with economists who’d like to reduce greenhouse gas emissions by imposing carbon taxes or a cap-and-trade system, but they think people need extra guidance. Getting the prices right will not create the right behavior if people do not associate their behavior with the relevant costs,” says Dr. Thaler, a professor of behavioral science and economics. “When I turn the thermostat down on my A-C, I only vaguely know how much that costs me. If the thermostat were programmed to tell you immediately how much you are spending, the effect would be much more powerful. It would be still more powerful, he and Mr. Sunstein suggest, if you knew how your energy consumption compared with the social norm.” read more
From The Economist Blog Free Exchange:
” STEVEN LEVITT, Freakonomist, can expect an angry letter from Greg Mankiw. At Mr Levitt’s New York Times blog today, he says:At least some choices are beyond reproach environmentally. It is clearly better for the environment to walk to the corner store rather than to drive there. Right?
Now even this seemingly obvious conclusion is being called into question by Chris Goodall via John Tierney’s blog. And Chris Goodall is no right-wing nut; he is an environmentalist and author of the book How to Live a Low-Carbon Life.” Read more from Free Exchange
Becker and Posner discuss carbon offsets on the Becker-Posner blog. Posner suggests that the most serious drawback of the carbon offset movement is that it “creates the false impression that global warming can be tamed by voluntary efforts just as cleaning up after dogs has been achieved by voluntary efforts, without need for legal compulsion. Global warming cannot be tamed by voluntary efforts, because the costs of significantly reducing carbon emissions in order to reduce the atmospheric concentration of carbon dioxide (or at least stop it from increasing) are enormous. If people believe that voluntary efforts will suffice, there will be no political pressure to incur the heavy costs that will be necessary to avert the risk of catastrophic climate change.”
In a comment Adam Stein co-founder of TerraPass, a carbon offsets selling company objects: “…offsets are not a substitute for cap-and-trade at all. Rather, the voluntary market is a potentially useful complement to a regulated market, acting in the short-term as a sort of policy bridge while the world waits for the U.S. federal government to take meaningful action; and in the long term as a supplementary source of carbon reductions…Regarding whether the existence of a voluntary market reduces political pressure for mandated reductions: this is a charge that is made frequently, and without real evidence. Awareness of the causes and potential solutions of climate change is still dismally low in the United States, and it is hard to see the disadvantage of programs which draw attention to the problem. In fact, the rise of the voluntary market has coincided with a remarkable surge in support for political solutions to climate change.”
RFF scholars Dallas Burtraw’s and Ray Kopp’s testimony before Congressional committees on what can be learned from the European Union’s experience with its cap-and-trade program on carbon emissions is available here.
I am always looking for papers on applications of behavioral economics to environmental policy. Today, I found the interesting paper by John Gowdy Behavioral Economics and Climate Change Policy. Below is the abstract:
“The policy recommendations of most economists are based on the rational actor model of human behavior. Behavior is assumed to be self-regarding, preferences are assumed to be stable, and decisions are assumed to be unaffected by social context or frame of reference. The related fields of behavioral economics, game theory, and neuroscience have confirmed that human behavior is other regarding, and that people exhibit systematic patterns of decision-making that are “irrational” according to the standard behavioral model. This paper takes the position that it is these “irrational” patterns of behavior that uniquely define human decision making and that effective economic policies must take these behaviors as the starting point. This argument is supported by game theory experiments involving humans, closely related primates, and other animals with more limited cognitive ability. The policy focus of the paper is global climate change. The research surveyed in this paper suggests that the standard economic approach to climate change policy, with its almost exclusive emphasis on rational responses to monetary incentives, is seriously flawed. In fact, monetary incentives may actually be counter-productive. Humans are unique among animal species in their ability to cooperate across cultures, geographical space and generations. Tapping into this uniquely human attribute, and understanding how cooperation is enforced, holds the key to limiting the potentially calamitous effects of global climate change.”
While looking for Gowdy’s full paper, I also came across an interesting blog, which I added to my link list. It is the Environmental Law Prof Blog by Susan L. Smith Professor of Law Willamette Univ. College of Law. Prof. Smith sights Gowdy’s paper here.