EclectEcon

A consistent theme running through the famous article, "The Problem of Social Cost" by Ronald Coase is that it is not always efficient to charge a tax on some activity that generates costs borne by others. As I reflect on the social costs that might be attributable to global warming, despite what I have written earlier, I wonder whether maybe Pigouvian taxes imposed on carbon-based fuels might not be the best way of dealing with the risk of global warming.

I used to think that if carbon emissions are a problem, then we should just "tax the snot out of 'em". I wrote about this earlier in a posting titled "To Pigou or Not To Pigou," but even then I had concerns about whether the implementation of Pigou taxes on carbon-based fuels would be practical or politically feasible.

As I ponder it more, I am even less certain that Pigou taxes are the most efficient route to take. Maybe it would be more efficient just to let global warming happen (especially given the uncertainty about whether humans can do anything about global warming, and given some questions about whether it is occurring, and if it is, whether it is attributable to human action: see this). Maybe, given the costs of trying to implement any other policy, and given the risk that "doing something" now might involve high costs with little or no benefits,... maybe we should just let it happen, and if it does, then deal with it.

Waiting; and then building dikes and moving people could well be a whole lot cheaper. That doesn't mean it would be efficient not to consider other options. That doesn't mean it would be efficient not to plan strategically for the building of dikes and levees. That doesn't mean it would be efficient not to plan for the future. It just means that the planning should include the possibility of not trying to prevent global warming but instead coping with it, should it occur.