With Copenhagen on our minds, some remarkably incisive commentary coming from — of all places — the IMF. Here’s Carlo Cottarelli, the Director of the Fund’s Fiscal Affairs Department:
The science of the issue can get pretty incomprehensible pretty quickly. And the politics are clearly very ugly. Let’s not forget, however, that much of the economics is simple.
It’s an externality, stupid — so price it.
An informed citizen trying to follow the debate may easily become overwhelmed. But Cottarelli is right: the economics principles here are pretty straightforward.
via freakonomics.blogs.nytimes.com
This post is written by Justin Wolfers and would have made an excellent addition to Chapter 6 of SuperFreakonomics.
The problem, those responsible for pricing it have little incentive to do so. For a politician, pricing carbon right may mean losing votes.
Posted by: DM | December 15, 2009 at 01:23 PM
As an economist who used to work for the White House and is right now sitting at the negotiations in Copenhagen, one thing I have learned is how much of the world, the simple models of economics does not capture. I agree completely that the economics of externalities are straightforward, but without even dipping into the many scientific uncertainties and political hurdles, even the economics is not so simple when you add in innovation and learning by doing which is a crucial component of addressing climate change, not to mention equity concerns when the main polluters for the next 50 years have only a fraction of the income compared to the developed world, and equity cannot be fixed by direct transfers for a wide variety of reasons.
Posted by: Ben Ho | December 15, 2009 at 04:33 PM
The science of the issue can get pretty incomprehensible pretty quickly.
I wonder whose fault that is?
I can accept that the economics are pretty simple. At least John and Tim and newspapers and other economists and teachers have taken the time to actually explain economics and the public can generally get it.
Why is climate science so different? Why is it so oblique compared to other sciences?
Posted by: joshua corning | December 15, 2009 at 06:50 PM