Sausage, Anyone?

by Will Wilkinson on June 3, 2008

Jim Manzi braves the tedium of typing in a partial list of exemptions and carve outs inside the cap-and-trade bill working through Congress. It is not a small list. He concludes:

Calling some of these carve-outs “transition” assistance is pretty funny, since they extend out to 2030 for the oil, natural gas, power generating and manufacturing companies (six presidential elections and more than three senate terms from now). Do you think that when 2030 rolls around their reaction is going to be “a deal’s a deal”?

Of course, this is the rent-seeking we have now as the regulatory process is about to be kicked off. For this program to work, it has to remain in force for many decades. If this happens, entire lobbying firms will be built up to seek exemptions, allowances and so on. Many nice homes will be built in McLean with the proceeds, and many members of congress will have re-election campaigns financed by the contributions this bill will generate. It will create another income tax code.

As Jim mentions, some people think he is cynical. I don’t know, maybe he is. But he’s right. Understanding basic public choice dynamics is required for a rudimentary grasp of what politics and government are. A civics or “social studies” course without rent-seeking is the equivalent of an economics course that never touches on the logic of a collective action problem. Both leave you laughably incapable of grokking how and why things work (or don’t) they way the do (or don’t).

This bill is obviously going to be worth much less than nothing, and, to be frank, I think people who can’t understand why are sadly ignorant of how politics works. Global warming is the sort of “crisis” that is useful as a pretext for the enrichment of the connected. And that may be all global warming legislation ever manages to accomplish. Is that cynical?

Viewing 7 Comments

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    Yes, that is cynical. True, but cynical nonetheless. The basic problem is the bias toward action. The feeling that we should do something damnit, anything, even if it doesn't make sense.

    The other problem is that people think that government is mystical and superhuman, immune to the inherent selfishness of humanity.
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    You and Manzi invoke public choice as if that is an automatic argument against government action, even where externalities are huge. This is essentially just intellectual laziness.

    Public choice theorizes that people will act in politics more or less as they act in markets: they will try to optimize their private benefit-cost function. Social policy to be enacted therefore has to have a private benefit-cost ratio of greater than 1 for everyone in a winning coalition. The greater the social surplus caused by the government action, the better the odds of obtaining that kind of result. It won't be what the ideal philosopher-economist-king would order, but that does not prove it won't be more efficient than the status quo.

    Manzi's example of lobbying costs is fundamentally trivial. If global warming is a real problem, the social cost of lobbyist income will be miniscule in comparison to not doing anything about it. If global warming is not a real problem, then the social cost of lobbyist income is nothing compared to the cost of doing something about it.
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    I second Pithlord's comment. If the goal is to prove that the bill is net welfare-reducing, what is needed is a quantitative analysis of deadweight loss and rent-seeking effects, in comparison to the estimates of reduced externalities.

    You might say, well it's totally obvious the bill is net welfare-reducing, look at the list of side deals! But the list of deals is not decisive, in particular because many items on the list actually look pretty good!
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    Well, I don't think it has even been established that carbon emissions have a net negative external effect, so I don't even buy the argument for the pigouvian tax. In that context, it's hard to see this as anything other than a rent-seeking expedition.
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    It's true, if you believe there is no proven AGW problem to solve then it must be a net loss for the government to move money around trying to solve it.

    In my view the tax is partly idealism and partly rent-seeking. I don't believe the rent-seeking coalition behind the bill is very strong (the net winners appear to be coastal states and renewable energy companies). So I think the main force here is idealism, or perhaps political posturing since the bill won't pass.
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    I'd like to return the compliment. mk has a point. Anti-global warming legislation, no matter how misguided, is a bad case for crude public choice theory. We wouldn't be discussing this issue if there weren't a lot of people motivated by their view of the public interest and morality. It's really hard to believe that the fuel cell lobby has more power than the oil and auto industries.
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    Pithlord, "Baptists and Bootleggers" just is part of "crude" public choice lore. Morally-motivated regulation can be one of the most powerful sources of cover for those who profit from them.

    If public choice theory is the theory that no one is morally motivated, then not even the inventors of public choice theory believe in it.

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