thegreekdog wrote:The two links you've provided in this regard don't actually show any causation evidence. There aren't even quotes from ex-smokers saying "I quit because smoking is too expensive." I'm sure there are people who quit smoking because it's too expensive and because of health risks, but I simply don't know how many people quit smoking merely because the tax increases from 5 cents to 20 cents on a pack of cigarettes. I have anecdotal evidence - I was a smoker - and I quit because of health risks, not because of the cost. And a government does not need to raise the tax to 100%; if the government was interested more in dramatically reducing tobacco use (and not in generating revenue) it could raise a tax that was prohibitively expensive that is less than 100%. For example, raise the tax from 5 cents to $3.00 a pack (so that a pack now costs upwards of $15). Additionally, and maybe more importantly, tobacco costs more or less depending on the jurisdiction.
The second link was a meta-analysis of the studies that are out there, you can follow whatever references are in there if you would like to see the actual data. It includes the statement:
Evidence from countries at all income levels shows that price increases on cigarettes are highly effective in reducing demand (Jha and Chaloupka, 2000). Higher taxes induce some smokers to quit and deter others from starting. They also reduce the number of ex-smokers who return to cigarettes and reduce consumption among continuing smokers. On average, a price rise of 10 percent on a pack of cigarettes would be expected to reduce demand for cigarettes in the short term by about 4-percent in high-income countries and by about 8 percent in low- and middle-income countries, where lower incomes tend to make people more responsive to price changes.
The article they mentioned is available here:
http://www.bmj.com/content/321/7257/358It's behind a paywall, so it may be hard for people who don't have scientific journal subscriptions to access it. But the data is certainly out there; I didn't plan on holding anyone's hand to find it though.
In the case of carbon emmissions, we don't live in a perfect government world. The government wants polluters to exist and therefore any tax on carbon emmissions, in my opinion, will be based primarily on revenue generated and not on "the right balance" as you put it. I guess we'll see, but even politicians ardently in favor of reduced pollution levels and the carbon emmission tax still receive funds and are lobbied by polluters.
I am trying to have a discussion about what optimal government policy is. You're skipping that step and just assuming that no government policy can do what we want. I'm not going to be that defeatist -- I believe that the role of government is to implement Pigovian taxation, and that if done optimally it would achieve what I desire. Whether or not it can actually be done that optimal way is a political question and not an evidence-based policy question. The reason it's important to frame the question this way is that if you can find the optimal policy, then you can start from there and discuss how much of a compromise you're willing to make to get the policy through a real, political Congress. If you never have this discussion, then you can never know what the right answer is, at least in the ideal case.
See above (and you know my inherent distrust of government). The other problem is that consumers will bear the burden of any carbon tax. That may be a good thing (I think it is in the context of trying to reduce pollution - if I need to pay more for coal electricity than wind electricity because of carbon taxes, I'm purchasing wind electricty). But people inherently don't like to pay more for stuff via taxes (even cigarettes). In any event, as you've noted a revenue-neutral tax is difficult to achieve in Congress. Further, we need only look to the energy generation industry to find issues with rent-seeking.
A revenue-neutral tax doesn't really put the burden of the carbon tax on consumers (by construction), though it may redistribute wealth slightly. They're spending more on tax when buying gasoline, but they're also getting the money back. The idea here is that if they lessen their usage of fossil fuels, then they'll effectively be saving money because they're getting paid by the government either way, but contributing a smaller share of the tax.
I don't disagree that consumers create the demand fulfilled by coal miners and truck drivers. And ultimately what you're going to tell me is that consumers should pay for retraining of the coal miners and truck drivers that they've demanded over the period of time. I tend to be in favor of retraining programs (generally), but get a little concerned when businesses don't bear the burden of the cost (where the government does). But I like it better than the alternative (which is unemployment compensation).
Consumers will pay for this either way, down the line. Any costs associated with shifting technology will be passed on to the consumer because the business has to make money. There's no reasonable scenario in which we can just force businesses to eat the cost of retraining simply because we don't like that fossil fuels are nonrenewable.
At the risk of being BBS-ian (and incurring foe-ish wrath), why do you think the market doesn't work? My theory (untested and unproven) is that the free market doesn't work because the businesses that generate the pollution and the government work in tandem, rather than separately. In other words, I don't blame the market, I blame the individual business's influence on government to prevent competition, especially from cleaner forms of energy usage. As just one example and without getting into details, most electricity generation is highly regulated, including with respect to price. Why? To keep costs down for consumers. Why? So that consumers will continue to buy electricity that is generated by polluters. How does it happen? Lobbying, money, rent-seeking. Until these are removed, the free market cannot work. If my choices are electricity from a polluter that costs $1.00 (because of government intervention) compared to electricity from a wind farm that costs $3.00, I'm buying the former, not the latter.
The issue of government regulation is entirely separate from the market failure I have described. Yes, a market failure does occur because of regulation of energy prices. But that regulation doesn't actually address the problems related to climate change in a way that can really solve the problems (as you've pointed out, with the CAFE standards). If the government completely took its hands off the energy market, then how would the market pay for the externality associated with global warming? By construction, it couldn't. Even if there was a gentleman's agreement to raise the prices and use that to pay for carbon sequestration, some new corporation that wants to make money would just sell at lower prices and not do the sequestration. These types of externalities require government intervention.
One of the major Republican proponents of a carbon tax has been Bob Inglis, former S.C. congressman. He has said that if Republicans will accept a carbon tax bill, that in return, the government would have to scrap all existing EPA regulations on the affected industries. I am more or less fine with this -- the market can solve this problem, once the correct price is being paid, so why not let it?
