Power Decisions to The People

It's fun to play Armchair Commissar. I do it myself. Speculating on the optimal solutions for global warming is a stimulating intellectual challenge. Power is pleasurable.

But we should resist the impulse to centrally plan. Any central plan would be too costly to be politically viable. It would get either watered down or delayed until it is too late. Only The People know the cheapest solutions.

The role of the federal government is simple: tell The People to burn less fossil fuels.

Requirements vs. Design

In the software engineering world, we talk of separating requirements from design. Requirements are what the user wants a piece of software to do. Design is how the code is organized to perform the requirements.

Marketers and human interface engineers are the experts in determining the requirements. Management then passes these requirements on to software designers and coders to produce the finished work.

All too often this protocol is violated. Sometimes coders rush ahead with the design, building a piece of software that only nerds can use. Other times, managers looked at the roughed out prototypes made by the requirements team and think the project is nearly done, resulting in buggy code that is not really designed at all.

When the federal government dictates design when it should be specifying requirements, society runs like such buggy and unusable software.

For example, consider the government's attempt to reduce gasoline consumption by dictating Corporate Average Fuel Economy (CAFE) standards. Each car maker is required to sell cars that average a target fuel economy standard for passenger cars or else pay steep fines. The result was a clobbering of the domestic auto makers and an overall worsening of fuel economy.

The American car companies were tooled to produce large comfortable cars. To meet CAFE standards they had to market Japanese and Korean cars under their own nameplates. And even then, they still had to cut back on producing the large cars that the customers wanted.

So they replaced the large cars with vans, trucks and SUVs. That's right, the SUV craze was created by environmental regulations!

Just the Requirements, Feds

“Burn less fossil fuels.” That's all the federal government needs to say. And The People can then apply thousands of different solutions, large and small, to the problem. But how does the federal government say to burn less fossil fuels?

Easy. Have a carbon tax.

The market is a powerful multi-dimensional optimization engine. It isn't perfect—witness the QWERTY keyboard—but it is far more powerful than any central committee. Give it the right inputs and 300 million people will work on the problem.

The market isn't solving the problem today because it is not receiving the input. No one owns longterm weather rights, so no one is charging for the right to dump mass quantities of carbon dioxide into the air. Here is a case where government action is needed in order to make the market do its magic. Consumers and producers need to see the costs of CO₂. Currently they do not. Today they only see the cost of extracting fossil fuels from the ground. (In fact, they don't even see all the costs of extraction when you take into account the cost of guarding the most valuable oil fields and tanker lanes; these costs currently show up as income taxes to support military operations.)

A carbon tax is the most market-based solution. It is more market-based than carbon permit markets. A carbon tax gives the market a proper price to work with. Carbon permit trading is quota based—governments set arbitrary timetables for reductions—and carbon permit trading constitutes a gift to existing polluters at the expense of new businesses.

As the most market-based solution, a carbon tax should be the most appealing solution to conservatives. But it is still a tax, and conservatives hate taxes. How do we get the conservative global warming skeptics on board?

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