In the case of global warming, markets fail because we don’t take into account the costs that our carbon dioxide emissions impose on others. The least intrusive way to have us weigh those costs is by taxing emissions, or by requiring tradable emissions permits. Either step would move us closer to [...] the outcome we’d see if there were perfect information and no obstacles to free exchange.Unfortunately, Frank does not discuss that politics fails because we don't take into account the costs that our opinions and votes impose on others; that because of the wide variety of activities involved and the large number of people affected, there is no practical way to negotiate perfect taxes or tradable permits; and that imperfectly-designed taxes or tradable permits can move us even further from the ideal outcome.
January 11, 2010
Global warming and political pollution
Robert H. Frank correctly argues in The New York Times that "because of the wide variety of activities involved and the large number of people affected, there is no practical way to negotiate private solutions" to the problem of greenhouse gases and global warming. He concludes: