Directions for Research on Decentralization

From a conversation elsewhere:

I think it's absolutely relevant to explore the ways in which social problems can be solved without a centralized decisionmaker. Ultimately, so-called "market-anarchists" are rejecting the state model for social organization, and are suggesting that it be replaced with a model which relies on decentralized decision-making. Accordingly, it seems worthwhile to discuss some of the ways in which that model can be expected to function, if only to educate the market actors who are being expected to make the system work. After all, keep in mind that anarchy can only function in an ideological atmosphere where people don't want a state. If they do want a state, or don't know how to make things work without one, then they will have a state: you can bet on that.

So as philosophers, economists, etc., it's our job to show why centralized decisionmaking entities like our national governments provide inferior mechanisms for social organization. There are several parts of this argument which need to work in concert in order to truly convince people that decentralized decisionmaking is a truly better alternative. Relying on only one, and leaving out the others, will leave many people unsatisfied, as we're clearly seeing here. As I see it, those in favor of decentralization need to show the following:

1) The model of social organization which holds that everyone needs to get together and find the right answer, and then apply the right answer in the right way, is flawed. There is no "right answer" to social problems which can be discovered, even if we get the smartest, most creative, most honest people together to work on them, and even if there were, there would be no "right way" to implement it that could be instituted by coercing individuals to play their "part" in the solution. As David Schmidtz wrote in his book Elements of Justice, "In effect, there are two ways to agree: We agree on what is correct, or on who has jurisdiction - who gets to decide. Freedom of religion took the latter form; we learned to be liberals in matters of religion, reaching consensus not on what to believe but on who gets to decide. So too with freedom of speech. Isn't it odd that our greatest successes in learning how to live together stem not from agreeing on what is correct but from agreeing to let people decide for themselves?" (6). The advocate of decentralization takes this idea to its extreme, and needs to justify that position. Was John Rawls correct when, in his book Justice as Fairness, he suggested that there are "...profound and irreconcilable differences in citizens' reasonable comprehensive religious and philosophical conceptions of the world, and in their views of the moral and aesthetic values to be sought in human life" (3)? And if so, why is decentralization the proper response?

2) Decentralized solutions can effectively solve social problems, or perform comparably well compared to centralized solutions, or have benefits which make them more desirable than centralized solutions, in spite of their comparative weaknesses. Most people believe that a system of social organization should be judged, at least in part, by its capacity to bring about desirable social outcomes. Economics teaches us that in the absence of cooperation, markets can fail: free riders, externalities, collective action problems, tragedies of the commons, and prisoners' dilemmas can lead individuals acting separately to undesirable outcomes by the standards of all involved (see on this James Buchanan's essay, "Positive Economics, Welfare Economics, and Political Economy"). Advocates of decentralization need not only satisfy the alleged "statists" and "collectivists", who see government as a perfect substitute for a necessarily imperfect market, but also more reasonable objectors who see centralized solutions as having at least some potential for bringing about solutions in instances of prohibitive transaction costs. For example, in his essay, "Market-Based Environmentalism and the Free Market: Substitutes or Complements?," Peter J. Hill writes:

Market solutions are superior to coercive ones because voluntary exchange offers the assurance that social interactions are mutually advantageous. However, transaction costs prevent some potentially profitable voluntary exchanges from taking place. Through the use of appropriate rules, government can provide feasible alternatives. In the standard examples of roads and national defense, the transaction costs of individual exchange are high and the free-rider problem is substantial. Thus, there is at least some potential for using tax-financed provision of these public goods as a corrective mechanism. Of course, government provision of public goods is fraught with numerous problems, and one ought not to be overly optimistic that government will get it right. However, we should not automatically rule out all government intervention (389).

Advocates of decentralization need to show that actually, we should automatically rule out the kinds of solutions that can be produced through government intervention, or that decentralized solutions are capable of effectively emulating government intervention, so we don't lose tools from our policymaking toolkit when we move towards decentralization, or that decentralized solutions can actually produce solutions which work somewhat like government interventions, but are either inherently or more likely to be better suited to solving the problems with which they are charged.

3) Disputes can be resolved effectively and without violence in the absence of centralization of authority. In many ways, international law, corporate and industry dispute resolution, private arbitration, and private security companies set the stage for this conversation. But on the other hand, state imperialism, genocide, human rights violations, and the ineffectiveness of the UN (which lacks sovereignty) bring up questions which demand answers. Advocates of decentralization need to explain how a system without a central authority could bring about the settlement of disputes between individuals and groups effectively and predictably. And further, they need to show that such a system would be adequately resistant to things like bribing, corruption, and caprice, as well as being capable of enforcing rulings effectively. Failing this, decentralists would need to present the case that a decentralized system is more desirable for reasons which are not generally appreciated, perhaps because it would better preserve freedom of choice, it would recognize a lack of objective standards of justice (particularly procedural justice), or it would be better on balance than a centralized solution because of some flaw in the latter.

4) A decentralized system would be beneficial for those members of society who are less advantaged. Any "solution" which explicitly consigns people to death by starvation, exposure, or lack of routine medical care will simply be unacceptable to many people, and for good reason. Advocates of decentralization need to show how disadvantaged groups would benefit or at least not be made worse off by decentralization. And it will not do to demonstrate that those in need can be expected to be generally better off than they would be in other systems. Decentralists must show that there is no reason to worry about the fate of the disadvantaged in a decentralized society, at least any more than we worry in our current society. Alternatively, a case needs to be presented in substantially more convincing fashion that concern about the fate of those in need is misplaced.

5) There is historical precedent for effective decentralized decision-making. This one seems pretty self-explanatory, but ultimately it will not be the advocates of decentralization who actually go out and create the decentralized order which they are promoting. As the saying goes, there is no plan for freedom. Accordingly, it will be important to show that individuals who were not philosophers or "anarchists" have been able to successfully make decentralized decision-making mechanisms work for them, ideally without even realizing that they were doing it. Perhaps more importantly, it will be desirable to demonstrate why the failures of certain ventures in decentralized decision-making do not demonstrate a failure in the general idea.

And personally, I don't think that's such an unreasonable research program. I actually think there's something in there for almost everyone. And luckily, there's a lot already out there to start from. I've actually been toying around with the idea of putting together some sort of association of people working on these issues, and would love to hear from anyone who's interested in joining the effort.

Social Policymaking and the Libertarian Party

[It occurs to me that the beginning of this post is very poorly written, and does not convey the idea that I was trying to get across. I apologize. Feel free to read it anyway, but feel even freer to skip down a little until the next bracketed comment.]

I take it that most libertarians acknowledge that society does need certain institutions and rules in order to operate, and that these rules would require individuals to abide by agreements which might end up with outcomes that they don't particularly like, but have to abide by because of the agreements. For example, if I voluntarily enter into a living arrangement in an incorporated city which is governed by a set of laws, then I must abide by those laws so long as I continue to live in the city. Going further, it seems reasonable to believe that in such a living arrangement, part of my agreement would include a mechanism for deciding on new rules which could be enforced. For example, if the members of my community wanted to employ a lawn mowing service, perhaps we could somehow get together and decide to be bound to contribute to the lawn mowing fund.

Now, what I've just described is a public policy. This public policy would be one that I could advocate for some reason like "I think we can all agree that it would be nice to have mowed lawns in our town, so we should have lawn mowing," or "It seems to me that people aren't motivated to mow their lawns, but would be glad to pay the price of mowing their lawn if for that price they knew they would get their lawn mowed and also get to live in a town of beautifully manicured laws." And given that I would be living in a community where all the members had agreed to abide by the rules turned out by some rule-making procedure, it seems like such a policy would be perfectly consistent with the ideals of anarcho-capitalism.

Hearing this, it might occur to some members of our current social order to suggest something like the following: What's the point of being an anarcho-capitalist if that's what you're going to end up with? If you have a vision of what society should be like, you should try to convince enough people that you're right, and then you can direct the political process towards implementing that vision. That's how democracy is supposed to work, and you just need to get out there and let your voice be heard!

It is this sort of thinking, as far as I can tell, that leads to the idea that a Libertarian Party can be successful. The idea, then, is that if Libertarians get their message out, they can make the government give us back our freedom and stay out of our lives. Society, under such a government, would then be able to decide whether to disband the State entirely or to attempt to maintain a smaller, more limited State. And perhaps both. After all, what's most important is that we start working towards a point where such a conversation could even be possible on a national level.

But notice an interesting feature about what I've said so far about taking a position on social issues. First, I talked about anarcho-capitalism as a starting point, and then talked about public policies that I would personally advocate for implementation in my own society, which I had voluntarily entered, and where the other members could only be bound by rules produced by a procedure that they had directly agreed to. By contrast, the capital-L Libertarians, it appears to me, leave out the first step. Their objective is to determine what rules they would want to govern their society, and then to attempt to have those rules implemented (this manifests itself in some sort of private property regime where there are very few socially enforced rules besides respect for property).

[If you just read the above, see what I mean about me not talking sense? Yea...sorry about that, I wrote the beginning of this post at 2AM last night, and didn't notice how bad it was when I resumed writing today. What follows is the main idea of this post, and hopefully makes sense on its own.]

This difference is not insignificant. To illustrate why, imagine that there is a fraternity, Alpha Beta (AB), which throws a huge party every year with a sorority, Chi Upsilon Zeta (XYZ). Let's say that a member of Alpha Beta, Chad, decides that he doesn't like the XYZ parties and no longer wants to contribute to them, but the other members of AB are willing to use force if necessary to get the money from Chad if he refuses to pay and doesn't leave the fraternity. Chad first considers leaving AB to go live elsewhere, but unfortunately, all the housing with access to his college's campus belongs to the Greek system, and all the other fraternities on campus do things that Chad finds equally lame, but would be forced to contribute to. His situation, I take it, is somewhat analogous to the one in which libertarians find themselves today (though of course Chad could transfer or drop out, but whatever).

Now, if Chad were to pursue the sort of plan I outlined in the beginning of this post, what would he need to do? Essentially, he would have several options. He could attempt to convince the other AB's (or the members of another fraternity) to allow him to build a shed on part of their lawn to sleep in. While in his part of the yard, the fraternity's rules would not apply to him, including the one which forced him to help pay for the party with the XYZ's. Second, he could purchase a patch of yard from the AB's (or another fraternity) which would belong exclusively to him, where he could make rules for himself, and would not need to contribute to any kind of fraternity organization. Third, Chad could claim a patch of lawn for himself and defend it with force of his own if anyone tried to make him contribute to any fraternity programs. There are probably a bunch of other things Chad could do instead. But the common theme here is that what Chad is doing is entering a non-affiliated state of affairs.

I should note that Chad would be an idiot to do this alone, especially if doing this would prevent him from any sort of social cooperation with anyone in the fraternity system. I don't think any reasonable anarcho-capitalist would contend that non-affiliated status would "work" if it meant that people would be out on their own. Being on your own is awful--worse, I think, than being subject to unreasonable and involuntary rule. But this is besides the point of this post.

Now let's contrast the above strategy to the kind of thing that Libertarian Party libertarians are trying to do. Imagine if instead of looking for a way out of the fraternity system, Chad thought to himself, "Well, I don't like the parties with the XYZ's. So what I should do is get AB to stop throwing the parties; if people really want to throw the parties, they can get together and organize the party voluntarily. The AB fraternity shouldn't be involved in the party; the members who want the party should be the ones to organize it." Chad would then try to popularize this idea, and get enough people in AB to agree to stop funding the party to bring about a change in the fraternity's rules. If Chad were like the Libertarian Party, he would go about this goal by trying to convince the youngest and most impressionable members of the fraternity about why the party wasn't so great, and why it would be really great if everyone who wanted the party just got together and had it without involving any of the people who didn't want to have it. Eventually, if Chad were successful, enough of AB would be filled with this new generation of Libertarian AB's, and the fraternity government would be withdrawn from involvement in throwing the party.

See how that's a very different way of getting things done? Consider, for a moment, the consequences for the AB member who is perfectly happy with the XYZ parties, and is glad to pay the dues to fund them. In the first scenario, where Chad goes out of his way to leave in a way that does not disturb the AB system of governance, the members of AB who are happy with their fraternity government still get to have their party, and without any perceptible change except for the one we want them to feel, which is that now Chad no longer has to pay for something that he doesn't want, and they have to deal with the consequences of that. If the party was only worth it to them because they could make Chad help pay for it, then perhaps they would stop having the party, and that's a good thing. But otherwise, the remaining members of AB would get to continue living the way that they were living, and it would be on Chad to figure out a way to make his new life work outside of AB.

By contrast, in the second scenario the mechanism by which the XYZ party was formerly thrown has now been denied to the AB members who have always depended upon it in the past, and if they want to have their party, it will now be contingent on them to get together and negotiate a new deal. If AB were an extremely large fraternity, and the members did not have a very good way of communicating and negotiating with each other, this might be incredibly difficult for the AB's to organize. Certainly they would have an incentive to figure it out. But that doesn't mean that they would figure it out, and figuring it out would certainly involve opportunity costs that could be very significant to them.

The difference can be summed up like this: In the scenario I've advanced, where Chad separates himself from what he takes to be an oppressive system and strikes out to pursue his own goals, what Chad does is to remove himself, but to leave the existing system intact for those who want it to remain that way. He changes nothing for anyone except so far as others were depending on him to help further their own ends (using him as a means). In the scenario in which Chad embodies the Libertarian Party, on the other hand, the entire system of government by which the other AB's are used to coordinating their activities is disabled, and they must take it upon themselves to coordinate the party in its stead. As I've suggested, this might not be particularly easy for them to do, especially if the fraternity is extremely large and communication is difficult, and lots of coordination is required to get the XYZ party off the ground.

As I see it, the former strategy is the one most consistent with the ideal of just wanting to be left alone. The latter, it seems to me, effectively stops the other AB's from imposing things on Chad by creating a coordination vacuum, which could have seriously unpleasant consequences for the AB's. It's stopping an imposition on Chad by essentially imposing something else on the AB's: the responsibility to throw a party for which they had gladly delegated the responsibility away to their fraternity government.

Essentially, this is what I think that the Libertarian Party is trying to do. It's trying to take a government entity that many people rely on and that many people believe must be involved in certain areas of their lives, and destroying its ability to fulfill the tasks that these people are looking for it to fulfill. Sure, it's probably true that these people will be able to adapt to their new circumstances and perhaps be better off than before. But the point is, people who are not libertarians don't want to live in a society that reflects libertarian ideals. They would gladly submit to a coercive government if the alternative were trying to make all the decisions necessary to decide on what kind of life they want to live. To paralyze their government, I take it, would be to do these people a profound disservice. And because I like these people, I will advocate nothing of the sort.

Rather, I will advocate what I consider to be the high road. I would gladly endure greater oppression under the state, and gladly make greater sacrifices in order to bring about a world in which secession from our statist friends is a feasible solution for libertarians who no longer want to live under the state system, rather than advocate the destruction of the state system to serve my ends, at the great expense of those who very much want the state system to remain in place, and who have no interest in giving anarchy a shot.

I want to qualify that by saying that I'm finding it hard not to want to see McCain run this country into the ground in a spectacular fashion so that Americans will have reason to critically reexamine the ideas on which they base their social order. But I think that's sort of different from wanting to force people to act like libertarians: I want them to see how stupid their system is and change their minds, as opposed to wanting them to have to act as though their minds were changed when they really hadn't been.

On the Use of the Term "Self-Interest" in Economics

I've been repeatedly embroiled in an argument for the last few weeks over the term "self-interest" as it is used in economic discussion, and I wanted to hammer out my position once and for all so that I don't have to keep trying to start from the beginning. Here's the deal. I am told that within the discipline of economics, what it means to say that a person "acted in her own self-interest" is that a person "acted according to her own interests." The idea here is that all action demonstrates preference, and that this necessarily means that the actor preferred the action that was taken to all other actions. So if I jump on a grenade in order to save my friends, what I have demonstrated is that I preferred to jump on the grenade over all other alternatives that I considered, and it's fair to say that I wanted to jump on the grenade; that out of all available alternatives, the one I consider the best is the one where I jump on the grenade so that my friends live. I'm down with that.

When I jump on the grenade because I want to save my friends, I take it to be uncontroversial that I do so according to my own interests. How could it be otherwise? And if what we mean by "self-interest" is simply that I act according to my own interests, then yes, my jumping on the grenade is self-interested.

But when presented with the claim that jumping on the grenade is a self-interested behavior, the average person tends to become perplexed. It's only after a thorough explanation of the "economic" meaning of the term that it becomes clear how this could be the case. Why does this happen? The reason, I contend, is that economists mean something completely different by the term "self-interested" than lay people do. This, I will argue, is a problem, and should be remedied in order to prevent completely unnecessary confusion and error.

Let me explain. In talking about any interest or preferred scenario, there must be a subject and an object. The subject, generally speaking, is the person who has the interest or the preference. So if we're talking about my preference for eating an apple, the subject is me. It is I who prefers the apple, and the preference for the apple is incoherent without the fact that the preference is my preference. The object of the preference, on the other hand, is the end which the subject is seeking to promote. In our example, I prefer the apple, but the object of my preference is not simply the apple: I don't value the apple for itself. I want to eat the apple. The object of my preference, then, is something along the lines of my having eaten the apple (perhaps we might say that I want "the experience" of eating the apple, or "the happiness" produced by my eating the apple; the exact way we phrase this is not critical).

The critical thing to note here is that the economists' definition of "self-interest" simply refers to the idea that interests are subjective: the subject of all interests is the interested individual. It is my understanding, however, that when lay people use the term "self-interest," what they have in mind is, minimally, that the object of the preference has something to do with the interested individual. So if my sister were sick, I might go get her some medicine. To say that my getting the medicine is "self-interested" would mean, to the lay person, that I get the medicine in order to promote some self-directed end. That is, I get the medicine because, perhaps, I am happier when my sister is not sick, or my sister is irritating when she's sick, or there's a cute pharmacist who will think I'm sweet for taking care of my sick sister. The lay-person, then, would call "non-self-interested" or "selfless" an interest with an object which does not directly involve the actor. So I act selflessly if the reason I go get the medicine is that I value my sister's health for its own sake, and am willing to take on the costs necessary to promote her health.

Note that this lay definition of self-interest is not incoherent or contradictory. And note also that the "selfless" act identified by the lay definition is labeled as "self-interested" by the economist definition. Indeed, the notion of "selflessness," as identified by the lay definition, is defined out of existence by the economist definition. Because the economist identifies as "self-interested" all actions where the subject is the actor, and because all actions demonstrate an interest on the part of the actor, it becomes clear that there can be no such thing as a "non-self-interested" or "selfless" action.

A number of problems immediately present themselves. The first problem is that the economist definition completely eliminates what I take to be an extremely useful distinction between "self-interested" and "selfless" actions, which is captured very well in the lay definition, without providing an adequate substitute. One might object that the term "selfish" captures the layman's "self-interested," but to most people, the term "selfish" is emotionally charged with negative connotations. Observe the struggles of the Objectivists to try to divorce this emotional
connotation from the term! By contrast, the layman's "self-interest" is relatively neutral and already conveys the sort of thing that the economist would be trying to bend "selfish" into meaning. Further, the economist would then need a new word for the layperson's "selfish"!

Another reason that the fundamental difference between the lay person's and the economist's definition is undesirable is that the economist's definition of "self-interested" means exactly the same thing as the lay person's "interested." Because all interests are subjective, and the "self" in "self-interested" refers only to this fact, the term becomes redundant. The only thing that could conceivably be added by using the term "self-interest" would be if the addition of the "self" served to remind people that preferences are subjective. But as we have discussed, the term "self-interested" already means something, and it has nothing to do with subjectivity. If anything, the use of the term crowds out more useful terminology like "subjectively-interested."

Yet another problem with the economists' definition is that now we have a situation where the technical definition of the term "self-interested" is fundamentally different from the normally accepted definition of the word. That means that in order to actually communicate their points to lay people, economists will need to first make clear what they mean by self-interested, and ensure that their audience keeps this definition firmly in mind so as to avoid drawing bad conclusions. This also creates a systematic likelihood that people will be misled by economists who fail to properly emphasize their use of the redefined term. Nowhere is this problem more apparent than in the field of Public Choice economics. We might imagine an economist going before a crowd of lay persons and announcing that "The problem with governments is that they are run by self-interested people." We might imagine that what the economist means here is that politicians act according to their own preferences, and do not magically take on "society's" preferences when they are elected to office. They are, after all, human! And this would be a good and important point. But upon hearing the economist say that politicians are self-interested, a number of lay people might interpret the economist as making the argument that politicians are "in it for themselves" and are simply involved in politics in order to accrue benefits for themselves, regardless of whether others are harmed in the process. If it's true that the economists' use of the term "self-interest" does not offer any new or important insight into anything, as I argued above, it's unclear why we wouldn't want to simply avoid this problem altogether.

The final problem with the economists' use of the term "self-interested" is that economists themselves may end up misusing the term and reverting to the normal definition without noticing. Remember, economists are lay persons before they are economists, and have generally grown up with a meaning of the term "self-interested" which is very different from the meaning they've been trained to adopt in their profession. As a result, you end up with phenomena like economists saying things along the lines of "Because all actions are self-interested, it's clear that the reason you jump on the grenade is because you would be miserable if you didn't, and you expect that the misery would be way worse than dying." And I assure you, having heard that point made today, the risk of this sort of thing occurring is very real.

So in conclusion, I say that economists should quit their ridiculousness and give us back "self-interest." Their definition takes away a useful distinction which is captured by the normal meaning of the word, doesn't explain anything new, and doesn't accomplish anything except confusing everyone, including the economists themselves.

Cap and Trade vs. the Carbon Tax

So I've been addressing the issue of anthropogenic climate change for some time now, and I haven't said much in the way of addressing specific policy proposals. But I was just given a delightful present by one of my fellow FEE associates: a copy of the American Institute for Economic Research's latest Economic Education Bulletin, entitled "The Global Warming Debate: Science, Economics, and Policy." I didn't read the whole thing, but my favorite part was definitely when William R. Cotton, a professor of atmospheric science at Colorado State, closed his completely science-oriented essay, "Summary View of Climate Change," with:

There are strong indications that our global climate is warming. But the question is, is the warming due to anthropogenic greenhouse gases, or is it due to some other forcing mechanisms (or their transient absence) and natural variability. As human population on Earth continues to increase, the chances of human-induced changes in climate due to greenhouse gases, aerosol pollution, or alterations in land use become increasingly likely. Thus, rather than consider climate engineering, we should devise methods of encouraging the reduction of population growth through economic and quality-of-life incentives.

Period, end of conversation. No comment on that gem anywhere else in the entire essay. Who's got two thumbs and loves it? This guy.

But anyway, that's not the point. Later in the publication was an essay by Kenneth P. Green, a resident scholar at the American Enterprise Institute, where it was argued that a carbon tax is superior to a cap-and-trade system. I bounced between frustration, amusement, and glee as I read it, and felt an immediate need to comment. Not because Green did a bad job--he did just fine--but because he was guilty of something which is very common among people who discuss climate change: he discussed the possible "solutions" to climate change without addressing the reasons that a policy was to be implemented in the first place, and how the different solutions worked to address those reasons. His argument for a tax scheme over a cap-and-trade scheme was simply that a tax scheme could achieve the same goals, but with better economic side-effects and less potential for failure. Fine, I'll even grant it. But taxes and caps are fundamentally different policies, which only make even a little sense when confronted by specific sorts of problems.

I should explain what I mean. I've discussed elsewhere the idea that in order to make any sense from an ethical point of view, pollution taxes need to be based on the idea that an individual is justified in polluting if and only if she pays compensation to her victims for any damage done to them. That idea is controversial, but for our purposes we don't need to address that controversy. The point is only that even if we accept that idea as true, there are still only certain kinds of instances in which the injustice of pollution can legitimately be dealt with through a tax on pollution. The paradigm cases are those instances in which the damage caused by pollution is directly proportional to the amount of pollution that there is, so that the tax becomes the "price" of compensating the victims of one's actions for the costs one imposes upon them.

Cap and trade schemes, on the other hand, are built for an entirely different kind of problem. In a paradigm cap and trade situation, there is a threshold level of pollution with which policymakers are concerned, and at the threshold, a certain amount of damage is anticipated. The cap and trade scheme accordingly sets the cap at the relevant amount of pollution, and then distributes "shares" of the "environmental space" below that threshold in some way (e.g., auction, grandfathering system...). Because the allocations may be economically inefficient for whatever reason, the shares can then be traded in accordance with the wishes of their owners in order to ensure that the right to pollute is distributed to those individuals who are willing to pay the most for it (note that the normal objections to the "willingness to pay" criterion are avoided by passing the buck to the distribution process, which of course must be justified separately).

The point I want to make here is that global climate change is a very different phenomenon than the sorts of phenomena for which either of these policies is built to provide a solution. As noted elsewhere, climate change is an emergent problem. That is, climate change is not the result of any individual's actions, but rather is the consequence of many individuals acting separately, so that no individual can reasonably be said to have been able to prevent climate change from occurring, and no individual could have caused climate change singlehandedly. Accordingly, it does not make sense to talk about the consequences of climate change in terms of marginal contributions. The amount of damage caused by climate change will not likely change recognizeably with an additional increment of CO2 (or any other forcing agent), so it's not reasonable to try to put a price on how much damage "a unit of climate forcing" (expressed, perhaps, in terms of GWP, or Global Warming Potential, as defined by the IPCC?) causes.

A tax on contributions to climate change, therefore, seems like a policy which would require a bit of shoehorning. Individuals paying the tax would not be paying the "social cost" of their particular contribution, taken in isolation, because that would be basically zero. They would need to be charged for their "portion" of the total amount of damage done by climate change. So what policymakers would need to do would be to determine the total amount of damage which would be done at the equilibrium price for pollution permits, and then sell the permits at that price. The problem then becomes one of economic calculation. It could be done to some degree, but it would be inherently imprecise. And remember: the end result needs to be that the victims get compensated, so the government would have to go into its own pockets (that is to say, the pockets of its treasury or, more realistically, the pockets of its Federal Reserve printing press) to take care of the balance if it aimed low. And as my wonderful economist friends would point out, there would be a considerable incentive to aim high, creating a surplus revenue stream for the government which would almost certainly not be returned. So the tax is doable, kind of, but the problem is not the kind of thing that the tax is designed for. It's just that you can use the tax to accomplish the end goal if you want.

The cap and trade system is a little harder to adapt to the task, but there are a number of ways that the idea can be useful. First, there is a level to which we could collectively exert a forcing on the climate system without producing objectionable consequences. This level of climate forcing is a threshold which could be amenable to a soft cap and trade scheme (soft like the baseball salary cap). In this kind of policy, the cap would be set at the level of forcing which would produce no negative consequences, and this "environmental space" would be allocated somehow (or, if people find this to be a bad idea, we would simply say that these shares should be allocated in proportion to one's contribution to climate change, so that the soft cap has no effect). People not receiving these shares, or polluting in excess of their shares, would be filling environmental space which represented something like "harmful social emissions". Because these emissions would not be legitimated by the soft cap, they would be the ones which would be subject to the obligation to compensate the victims (again, if the soft cap isn't being used, as mentioned above, it would just be that everyone would have to participate in compensating the victims).

Here a potential for another cap would become apparent: We might imagine that policymakers would decide on a level of pollution (corresponding to some amount of total damage) which was determined to be "socially desirable" somehow. Perhaps, using the same reasoning involved in the tax scheme discussed above, the policymakers would arrive at the level of pollution which would clear the market if everyone paid some price for it. Or perhaps the policymakers would identify a level of pollution beyond which unacceptable results would occur, and the cap would be set there. In any case, you would then have to set a cap and allocate the shares. So again, the policy could be made to work. But the problems are simply that it's difficult to identify a level of "unacceptable" pollution, it's just as difficult to identify a market clearing price in this scheme as it is with the tax (assuming that the shares are auctioned, of course), and any other way of running the scheme is sure to carry either difficulties of its own, or charges of arbitrariness which would sever the connection between the problem and the solution.

So ultimately, what we're faced with is a situation in which the only two policy suggestions that are on the table are not particularly well suited to the task of "solving" the problems arising from climate change (and I haven't even begun to address the question of how the compensation process would even work, or whether compensation could make climate change legitimate!), and the only way to make either of them work is to basically stretch and contort them until they are made to do the job acceptably. Doing so, it will be noted, requires in both cases that government decision-makers possess knowledge and foresight which they almost certainly do not have, and even then it's unclear that the policies would work properly.

Obviously, there's a lot more to say about this. I just wanted to get some preliminary thoughts down, and I think this was a good start.

Another Double Standard Between Governments and Individuals?

So today was my first day at the Foundation for Economic Education, where I'll be interning over the summer, and I've already had some excellent debates; this is going to be a fantastic experience. Everyone seems really passionate and interesting, and I'm sure I'm going to learn a lot from everyone. I wanted to put one of the more controversial debate topics on my blog as a record, and to get the idea out to a wider audience. I've been toying around with the idea for a few days; I'm really curious to hear what other people think.

The idea is this: If we recognize private entities' claims to property titles as legitimate, even when they have a known history of violence and illegitimacy, then it's difficult to argue that currently existing governments are illegitimate for property rights-based reasons. Governments claim that we live in their territory, and their claims have roots that go back many generations. To claim that a government is not justified in enforcing rules in its territory is, effectively, to claim that the government is not the legitimate owner of that territory. But saying that, it seems to me, makes it very difficult to consistently argue that many (most, if not all) private property titles are legitimately held.

We had a bit of fun with this one at dinner, and I'm not completely sure what I think of it. Of course, everyone else at the table was not too comfortable with the idea, and it made for some lively debate. But nevertheless, I figured I'd post it here. Feel free to leave any comments; I'll be interested to hear what people think about this.