The Corner

Energy & Environment

Sorry, Your Newest Government-Run Technocratic Scheme Is Not a ‘Market-Based Solution’

Autumnal trees surround people use a boat at Tiergarten Park in Berlin, Germany, October 11, 2018. (Fabrizio Bensch/Reuters)

It’s a small thing, I suppose, but it really grinds my gears when people refer to their favorite social-engineering projects as “market-based solutions” — as former secretary of state George Shultz and his co-author Tom Halstead do in a recent Washington Post sales pitch for a Republican-led carbon-pricing bill.

The duo argues that conservatives have three choices in reducing carbon emissions, “regulations, subsidies and pricing,” (though, almost surely, the authors support all three of these options to some extent) before offering up this paragraph:

The winning Republican climate answer is the third option: carbon pricing. Just as a market-based solution is the Republican policy of choice on most issues, so should it be on climate change. A well-designed carbon fee checks every box of conservative policy orthodoxy. Not surprisingly, this is the favored option of corporate America and economists — including all former Republican chairs of the president’s Council of Economic Advisers.

The biggest lie of Obamacare wasn’t that Americans would be able to keep their insurance — anyone who paid even the slightest bit of attention to the Affordable Care Act debate knew that was untrue — but rather that their purportedly well-designed law was grounded in “market-based solutions.”

While there is never perfect competition, market-based solutions tend not to hold consumers captive, create monopolies by shutting down interstate and international commerce, force companies to sell a state-approved ideological menu of goods and services, or sue nuns who aren’t interested in buying those goods. They definitely don’t artificially spike the price of an otherwise affordable commodity in an effort to control consumer behavior.

Just like Obamacare, carbon pricing creates a fabricated “market” meant to nudge you towards better behavior. Whereas “markets” rely on efficiencies created by competition to drive down prices, carbon pricing relies on “fees” (known in non-DC parlance as a “taxes”) to induce you into rationing energy consumption. Washington will then mail you (well, some of you) refunds for good behavior.

The term “market-based solution” intimates — or should — that the answer to a problem can be found in the innovations created through a series of voluntary economic decisions made by millions of individuals in millions of interactions, not a top-down state-run pricing plan concocted by a gaggle of politicians and economists. (Another irritating habit of technocrats is to declare that “economists” — every one, apparently — agrees with them on any given policy. Obama pulled the trick when selling voters on the bank bailouts. Schultz does the same in the piece.)

It’s impossible for anyone to price the negative externalities of carbon emissions just as it’s impossible for anyone to put a price on massive positive externalities of affordable and plentiful fossil fuels. Some of us just happen believe the benefits far exceed the costs — a reality that more Americans will internalize when they are forced to wait for a breeze to pick up before being able to heat their homes.

Schultz claims carbon pricing “checks every box of conservative policy orthodoxy,” that “it is revenue neutral,” and that the idea doesn’t grow government. Carbon pricing might show up as revenue neutral on a government balance sheet, but it certainly won’t be revenue neutral for millions of Americans who, for the foreseeable future, will be compelled to spend more on everything that’s effected by the cascading repercussion of higher energy costs — which is to say virtually the entire economy. No refund check will come close to covering it.

Surely Shultz, who worked for Ronald Reagan, a president who regularly lamented the growing influence of the state, understands that government power doesn’t always sprout from higher taxes, but from the ever-expanding bailiwick of bureaucrats.

Now, perhaps Republican voters, increasingly open to idea that climate change is a pressing issue, believe that tinkering on the margins of emission control will be worth the enormous economic cost. That, however, is another conversation. This conversation is about policymakers deceiving voters by dropping phrases like “market based solution” when what they really mean to say is “market-controlling” or “market-inhibiting” or “market-busting” schemes. We all fall short sometimes, but more precise language can go a long way in fostering a more honest political dialogue.

David Harsanyi is a senior writer for National Review and the author of First Freedom: A Ride through America’s Enduring History with the Gun

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