Robin Hahnel wrote:
> I have been campaigning on this theme recently because the mainstream of
> the profession has generated an intellectual stampede in favor of
> permits and has ignored taxes completely. I think the entire reason is
> permits can be part of a massive corporate boondoggle -- and pollution
> taxes cannot. As evidence of a stampede without real intellectual
> content, witness the effects on Wally Oates and Max Sawicky! So, I have
> been giving talks challening anyone to come up with a situation in which
> permits are superior to taxes -- in an attempt to even the debating
> playing field as much as one radical can. So far my I'm not getting very
> bloodied in my version of a John L. Sullivan, challenge-all-comers in
> boxing tour.
Granted that parecon would generate full social and ecological price signals, I
still don't understand why in capitalism non-tradable, auctioned, permits with a
floor are not superior.
Suppose greens won enough influence in the U.S. to force a ten percent reduction
in fossil fuel consumption. Undoubtedly there is a carbon tax that would create
such a reduction. But under the distorted price structure of capitalism I don't
know how to find out -- in advance -- what it is. Perhaps for professional
economists this is a simple problem. If the tax was too high , no problem from
my point of view. I want more than a ten percent reduction anyway. But given the
wiggle room the question leaves, it seems likely to me that the tax is far more
likely to be set too low.
Now look at non-tradeable permits auctioned, with a floor. The floor is of
course a guess as to what the carbon tax should be. ( I'm leaving aside the
possibility that markets will work well in the auctioning process, since
corporations would probably manage to rig them, and assuming that essentially
permits are sold at the floor). BTW the auctioning is not on a multi-year basis.
New permits must be bought every year or every month, and prior purchase give
you no special rights for current one. In short, what I am trying to propose is
not really a permit process as normally described, but green taxes with
rationing as a precaution against excessively low rates If fewer permits sold
than were offered, then your price was right or perhaps too high . If all
permits sold then the price would automatically rise until some permits went
unsold. The advantage over green taxes without rationing in this context is if
a green tax is set too low, pollution goes above the target, while with a permit
process, pollution stays at target even before the price is raised
sufficiently. On the other hand if both prices are right or are too high, then
the results are identical -- even given market rigging in the auction process.
In short leaving the assumption of perfect markets, and assuming highly
imperfect information, and a highly politicized process it does seem that green
taxes with rationing would work better. Given the political effort required to
achieve green taxes, it seems that it might be worth while to include such a
rationing process in the demands.
