Some Economics of the Green Partisan Divide

I would like to offer a couple of thoughts about Dan’s post today.   To keep this entry short and sweet, I will invoke some stereotypes.   In my economic model, there are two types of people;  “Laura the Liberal” and the other is “Chuck the Conservative”.   I want to sketch their two lifestyles and tell a dynamic story and then link this back to the political economy of support for environmental regulation.  This narrative will also allow me to plug several of my recent academic economics papers on the consequences of environmentalism!

Why is Laura a liberal/environmentalist?  What role did her parental discussions, peers, teachers, life experiences play in shaping her world views?  This is an important question that I would like to see social scientists make more progress on.  In my own work, I’ve documented that more educated people are more likely to be environmentalists.

Relative to Chuck, Laura is more likely to live downtown, close to public transit.  She will drive less, consume less meat, be more likely to install solar panels, be more likely to drive a fuel efficient car, and she will consume less electricity.    The net effect of her “small ball” life choices is a small carbon footprint and lower local air emissions.    In contrast, Chuck = Houston.

Now, the politicians asks Laura and Chuck to vote on carbon taxes.  Even if they both equally feared climate change, they face very different “prices” in terms of lifestyle sacrifice if a carbon tax is adopted.  Laura’s life choices make it easy for her to adapt to carbon pricing while Chuck is well aware that he faces a much higher price in terms of sacrifices he would have to make once the carbon tax is enacted.  He may like his Hummer and not want to putt around in Laura’s Prius.   He may also be offended that carbon tax advocates implicitly  suggest that his current lifestyle is causing the pollution problem.    While the New York Times talks about polarization, it never analyzes the causes of this polarization.   It is common sense that when Laura points a finger at Chuck and implicitly calls him a “bad person” that this could be counter-productive in encouraging a democracy to adopt efficient  Pigouvian incentives (i.e the carbon tax).

So, my question for the loyal readers of this blog is the following;  how do you propose to defuse this tense situation so that we can unify and make further green progress?  Do you support freely allocating Chuck some pollution permits to aid his transition?   Who has the property rights here?   Does the Coase Theorem apply?

Reader Comments

8 Replies to “Some Economics of the Green Partisan Divide”

  1. I would say NO. First, Chuck’s decision to buy a Hummer, even if made some years ago, was certainly with the knowledge that it would have adverse impacts for the environment, national security, and resource use. Unless he is one of those few for whom a Hummer is really the only vehicle that would meet his needs, his choice reflected a preference for personal pleasure (which he has now enjoyed for some period of time) as the expense of public interests (externalities). Second, the benefits resulting from the carbon tax are universally shared, and may well benefit Chuck and his family as much or more than Laura’s.
    Third, Giving Chuck any kind of pollution credits in effect penalizes Laura for her past good behavior and provides an additional incentive to people like Chuck to do as much environmental damage as possible as soon as possible, both for the immediate benefit and for the opportunity to claim special treatment under subsequent environmental rules because they will suffer more than others. Fourth, once Chuck dumps his Hummer and buys a Prius (or a bicycle) and puts in solar panels, he will also benefit from lower gasoline and electricity expenses, so giving Chuck any kind of credit will simply provide a disincentive to change to a more environmentally appropriate lifestyle.

    So the only reason to give Chuck a credit is to bribe him to do what is good for all of us, including him. It’s hard to justify that from an economic, political, legal, or moral perspective. It’s only virtue is that it might work.

  2. I would say NO. First, Chuck’s decision to buy a Hummer, even if made some years ago, was certainly with the knowledge that it would have adverse impacts for the environment, national security, and resource use. Unless he is one of those few for whom a Hummer is really the only vehicle that would meet his needs, his choice reflected a preference for personal pleasure (which he has now enjoyed for some period of time) as the expense of public interests (externalities). Second, the benefits resulting from the carbon tax are universally shared, and may well benefit Chuck and his family as much or more than Laura’s.
    Third, Giving Chuck any kind of pollution credits in effect penalizes Laura for her past good behavior and provides an additional incentive to people like Chuck to do as much environmental damage as possible as soon as possible, both for the immediate benefit and for the opportunity to claim special treatment under subsequent environmental rules because they will suffer more than others. Fourth, once Chuck dumps his Hummer and buys a Prius (or a bicycle) and puts in solar panels, he will also benefit from lower gasoline and electricity expenses, so giving Chuck any kind of credit will simply provide a disincentive to change to a more environmentally appropriate lifestyle.

    So the only reason to give Chuck a credit is to bribe him to do what is good for all of us, including him. It’s hard to justify that from an economic, political, legal, or moral perspective. It’s only virtue is that it might work.

  3. My sense from observing the politics around the Waxman-Markey bill is that the biggest economic division on the climate issue relates to coal rather than oil. The resistance seemed to center on states that either produce coal or rely on it heavily for electricity. The same seems to be true internationally — the sticking point is the reliance of India and China on coal. If that’s true, then the politics might shift if natural gas prices stay low enough to make coal unattractive anyway. All of this is just based on hunches on my part — I’d be very interested if anyone has done any quantitative analysis on the voting patterns on Congress.

  4. My sense from observing the politics around the Waxman-Markey bill is that the biggest economic division on the climate issue relates to coal rather than oil. The resistance seemed to center on states that either produce coal or rely on it heavily for electricity. The same seems to be true internationally — the sticking point is the reliance of India and China on coal. If that’s true, then the politics might shift if natural gas prices stay low enough to make coal unattractive anyway. All of this is just based on hunches on my part — I’d be very interested if anyone has done any quantitative analysis on the voting patterns on Congress.

  5. James Hansen proposes fee at the source and a dividend back to both Chuck and Laura. That way they can bypass the regulator in bed with the pollutor and enable the forcing technology to control global warming. CLEAN by Cantwell-Collins was a limited attempt at Fee and Dividend. There was talk that the bill appealed to Republicans.

  6. James Hansen proposes fee at the source and a dividend back to both Chuck and Laura. That way they can bypass the regulator in bed with the pollutor and enable the forcing technology to control global warming. CLEAN by Cantwell-Collins was a limited attempt at Fee and Dividend. There was talk that the bill appealed to Republicans.

  7. Matthew E. Kahn asked:

    “…how do you propose to defuse this tense situation so that we can unify and make further green progress?…”

    If carbon taxes/credits were technically feasible methodologies for reducing the global atmospheric temperature, and the effectiveness of these methods could be guaranteed and verified, then this would defuse a tense situation so that we could unify and make progress. (But this is not going to happen).

    Alternatively, we may pursue a strategy of “adaptation” and reject those ineffective and unproven methodologies which do absolutely nothing to mitigate climate change (but do increase the cost of living).

    There are many of us who believe that the best way to adapt to climate change is by voting for the “Right” candidate(s) in November. This strategy seems to offer the best hope for “fixing” the climate change problem.

  8. Matthew E. Kahn asked:

    “…how do you propose to defuse this tense situation so that we can unify and make further green progress?…”

    If carbon taxes/credits were technically feasible methodologies for reducing the global atmospheric temperature, and the effectiveness of these methods could be guaranteed and verified, then this would defuse a tense situation so that we could unify and make progress. (But this is not going to happen).

    Alternatively, we may pursue a strategy of “adaptation” and reject those ineffective and unproven methodologies which do absolutely nothing to mitigate climate change (but do increase the cost of living).

    There are many of us who believe that the best way to adapt to climate change is by voting for the “Right” candidate(s) in November. This strategy seems to offer the best hope for “fixing” the climate change problem.

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