Note that, if you're not rational enough to accept, provisionally (as all science is provisional), the scientific consensus on global warming, you won't get a detailed argument about that here. Krugman generally assumes that his readers are intelligent and rational. If you are, it's a very interesting read. If you're not, don't bother.
It's really too long - and too good - to summarize here, since he so clearly explains what he means, and why. I simply couldn't do it justice. So I'll just point out a couple of things that struck me, for one reason or another. But I urge you to read the original article. It's worth it!
Krugman starts off explaining why intervention in the free market is necessary in the first place, and what we've tried in the past (if we don't learn from history, what's the point?). He looks at Pigovian taxes, cap-and-trade, and direct restrictions on pollution. And he uses acid rain as an example:
In any case, experience suggests that market-based emission controls work. Our recent history with acid rain shows as much. The Clean Air Act of 1990 introduced a cap-and-trade system in which power plants could buy and sell the right to emit sulfur dioxide, leaving it up to individual companies to manage their own business within the new limits. Sure enough, over time sulfur-dioxide emissions from power plants were cut almost in half, at a much lower cost than even optimists expected; electricity prices fell instead of rising. Acid rain did not disappear as a problem, but it was significantly mitigated.
I remember that, maybe because I was in the electrical utility business at the time. I remember hearing the terrible predictions from right-wing politicians and industry at how expensive this would be. But in fact, it was cheaper than even proponents had predicted. The horror stories were just scare tactics, and the cost of pollution permits dropped like a rock.
That's a good lesson for today. Political opponents will always exaggerate the effects of regulations like this, and so will the affected industry. It's pretty much a natural law. And when you create incentives for developing clever technological solutions to problems, that's what you'll get - and generally at a lot cheaper cost than you expected.
What you hear from conservative opponents of a climate-change policy, however, is that any attempt to limit emissions would be economically devastating. The Heritage Foundation, for one, responded to Budget Office estimates on Waxman-Markey with a broadside titled, “C.B.O. Grossly Underestimates Costs of Cap and Trade.” The real effects, the foundation said, would be ruinous for families and job creation.
This reaction — this extreme pessimism about the economy’s ability to live with cap and trade — is very much at odds with typical conservative rhetoric. After all, modern conservatives express a deep, almost mystical confidence in the effectiveness of market incentives — Ronald Reagan liked to talk about the “magic of the marketplace.” They believe that the capitalist system can deal with all kinds of limitations, that technology, say, can easily overcome any constraints on growth posed by limited reserves of oil or other natural resources. And yet now they submit that this same private sector is utterly incapable of coping with a limit on overall emissions,..
Clearly, conservatives abandon all faith in the ability of markets to cope with climate-change policy because they don’t want government intervention. Their stated pessimism about the cost of climate policy is essentially a political ploy rather than a reasoned economic judgment. The giveaway is the strong tendency of conservative opponents of cap and trade to argue in bad faith.
This is the equivalent of "death panels" and "government takeover" in the debate over health care reform. Opponents were claiming what they themselves knew was false. They were lying just to "win," politically. It's the same thing with climate change policy.
Here's another point that's long struck me as significant in this discussion:
Finally and most important is the matter of uncertainty. We’re uncertain about the magnitude of climate change, which is inevitable, because we’re talking about reaching levels of carbon dioxide in the atmosphere not seen in millions of years. The recent doubling of many modelers’ predictions for 2100 is itself an illustration of the scope of that uncertainty; who knows what revisions may occur in the years ahead. Beyond that, nobody really knows how much damage would result from temperature rises of the kind now considered likely.
You might think that this uncertainty weakens the case for action, but it actually strengthens it. As Harvard’s Martin Weitzman has argued in several influential papers, if there is a significant chance of utter catastrophe, that chance — rather than what is most likely to happen — should dominate cost-benefit calculations. And utter catastrophe does look like a realistic possibility, even if it is not the most likely outcome.
I hear conservatives claim that we shouldn't do anything because we don't know for certain, beyond a shadow of a doubt, that man-made climate change will be a disaster, or is even happening at all. But tell me something: In what universe is that "conservative"?
To my mind, the real conservative position is that we shouldn't be pumping carbon dioxide and other greenhouse gasses into the air - actually changing the composition of our only planet's atmosphere - unless we know for certain that it won't be a problem. How isn't that conservative? And how could that possibly not make sense?
I've hardly even mentioned the real meat of this article, the clear explanation of environmental economics, and the carefully reasoned and argued discussion of our options. It really is worth a read - and thoughtful consideration, too.
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