Common Tragedies

Thoughts on Environmental Economics

More on the Stavins quote

Posted by Rich Sweeney on January 9, 2009

To recap, what Rob actually said was this:

“Let’s say I want to have a dinner party. It’s important that I cook dinner, and I’d also like to take a shower before the guests arrive. You might think, Well, it would be really efficient for me to cook dinner in the shower. But it turns out that if I try that I’m not going to get very clean and it’s not going to be a very good dinner. And that is an illustration of the fact that it is not always best to try to address two challenges with what in the policy world we call a single-policy instrument.”

Translation: just because two things can be accomplished simultaneously, doesn’t mean that doing them simultaneously is more efficient than doing them separately.

This does not mean that Stavins (and others who question the coupling of labor and environmental policy) doesn’t think that its a good idea to promote employment or to reduce carbon emissions because such policies are costly. In fact it means the opposite. It means that promoting work and mitigating climate change are both so important that we should at least attempt to maximize our success in achieving both goals in the face of resource constraints. No one’s saying that it’s impossible that climate policy will create jobs, we’re just saying its not obvious either.

UPDATE: Great minds think alike (riiiiight……). As I was writing this Tim was apparently making the same point. His translation is even better:

the point is not that we shouldn’t try to meet both goals–good dinner and good shower–but rather, the policy of addressing both at once is STUPID.

Also while I’m at it, Romm’s comment (or post of a comment) on John’s post highlight’s my point exactly. Romm writes:

BTW, it’s quite unclear that the poor would be hit the most by energy tax increases; the rich generally consume way more resources than the poor and would thus bear a higher burden of energy taxes. It’s empirically clear that energy subsidies in the US, in China or India go overwhelmingly to the well-off. Conversely, an energy (or CO2) levy would fall mostly on the rich.

Ummmm, no. This is just like the green jobs myth. Its sounds great, the greens want to believe it, and, you know what, its even technically possible. But its not obvious, and should therefore be verified before we allow it to define our public policy. And when you look at the data, alas, it’s not true. It turns out energy price increases are in fact regressive, just like we thought. Note that my paper does not take this to mean that we shouldn’t raise energy prices instead, but simply that we should take economic reality into consideration rather than our green wishes when we design a carbon bill.

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8 Responses to “More on the Stavins quote”

  1. Tim said

    “As I was writing this Tim was apparently making the same point. His translation is even better”

    Well said.

    Oh, and you made the point nicely also.

  2. Will Duggan said

    Thanks for the clarification. I owe a closer examination of the whole effort here. I think I get it. But since the Obama meme is shaping up as the “clean energy economy”, it still looks like two great tastes that taste great together.

  3. Gregory said

    There seem to be a lot of people ignoring the simple mathematical fact that it is impossible to maximize for more than one variable. Even the great Barack Obama can’t do it (no matter how hard he hopes).

  4. [...] Are public-policy two-fers realistic? Or, can economists walk and chew gum at the same time? Follow the debate at Climate Progress and Common Tragedies. [...]

  5. [...] More on the Stavins quote [...]

  6. kvams said

    Gregory: If you have some function in two variables (a utility function, for example), it may have a maxima (or several), and there are methods to find it (them). The interesting thing is the trade-offs involved; how much of one thing do you have to give up to gain in another.

  7. Kvams said

    What you cannot do, however, is to maximize two different objectives (functions) which depend on the same variables. For example, the welfare of oil companies and the welfare of renewable energy companies, both depending on a carbon tax and a milage standard, cannot be maximized at the same time; the welfare of the oil companies would imply quite different taxes and standards than would the welfare of renewable energy companies.

  8. Carlos Ferreira said

    Exactly, Kvams. But if you optimize just one of them separately, the outcome is better for that variable specifically. I suppose you then have to compute what is better to society: two variables somewhat optimized, or just one of them pushed to its maximum. It comes to a cost-benefit analysis: what are the potential costs of climate change in the long run and what are the costs of an increase in unemployment in the middle of an economic downturn?

  9. [...] More on the Stavins quote [...]

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