Tuesday, February 13, 2007

Cap-and-trade: Pigovian Bootleggers exposed

For a sharp analysis of the economic muddle behind plans for cap-and-trade carbon schemes, no one beats Fred Smith of Competitive Enterprise Institute in his testimony today before the U.S. Senate Committee on Environment. In the 19th century, laws banning alcohol sales on Sundays were backed by Baptists and Bootleggers. "Thus politicians were able to pose as acting to promote public morality, even while taking contributions from Bootleggers." Smith argues that "environmental pressure groups active in the Climate Action Partnership are the Baptists, providing moral screen to the Bootleggers, in this case the energy and manufacturing companies."
The real problem, he goes on, is that the proposed cap-and-trade carbon systems is in fact '"an ugly combination of two of the greatest ills to affect the market economy over the past 200 years--cartelization and central planning."
Fred Smith is hereby enrolled in the No Pigou Club.
For another note on the use of state pricing to control demand, see my column today (On Gas Taxes, the Voters Know) at the Club site on the continuing wisdom of Canadian and American voters. They've seen what happened to tobacco.
TC