Krugman on environmental economics

Long but excellent article by Paul Krugman on Environmental Economics 101 and the economics of climate change. I also recommend Michael Roberts' addendum and heartily second his emphasis on argiculture, forests and land use which Krugman under-addresses.

One thing I found interesting was Krugman's favorable take on both the legitimacy and the feasibility of carbon tariffs:

To the objection that such a policy would be protectionist, a violation of the principles of free trade, one reply is, So? Keeping world markets open is important, but avoiding planetary catastrophe is a lot more important. In any case, however, you can argue that carbon tariffs are well within the rules of normal trade relations. As long as the tariff imposed on the carbon content of imports is comparable to the cost of domestic carbon licenses, the effect is to charge your own consumers a price that reflects the carbon emitted in what they buy, no matter where it is produced. That should be legal under international-trading rules. In fact, even the World Trade Organization, which is charged with policing trade policies, has published a study suggesting that carbon tariffs would pass muster. [emphasis mine]

These aren't pushover arguments, but my gut reaction is that even if the WTO sanctions this type of action, the reaction from countries like China wouldn't be pretty.

Economics Nobel and the Environment

Ms. Ostrom "challenged the conventional wisdom that common property is poorly managed and should be either regulated by central authorities or privatized," the Nobel judges said. "Based on numerous studies of user-managed fish stocks, pastures, woods, lakes, and groundwater basins, [Ms.] Ostrom concludes that the outcomes are, more often than not, better than predicted by standard theories. She observes that resource users frequently develop sophisticated mechanisms for decision-making and rule enforcement to handle conflicts of interest, and she characterizes the rules that promote successful outcomes."

Via Environmental Economics, which posts multiple times on the significance of this year's Nobel Prize selection for, well, environmental economics.

I found this particularly interesting:

One thing that I think is most interesting about Ostrum's work is that where common property regimes work well they are often enforced with very strong social sanctions and/or coercion. The notion that somehow in the absence of markets or government intervention we might get some sort of Kumbuya agreement- a favorite fantasy of some leftist critiques of markets- is not supported by the facts. Instead, complete social ostracization and even physical violence are often necessary in order to enforce common property rules. Bottom line: managing common resources is very hard no matter what institutions are in charge.

I often think of property rights and the rule of law (including safety from violence and intimidation) as an underappreciated prerequisite for well-functioning markets. (E.g. for libertarians who more or less advocate the abolition of government - who do you think will keep people from stealing your stuff? Maybe you with a gun, but that imposes enormous transaction costs that would greatly impeded the much-lauded efficiency of markets.) But this is almost a bizarre inversion - that it may be the very threat of violence (albeit controlled by strictly-observed social convention) which allows certain communities to manage their common resources in an effective way.