Carbon taxes are a perversion of free-market economic theory | Financial Post | Terence Corcoran:
November 3, 2023 - "Canada would not be embroiled in a political carbon tax crisis today were it not for the background endorsement of economists who argue that a carbon tax is a principled market mechanism that can be used to correct a 'market failure' such as climate change. In the words of a now-famous 2019 statement signed by 45 market-oriented economists, including former U.S. Federal Reserve chairs Alan Greenspan and Paul Volcker, a carbon tax is a sound market-based solution to a global problem. 'By correcting a well-known market failure, a carbon tax will send a powerful price signal that harnesses the invisible hand of the marketplace to steer economic actors towards a low-carbon future.' Since 2019, the statement has been signed by more than 3,600 economic thinkers and is described by the Climate Leadership Council as 'The largest public statement of economists in history'....
"The 'invisible hand' mentioned in the economic statement gives the impression that a carbon tax is aligned with the ideas that enlightenment economist Adam Smith and others — from liberals to neo-liberals to libertarians — have championed over government control and planning. The economists’ endorsement of invisible hand principles in the context of a carbon tax is, at minimum, misleading. The imposition of a carbon price by government — such as Canada’s $170 a tonne target — is nothing but a government price-fixing scheme.
"In a market economy, prices are not the starting line for economic activity nor are they the means to control supply and demand as implied by proponents of carbon taxation. Prices are the end point of economic activity. In a market economy prices are the product of supply and demand based on the multitude of individual and corporate choices that lead to final transaction prices. The dynamic of supply and demand determines price, a process that takes place outside the knowledge and thought processes of the economic actors.
“'Every money price of a good on the market, is determined by the supply and demand schedules of the individual buyers and sellers, and their action tends to establish a uniform equilibrium price on the market at the point of intersection.' So wrote the late Murray N. Rothbard in Man, Economy and State: A Treatise on Economic Principles. Another giant of free-market economics, Friedrich Hayek, described the invisible hand process in his 1946 essay “The Use of Knowledge in Society.” In a market economy, no one person or power determines pricing.
It is more than a metaphor to describe the price system as a kind of machinery for registering change, or a system of telecommunications which enables individual producers to watch merely the movement of a few pointers, as an engineer might watch the hands of a few dials, in order to adjust their activities to changes of which they may never know more than is reflected in the price movement.
"Using tax power to set a price to force a market movement stands the economic system on its head and gets the process backwards. With carbon taxation, the state is imposing a visible hand in an extreme and unprecedented way. For one thing, no participant in a market economy driven by the invisible hand would or could raise prices so as to ultimately reduce demand to zero....
"The idea that high and rising carbon prices can be used to remove carbon from the economy runs up against the fact that carbon-based fossil fuels are currently part of the foundation for most economic activity. They are essential today, to the point where industry and consumers cannot do without them. They are, as economists say, price inelastic. A doubling or even a quadrupling via taxation will not end demand for fossil fuels without killing economic activity. According to the 3,600 economist backers of carbon taxation, this little problem can be overcome by returning all the revenue from the carbon taxes to taxpayers 'to maximize the fairness and political viability of a rising carbon tax.' The Trudeau Liberal plan for Canada follows that advice.
"There is nothing invisible about carbon taxes. They are a perversion of free-market economic theory. We should bite the visible hand and axe the tax."
Read more: https://financialpost.com/opinion/carbon-taxes-perversion-free-market-economic-theory
No comments:
Post a Comment