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Global Warming: Public Choice Problems and Perverse Incentives



August 4, 2011

A guest post by Zebulen Riley:

Recent high temperatures have global warming activists confusing weather and climate. Americans must keep their cool during this heat wave, rather than melt down in the face of pressure from advocates for sweeping climate change policies.  These self-styled defenders of the ecosystem demand heavy government intervention in the economy to mitigate rising global temperatures and sea levels, and, of course, to save the polar bears.  However, simple economic analysis reveals that it is unreasonable to believe government capable of solving any kind of climate crisis.  

Public choice theory shows that regardless of whether the activists are right or wrong about the science of climate change, they’re dangerously wrong about how to approach it. Public choice economics extends the behavioral assumptions of economics to government.  That is, just as economists assume that people engage in rational, self-interested behavior in daily market transactions, public choice theory assumes politicians and bureaucrats engage in rational, self-interested behavior in political decision-making.  To assume that people become entirely selfless promoters of the public good upon entering politics is fitting for a 7th grade civics textbook, but not for real life.  Of course, the goal of serving the people can motivate some to become involved in government, but politicians who advocate heavy regulation to combat global warming act in self-interested ways, just like everyone else.

When citizens feel guilty about their environmental footprint and buys carbon offsets to ease their conscience, a former vice president cashes in at the bank. When a wind farm was built off the coast of beautiful Nantucket Sound, destroying the view from his living room, a late Massachusetts Senator cried foul.  And when scrubbers were mandated for companies burning “dirty coal,” a late Senator from the state that produced the supposedly offensive dirty coal required scrubbers be used in states that burned cleaner coal in the first place.  Self-interested behavior in Washington perfectly illustrates the attitude toward combating climate change: It’s great as long as I’m reaping the benefits and avoiding the costs.  Because legislators have an incentive to shift the cost of fighting global warming to citizens outside their constituency, environmental regulations are imposed where they are most politically effective, not environmentally effective.  With thousands of legislators and bureaucrats, each trying to cost-shift onto the other, there is little reason to believe government action will be efficient in reducing the United States’ environmental footprint (whatever size it may be).

Cost-shifting occurs internationally as well.  Just like hypocritical senators love wind farms in someone else’s backyard, nations that would suffer serious financial cost to combat global warming prefer that other countries wreck their own economies instead.  Just as it is in an individual’s self-interest to shift the cost of environmental regulation onto others, it is in a nation’s self-interest to free ride on the costly efforts of other nations.  When the United States reduces its pollution, the rest of the world benefits at U.S. expense.  Thus, there is an incentive for the rest of the world to do nothing and “free ride” off the U.S.  Without legally enforceable anti-pollution contracts between every country (a dubious proposition), a free rider problem will always exist when trying to mitigate global climate change.

If average temperatures are indeed on the rise, a single country taking unilateral action will be insufficient to bring an end to global warming.  Because environmental regulations are most politically supported when the beneficiaries of those regulations don’t bear the costs, politicians and voters will always try to shift the regulatory costs to others.  Regulations, thus, are designed to be politically effective, not environmentally effective.  And without legally enforceable contracts between every country, too few nations would contemplate the radical environmental and energy policies to reduce global temperatures, and trillions of dollars worth of economic resources will be wasted for naught.

No serious climate scientist argues that unless urgent action is taken Earth will spontaneously combust from rising temperatures.  Most peer reviewed studies project mild warming over the next century.  Rather than losing our cool and spending trillions of dollars on the cause of “fighting global warming,” Americans would do better to acknowledge government’s inability to meaningfully affect world temperatures and recognize the perverse international incentives that make the dream of reversing global warming a near-impossible feat.

 

Zebulen Riley is an associate policy analyst with the National Taxpayers Union Foundation.


 

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