Friday, October 13, 2006

Law: the Stick

In Great Britain, the opposition party and environmental organizations have long called for a bill setting regular carbon emissions reduction targets. No surprise there. The surprise is that such a bill may be introduced by the Government.

Why would a conservative government introduce such a bill? Add up the overwhelming scientific evidence, growing awareness of the economic costs of inaction (see previous post), and, perhaps most importantly, a growing public consensus that our planet is really in grave danger, and the arithmetic becomes pretty compelling to almost any politician.

I say “almost any politician” of course because I live in the United States.

The advantages of passing laws to enforce socially desirable ends has a long history of success in general, and in solving environmental problems in particular. The problem with voluntary action in a free market economy is that no one wants (or can afford to) be first. No automaker wants to be the first to make slightly more expensive cars with better gas mileage – they fear they’ll go out of business if consumers choose their competitors’ cheaper equivalents. A law raising fuel efficiency standards, on the other hand, puts everyone on a level playing field AND gets automakers into competition with each other to invent the most efficient means to the end. Everyone wins. Using the law as the stick got us out of our smog problem and is well on its way to solving the ozone problem.

We can go a long way toward limiting global warming by just passing a law limiting carbon emissions by the power and transportation industries, and then sitting back and watching the free market economy go to work on the problem.

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