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The following got lost when posted on Neven’s Sea Ice Blog. It took too much effort to scrap.
Alex, Neven
it is not at all clear, how high carbon price can global economy endure – actually, the financial crash of 2008 was helped by high oil prices,
What do you mean by “global economy”? It’s perfectly possible to have full employment and a high carbon price. Job creation doesn’t need economic growth but carbon intensive goods and services must be made more expensive and labour intensive goods cheaper.
May I reiterate what I said earlier:
One big problem is that economic models do not disaggregate their labour sectors sensibly. They could then show that a carbon tax recycled into creating employment for the low paid (who are the ones out of work) could create full employment without economic growth.
Since 1968 I have been making similar points and eventually got funding from the European Commission to get a very good economist, Kim Swales, to show that subsidising the labour of the lower paid would create jobs. This was published in 1995 – I had a simpler version published in 1987.
In my proposals the subsidies were matched taxing capital and high paid labour. The modelling showed that the high paid didn’t lose out much because full employment raises GDP.
My frustration can be seen in one of the comment pages on Wikipedia
I think the moderator gave Peter Lawrence an unnecessarily hard time: “I can see only one reason for citing a non-peer reviewed article: ego-spam.” The “non-peer reviewed article” was a report that was commissioned by the European Commission.
I was aware that Wikipedia had become more prone to credentialism but this case highlights a problem – it is difficult for a non-academic with a bright idea like Peter Lawrence to get anything published – let alone with peer review. They must reference academic work to make perfectly sensible and obvious ideas credible to policy makers.But the idea he references is so ******* obvious that it shouldn’t need any reference – subsidise labour at the bottom end of the labour market (That is where unemployment hits!) and the poor find jobs and get paid more.
Obvious to taxi drivers and that “man on the Clapham omnibus”. I should know I have been asking them since the late sixties. I wasn’t until sometime in the eighties, when I met Kim Swales, that I found an academic economist that got the point.
For 45 years I have been pushing this absolutely obvious point and the attitude of the moderator shows the arrogance of academics to any ideas from the unqualified. It also shows the danger of waiting on the “experts” because if we accept their conventional wisdom and wait for that to change we are ******.
Now, of course, we have another argument for taxing the high paid to create jobs for the low paid because the spending of the affluent is most of the problem . Undifferentiated economic growth is carbon intensive and polluting. We must use carbon taxes to suppress polluting activity but encourage non polluting activity – and at the same time create full employment. With full employment it does not matter much if GDP actually falls.
For a dictator of any country the economics is simple.
I recognise that in our “spinocracy” the politics is very hard.
comment
Certainly making labour intensive goods cheaper by subsidizing cost of low pay workers would change the mix of what is demanded. That would certainly help in reducing carbon emissions.
Not sure that fully answers the question of how high a carbon price the global economy could endure. It helps keep the economy going if the tax is used to subsidize labour to create jobs. Whether the taxes raised are sufficient when used as a low pay subsidy to get full employment would seem questionable to me. The rate probably needs to be set low to start and this means that administration cost of the tax and the labour subsidy would leave the subsidy rate very low. As you crank up the carbon tax, administration costs are less of a problem but there is little you can do without without carbon being released until the infrastructure is geared up for this situation and that takes time.
Let’s suppose it is possible to make it work at some carbon tax levels. That doesn’t mean that it will work at the level needed to reduce emissions sufficiently.
Jobs are exported unless you tax imports based on their carbon release less any carbon tax the producing country has applied. So that has to be done, but how do you get the necessary information? The manufacturing country will allocate its energy use excessively to domestically consumed items and only admit a small proportion of the carbon actually involved is released by its exports. Doing it top down on economy wide values would mean approximations like same carbon release per dollar of export value. I suppose this doesn’t matter too much if it serves to force the country to implement a carbon tax.
I still see a need for international treaties. Developing Countries may need more time to develop appropriate infrastructure and it may only be fair to allow them to use lower carbon tax rates and/or start at later dates. That seems a major problem going by efforts so far. If Europe implementing it is sufficient to force other countries to do the same, that may change the dynamics of the negotiations. It would still be complicated.
Not sure about public opinion which will see this as a big income redistribution rewarding low paid unsuccessful people instead of rewarding success.
Something like this needs to happen, I’ve been looking at Steve Keens idea of a one off handout from government to everyone, which if you are in debt must be used to pay it down but if not may be spent /saved as you see fit. Personally I’d prefer it if instead of lending the banks £243B. [like last year] at 0.5% they abandoned the current welfare system and allowed people to borrow a guaranteed [equal, limited and fixed] income from them at 0.5%, where if you owed money to the scheme, or needed to claim tax relief on a sum equivalent to the GI, you’d pay 25% tax, if you were currently drawing on the scheme you’d pay 33% on everything you earned on top. everyone/thing else would pay 10% of turnover except for mature sectors where 5 or fewer players had 80% or more of market share they would have to pay 15% on turnover. Any tax payed at more than 10% would be deemed to be paying down the debt [unless you were claiming tax relief allowance]. Of course you’d need some form of wealth tax and others including carbon tax, nothing like this is going to happen this side of the meltdown.
Having no education to speak of I find the narrow/closed mindedness of the ‘educated’ in all fields similar in tone and rhetoric to religious zealots throughout history, and many areas seem to be little more than pyramid selling schemes.