Carbon taxes are officially set to increase in Alberta, while the UK government is rewarding those who turned in their gas-guzzlers with an electric vehicle-specific excise duty, enforceable in typical UK fashion by mandatorily-installed blackboxes and arbitrary inspections. Such policies are ultimately justified by establishment academia on the basis that markets fail to incorporate the consequences of individual actions and require the intervention of all-seeing, socially-inclined centralized governments. But this perspective betrays a profound misunderstanding of information and cooperation while providing a naively compelling excuse for authoritarianism.
Justification
Mainstream economists may pay some minimal lip service to the importance of markets, yet they emphasize “externalities” as the most prominent example of market failure. These are said to be any costs or benefits borne or received by parties “external” to the responsible economic transaction or activity.
Individuals are said to be too narrow-sighted and self-interested to consider the full costs and benefits of their economic decisions, and routinely fail to produce the “socially optimal” quantities of various goods. The state, on the other hand, is said to possess the calculating omnipotence and the coercive power to more efficiently guide said production towards a precise system-level ideal.
A typical example might be greedy, strictly profit-driven corporations overusing fossil fuels during their production process, reaping revenue at the expense of the victims of their pollutive activity. The state can then intervene through the imposition of carbon/energy taxes and environmental regulations to have offenders bear the actual “social” cost of their actions and ostensibly reduce their damaging activities.
Calculation
Virtually every aspect of the above framework is fallacious, specifically appealing to the pervasive absence of proper economic reasoning. Externalities in the economic sense are practically infinite, in that every social action necessarily results in an incalculably large number of repercussions on other individuals, whether party or not to a transaction.
To lambast markets for the existence of externalities is an example of the Nirvana fallacy, as imperfect and limited knowledge is a characteristic of all human beings, not only those freely engaged in trade. The subjective valuations of individuals cannot be measured, much less compared, and there exists no market prices for externalities, which are, by definition, effects felt outside the dimensions of trade and devoid of any demonstrable preference expressed through voluntary exchange.
There are thus no means to even estimate—let alone precisely calculate—the economic cost of an externality, as any such attempt constitutes an interpersonal utility comparison between the value scales of individuals, unanimously rejected by economic science. The plethora of official measures such as the “GDP impact of carbon emissions” cited by officials to justify their intervention are therefore economic absurdities feigning empirical rigor.
The typical statist argument concerning externalities is an explicit advocacy of socialism in its promotion of the state’s coercive powers over the free association of individuals as most efficient in allocating society’s scarce resources. As recent election results have shown, the taboo surrounding the support for socialism has been drastically reduced by the complete disappearance of a basic education in market principles and mainstream conservative hypocrisy in implementing heavily interventionist policies. Yet, as Ludwig von Mises so conclusively argued, and as the contributors to the Mises Institute have so exhaustively demonstrated, any criticism of markets on the grounds of inefficient calculation is infinitely more applicable to government.
The state obtains resources strictly through coercion and extortion; it faces, at best, distorted price signals; its employees are more incentivized to spend and embezzle than save and innovate; unchecked power attracts and promotes corruptible Machiavellians as opposed to innovative frugalities. These characteristics, among many others, render government strictly incapable of the sound calculation expected of it within the statist externalities argument, and are why wherever markets are replaced by state power, resources are invariably less efficiently employed.
Carbon taxes and credits are in fact often ironically spun by officials as “market-based” solutions or even more laughably as “prices” to appease what little stigma remains around central planning in economic circles. But, as with all coercive regulation, externality-targeting policies inevitably fall victim to the tragedy of unintended consequences caused by the perverse incentives of the bureaucrat’s poorly-planned edicts.
Cobra effects underscore the state’s utter incapability to foresee even the direct results of their intervention, as undesirable activity is often exacerbated by the very policies intended to eliminate it, which is precisely what occurred with UN greenhouse gas eradication schemes. And so, while such policies may be sold with a veneer of sterile calculation, they are entirely political, which is why they are enacted and adjusted on the basis of political whim and public opinion.
Property Rights
In reality, most of the adverse impacts labeled as externalities, such as pollutive emissions, are to varying degrees explicit violations of the property rights of others. Murray Rothbard discussed in detail how government courts of the Industrial Revolution set the destructive precedent of permitting producers to pollute airways in the name of promoting collective economic growth. Such examples should serve as a stark warning to environmentalists that dependence on the state for the enforcement of arbitrary collective welfare is a recipe for disaster and disappointment.
As Robert Coase famously argued, externalities can be resolved between freely-associating, property-owning individuals through exchange, regardless of how and to whom property rights themselves are originally assigned. Just as the profit-and-loss system funnels the “greed” of entrepreneurs into satisfying the demands of others, private ownership leverages self-interest into sustainable preservation. Human beings are simply much more capable and effectively incentivized to prudently utilize and maintain resources they recognize as their own through the economic maximization of their long-term asset values.
Through the combination of such a profit motive, the price system in exchange and the dispersed knowledge of the conditions of personally-owned property, optimal consumption/production/extraction decisions can be made in perfect accordance with long-term sustainability with precisely the level of accuracy feigned by externality-targeting statist policy.
The adverse environmental impacts addressed by externality policies, meanwhile, almost ubiquitously occur on and across public property, where private ownership has been substituted for state management, and where exploitative parties bribe and lobby corruptible civil servants for access, neither possessing any true economic stake in its sustainable stewardship. Externalities are thus a predictable result of the tragedy of the commons, and are symptomatic of a lack of markets as opposed to a sign of their failure.
Statism
Environmental externalities have simply served as of late to cover for an incomprehensibly large network of money laundering and embezzlement schemes and have lubricated a pipeline of increasingly tyrannical policies across the Western world. Carbon-targeting policies in particular have proven destructive, with disputed evidence as to their success in tangibly altering consumptive behavior or production methods.
It is no secret amongst officials that carbon/energy taxes are highly vulnerable to leakage, in which entrepreneurs simply alter their production methods to avoid regulation, neutering their effectiveness. And so the age-old dilemma forever faced by bureaucrats has arisen anew, in which they must either humbly recognize their meddling as ineffective and abandon their failed intervention, or double down, impose even stricter decrees and persecute circumventers.
This dynamic is precisely that which Mises described when exposing “middle-of-the-road” economics as theoretical fantasy: interventionists stubbornly fail to grasp that the state is an institution purely incapable of restricting its own expansion, and that any power granted to it in one sphere of society will inevitably be used to acquire more and invites its total imposition across all walks of life.
The UK serves as a perfect modern example, in which energy taxes initially presented as minimal and targeted gave way to more aggressive electric vehicle “incentives,” and are now broadly imposed upon all consumers, including those who dutifully shifted towards more “sustainable” consumptive behavior. It should be no surprise that prosperity, opportunity, and freedom have all concurrently deteriorated as the proverbial camel’s nose was allowed under the nation’s tent in one domain, only for the state to predictably and exponentially expand the reach and intensity of its intervention.
Just as the progressives of Cambodia, the USSR, Maoist China, etc. discovered, the socioeconomic destruction wrought by ever-increasing government power inevitably annihilates any temporary progress made on their issues of interest, and environmentalists should be prepared to witness environmental priorities abandoned by governments the very moment their treatment is no longer conducive to the expansion of its power.
Conclusion
It is a safe assumption that virtually all citizens of the globe desire a healthier environment for themselves and others, along with a sustainable use of the planet’s resources. Yet it is greater economic freedom and better-respected property rights which can both achieve such objectives and balance all necessary tradeoffs, while state intervention simply harvests such causes as the basis for its own expansionary ambitions. Unfortunately for humanity, the useful idiocy of progressive environmentalists will likely continue to fuel the rise of socialistic authoritarianism, just as it has in the past.
