Mark Thoma posts on climate change. I think he is misrepresenting the problem. The problem is the possibility of an optimal taxation. And it is not only a question of aproximation.
Lets me to explain it: In one of my favourite blogs (Newappsblog.com) some weeks ago Eric Schliesser highlighted the evolution of the term «uncertainty» in economics here and here.
“I had assumed that the concept had been promoted exclusively by political economists of the (political) right – e.g., Frank Knight and Friedrich Hayek — suspicious of central planning and over-confident claims of scientistic economists. In Knight the concept plays a role in explaining the existence of entrepreneurial profit, which is a (lucky) ‘reward’ for action in the face of uncertainty in a (relatively) free enterprise economy. (It is a sad fact that our leading economists ignore the role of luck and embrace a thoroughgoing just desserts theory.)”
“I had assumed the demise of the concept post-WWII could be explained in terms of a simple narrative, in which technocratic Keynesians wished away the very possibility of Knightian uncertainty in order to promote economics as a privileged and capable policy science. But that story is not quite right: as I have pointed out, (i) free market economists also promoted the demise of Knightian uncertainty and (ii) Keynes also embraced a thoroughgoing version of ‘Knightian uncertainty’ in his (1921) Treatise on Probability—the same publication year as Knight’s Risk, Uncertainty, and Profit.”
The problem with the pollution/externalities’ conundrum, as I see it, is not possible to be solved from a economic perspective (neither market nor central calculation).
- Not by markets because 1.a, it is impossible to integrate under property rights all the stuff that have a role as causal effects, climate phenomenons could affecting decisively the world economy. 1.b The well known problem of future generations.
- Because of the problem of uncertainty. The climate problem is, I defend, the real bubble we are facing today. And only when we will begin to face the consequences of our today’s actions, consequences (totally) unexpected, it will be possible to value it… there is no possiblity for an optimal taxation.
- problems 1 and 2 are related with the problem of belief… (belief not in the traditional sense of representation of the world): we know that it will be a catastrophe, but it is not possible for us to integrate this knowledge, to really believe such an unexpected consequences. Here I’m following Zizek and fetishism