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Rejecting microeconomic reforms – views from the right

My political preferences lie on the right side of politics but I find myself increasingly repelled by what I see the right doing – the Australian political movement is paralleling the total madness of the US Republican right. Like most economists I favour a pervasive role for markets in the economy because these often better reflect aggregated citizen preferences than the views of bureaucrats.  But, beyond the views of most economists, I think I am right-wing because, even in situations where I recognise that free markets do not work ideally, I still tend to favour using them rather than relying on the views of bureaucrats and planners.  The latter too often get it very wrong.

As an environmental economist, however,  I recognise that markets can fail disasterously or just not exist at all – the climate change externality is a prime example but other examples arise locally in, for example, water markets and in non-existent markets for road congestion and road damages. My natural inclination in these is settings is to look for solutions involving use of market-based mechanisms.

The right in the Australian economics profession generally oppose carbon pricing on various grounds (it isn’t necessary because climate change is a fiction and even if it were not unilateral policies by Australia won’t work because Australia is little and, anyway, the policies are not credible creating holdup obstructions). There are a battery of independent objections on dealing efficiently with the worst environmental problem the world has ever faced. If one can be rejected by evidence and logic (as they have) then try another.  If all are rejected then create enough confusion and doubt to bury the issue.

As I have recently become aware the right also oppose road congestion pricing. Astoundingly they recognise that there are high costs of pricing congestion but ignore other evidence that sees much higher gains eventuate than previously believed if bottlenecks are addressed, reliability of travel is improved and so on.  The right apparently want congestion in the cities to continue even though, again, a market-based solution that they should endorse, presents itself. The case for congestion pricing is overwhelming after 35 years of concentrated debate and discussion.

Finally,  the intellectual economics right opposed the mining tax reforms even though any second-year economics student worth their salt can tell you that, in efficiency terms, a profits tax outperforms our current system of distorting output-related taxes.   There may be objections to grabbing profits that would primarily go overseas on equity grounds (errr?) but the efficiency case here is water-tight. The argument , if anything, should have been about the level of the tax not about retaining a silly dependence on output levies that unduly penalise higher cost producers.

I’ll exclude discussion of the cigarette “plain packaging” legislation since the intellectually credible sections of the economics right avoided taking sides with the tobacco companies in opposing a move that can only at worse be ineffective – the chances are it will reduce deaths from cancer and emphysema.  The more disreputable sections of the right, who secure part of their funding from tobacco companies,  opposed this legislation. But this mob of no-hopers  comprise a minor grouping of intellectual irrelevancies.

I don’t know for sure what’s going on here. A fair bit of it is ideological ratbaggery. Some involves scouring literature for ‘wrinkle-like’ counterarguments to various measures and emphasising these to the exclusion of others that do not support right-wing ideological priors. There is no attempt to put arguments in perspective. There is also a pathetic attempt to establish prima donna reputations on the basis of time-worn arguments that have already been dealt with.  It is sad since some good minds are wasting their brains on efforts that if successful will be socially counterproductive.  I’ll pursue this issue further in future posts.

9 comments to Rejecting microeconomic reforms – views from the right

  • Uncle Milton

    Harry, your bemusement arises because you think that right wingers will necessarily support free markets. That simply isn’t true. What is true is that right wingers will almost always support big businesses (except see next paragraph), so they will oppose anything that runs counter to the interests of big businesses such as policies to reduce greenhouse gas emissions or smoking, or the mining tax. Add to that the fact that the champions of actions on greenhouse gases have traditionally been environmentalists, and you get the kind of unhinged opposition from the Right that we observe here and in the US (but not the UK, quite interestingly).

    Right wingers will however often be hostile to big businesses in manufacturing. Why? Because manufacturing tends to be highly unionised.

    With right wing economists, they will rarely admit that externalities (or any other market failure) can exist even in principle, let alone that a Pigovian tax is the solution to the problem, since a Pigovian tax involves governments doing things that makeprivate actions, like driving in one’s cat, more expensive. So congestion taxes are out. In those rare cases where right wing economists admit that an externality exists, the solution is always Coase. There is no problem that can’t be solved with more individual property rights. Point out to a right wing economist that Coase is inapplicable with traffic congestion because the transaction costs are prohibitive, and watch the ideological shutters come down.

  • Uncle Milton

    That of course should be driving a car, though driving a cat through traffic might create less congestion.

  • NickR

    A ceteris paribus preference for markets over governments is hardly the exclusive hallmark of a conservative. I suspect that almost everyone other than those on the extreme left would hold this view.

    The sort of opinions that I feel divide the left and the right efficiently (both in the U.S. and to a lesser degree here) are things like:

    1. The view that fiscal stimulus cannot possibly work based upon accounting identities
    2. A desire to return to the gold standard
    3. The view that climate change is either a total fraud or grossly exaggerated
    4. A lack of concern over poverty or inequality
    5. Belief that we are on the wrong side of the Laffer curve

    and for non-economists

    6. Belief in creationism
    7. Belief in evil government conspiracies such as birtherism, Obama being a communist etc

    IMHO if you don’t hold any of 1-7 you have much more in common with the left than the right.

  • observa

    Well If Wyoming investigating buying a carrier is somewhat counterintuitive, you can understand the sentiment behind it, given the mountain of US debt and extreme nervousness about debt developments across the Atlantic. As for CAGW, its meteoric rise to fame and fortune by pressing the latent environmental hot button out there in the broader community, unleashed so many carpetbaggers, snake oil merchants, rent-seekers and outright crooks as to be virtually impossible to salvage any credibility for it now. Well at least for a few decades while quiet science come to grips with how little we really know about the earth’s climate and the interplay of factors affecting it at present.

    Where does that leave us? Firstly for the left to recognise their environmental play for the commanding heights has fallen in a heap, largely because its policies are the same old command and control recipe which are inevitably doomed by human hubris and folly with no market based checks and balances with ongoing feedback. The name of the game becomes the handout by divine right of elected kings with the inevitable cronyism, patronage and ultimate destruction by rent-seekers. That said the right have a pyhrric victory because although the left’s usual recipe is in tatters again, the underlying environmental concern for the Spaceship Earth paradigm has not gone away and they have nothing to address it with. Welcome to the Mexican standoff at present with all sorts of lunar ideas crawling out of the woodwork in such a political vacuum.

  • observa

    To move forward we all need to accept that current reality, in particular that a global ETS is a pipe dream, fraught with jurisdictional problems and as such would play straight into the waiting hands of the Morgan/Sachs/Macquarie crowd. The very thought disturbed its originators with its hubris and besides it hasn’t worked anywhere it’s been tried. If Federal Labor couldn’t manage a C&T scheme with wall to wall Labor with the MDB in its own backyard, what chance has duck locally pipe-dream globally got?

    What does that leave? As the Irishman said when asked the way to Dublin you wouldn’t want to start from here but here is where we are. Suppose the right accept the left’s premonition about CAGW (and premonition is all it is at present)then the right could simply say OK, in that case what happens if we give you your head and we replace all forms of taxation with CO2E taxation only, no more divine right of kings but the level playing field for all, will that float your boat and ours and problem solvered? Well short of arguing the toss over the absolute level of Govt taxation and expenditure and we’ll leave that for next week’s pow wow.

  • observa

    The outstretched hand of peace lefties so where’s your problem? You’re not syill emotionally attached to your Fuelwatch, Grocerywatch, pink batt subsidies, solar reshiftable power bills, cash for clunkers, cash for hybrids,cash for windmills, etc, etc, etc are you? Not still out there looking to the UN or EU for answers to our problems are you? I’ll give up on the US for answers if you’ll give up on China and the rest of the gaggle of gangsters for the same. I’ve got all the answers you need right there with total reliance on CO2E taxing so what’s your problem with it? Let’s get it up and running and all move on.

  • rog

    There is some deep psychological reason for the current version of right wingededness – based perhaps on fear? Fear of what….? Maybe just fear of dying?

    I know lots of medicos, who swear by evidence based medicine but refute climate change and enthusiastically follow any faked up line trotted out by the Libs.

    It is certainly highly emotive, which tends to block reason.

  • conrad

    Congestion charges are a really weird one — I would have thought the left would have been the most against those given they hurt the poor more unless compensated for (which seems rather unlikely).

  • Alphonse

    Harry, here:

    “even in situations where I recognise that free markets do not work ideally, I still tend to favour using them rather than relying on the views of bureaucrats and planners”

    George Will (admittedly, no economist) :

    “So why is America’s “win the future” administration so fixated on railroads, a technology that was the future two centuries ago? Because progressivism’s aim is the modification of (other people’s) behavior.

    Forever seeking Archimedean levers for prying the world in directions they prefer, progressives say they embrace high-speed rail for many reasons—to improve the climate, increase competitiveness, enhance national security, reduce congestion, and rationalize land use. The length of the list of reasons, and the flimsiness of each, points to this conclusion: the real reason for progressives’ passion for trains is their goal of diminishing Americans’ individualism in order to make them more amenable to collectivism.

    To progressives, the best thing about railroads is that people riding them are not in automobiles, which are subversive of the deference on which progressivism depends. Automobiles go hither and yon, wherever and whenever the driver desires, without timetables. Automobiles encourage people to think they—unsupervised, untutored, and unscripted—are masters of their fates. The automobile encourages people in delusions of adequacy, which make them resistant to government by experts who know what choices people should make.”

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