Liberal and Conservative Economists Debate Best Climate Change Practices
On Sunday, June 21, Former Republican Treasury Secretary Henry M. Paulson Jr. wrote an opinion piece in The New York Times, titled “The Coming Climate Crash”, that garnered a lot of national attention for the author’s assured stance on climate change. As a prominent conservative, his argument that the shifting environment is not only a pressing physical concern, but also economic, is an important step for all those concerned with the state of the planet.
As Treasury Secretary, Paulson was on the front lines of the government’s efforts to stop the 2008 financial crisis, a challenge that he likens to the climate crisis in his article, noting that the latter “is a more intractable problem.” He advocates for the establishment of a carbon tax, a measure intended to penalize the emission of fossil fuels and thereby incentivize renewable energy sources. Proponents of the measure argue it is simply a way of assessing companies that pollute the environment for the damage they cost society, rather than a government invasion into the private sector.
A Harvard MBA and former Goldman Sachs CEO, Paulson carries a lot of weight in the economic community. While he acknowledges there is some uncertainty in climate predictions, just as there was in financial crisis, he explains that cautiously waiting for more information would actually be “a very radical risk.” Simply looking at the issue financially, the costs of inaction are far greater than the costs of preparation, a reality demonstrated by the American Security Project’s Pay Now, Pay Later reports.
Perhaps most notably, Paulson dispels the myth that government expenditures to combat climate change are economically liberal. In fact, the government will be forced to spend and interfere much more in the private sector down the road if nothing is done to combat climate change, so the carbon tax, he argues, is in many ways a conservative measure.
In response to the Paulson piece, Nobel Prize winning professor and Keynesian economist Paul Krugman wrote an editorial called “The Big Green Test” critiquing Paulson’s piece as advocating idealistic legislation unlikely to pass Congress. He highlights the “theory of the second best”, an economic principle stating that if a market inequality cannot be fixed (i.e. the societal cost of carbon cannot be penalized through emissions tax), then a second offsetting inequality will function in its place. Thus, Krugman argues for measures such as renewable energy subsidies, EPA regulations, and continued net metering agreements for homes and businesses that supply the grid with alternative energy.
Both arguments are compelling and should be debated as the United States determines how best to fight climate change. But, as Hank Paulson states in his piece, “there is a time for weighing evidence and a time for acting.” We have reached the point where the climate threat is too great not to act upon. The exchange between two leaders from opposite sides of the aisle is admirable, and represents the sort of public discussion that needs to take place. Once we acknowledge the indisputable reality of manmade climate change, as 95-100% of climate scientists and numerous military and business leaders have, we can begin to negotiate the various solutions to the problem, on a partisan basis if necessary. The conversation between Paulson and Krugman is a great start in this direction and hopefully will lead to a national discussion on the climate issue.
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