By Jeff McMahon
Leading economists at the “Mecca” of free-market economics, the University of Chicago, evoked their most prominent predecessor, Milton Friedman, last week in advocating a price on carbon to address climate change.
At a forum called “What Would Milton Friedman Do About Climate Change?” former U.S. Rep Bon Inglis (R-SC) opened the discussion by playing a 1979 clip of Milton Friedman on the Phil Donahue Show:
Phil Donahue: Is there a case for the government to do something about pollution?
Milton Friedman: Yes, there’s a case for the government to do something. There’s always a case for the government to do something about it. Because there’s always a case for the government to some extent when what two people do affects a third party. There’s no case for the government whatsoever to mandate air bags, because air bags protect the people inside the car. That’s my business. If I want to protect myself, I should do it at my expense. But there is a case for the government protecting third parties, protecting people who have not voluntarily agreed to enter. So there’s more of a case, for example, for emissions controls than for airbags. But the question is what’s the best way to do it? And the best way to do it is not to have bureaucrats in Washington write rules and regulations saying a car has to carry this that or the other. The way to do it is to impose a tax on the cost of the pollutants emitted by a car and make an incentive for car manufacturers and for consumers to keep down the amount of pollution.
Two current economics professors elaborated on Friedman’s view and applied it to the 21st Century problem of human-induced climate change.
“What’s happening when we turn on the lights, when the power is derived from a coal plant, or when we drive our car, is that carbon dioxide is emitted into the air, and that’s sprinkling around damages in Bangladesh, London, Houston,” said Michael Greenstone, the Milton Friedman Professor of Economics at the University of Chicago and the director of the Energy Policy Institute of Chicago.
“And those costs are real, and they’re not being reflected in the costs of that electricity or the tank of gas. Emitting carbon dioxide into the atmosphere does allow you to produce electricity more cheaply, but there’s a whole other set of people who are being punished or penalized. It’s a poor idea of economics.”
Greenstone and Steve Cicala, an assistant professor in the Harris School of Public Policy, argued that the market for energy operates without accounting for its full costs — without compensating people throughout the world who experience damages caused by the emission of greenhouse gases during the production of energy…
Continue reading at Forbes…