Here’s an interview with Naomi Klein where she details the “connection” between capitalism and climate change. She says the same thing here, where she argues, “If you take climate change seriously, you do have to throw out the free-market playbook.” I hear this a lot, and it never actually makes sense to me, especially when the claim is made in the following way:
(a) Climate change demonstrates the failure of capitalism
The implication is that contemporary forms of capitalism inevitably destroy the environment. The solution is to overthrow capitalism, and replace it with a more humane and sustainable planned economy.
It seems to me that climate change demonstrates a rather different phenomenon:
(b) Environmental degradation demonstrates a market failure
The implication here is that contemporary forms of capitalism have improperly allowed companies to externalize the costs of pollution onto non-consenting third parties (in both present and future generations). The solution here is find the most efficient way to internalize these costs back into the transactions between the company and its consumers – a solution that is perfectly compatible with free markets. For example, cap-and-trade proposals are a way to create a free market in pollution permits, which are priced based on a targeted (and capped) “optimal” level of pollution (who knows where this point is, but it’s somewhere between zero and our current level of carbon emissions – smart climate scientists and economists would figure it out).
What’s most striking about the previous paragraph is how obvious it is. Of course pollution is a form of market failure, an externalized cost imposed upon third parties, and thus stands as a paradigmatic example of the kind of action that a limited government is authorized to regulate. Here is Hayek, the arch-defender of free markets, on the issue: “Nor can certain harmful effects of deforestation, or of some methods of farming, or of the smoke and noise of factories, be confined to the owner of the property in question or to those who are willing to submit to the damage for an agreed compensation. In such instances we must find some substitute for the regulation by the price mechanism. But the fact that we have to resort to the substitution of direct regulation by authority where the conditions for the proper working of competition cannot be created, does not prove that we should suppress competition where it can be made to function.”
However, I am continually amazed at how irrational libertarians are concerning the issue of climate change. What’s going on? Libertarians believe that our only “public” concern is the prevention of harm. State power is only justified insofar as it enforces the principle of non-interference (or the “non-aggression principle”). Thus, libertarians believe that governments should be confined to activities that are (1) necessary for social cooperation to take place, and (2) not adequately produced by market interactions (what the economists call “public goods”). Restricting ourselves to these criteria, many parts of our government today would be eliminated: Social Security, Medicare, the National Endowment for the Arts, the Department of Education, funding for NPR, etc, etc. One of the few departments that would remain would be the EPA! We would have police to protect people from physical harm, an EPA-like agency to protect people from being harmed by polluters, and courts to help adjudicate disputes on these matters.
And yet, despite the fact that environmental regulation is mandated by the very principles of libertarianism, libertarians almost universally hate the EPA and are skeptical about climate change. [Note: libertarians are correct in noting that market failures don’t automatically validate government responses. The likelihood and cost of market failures must be balanced against the likelihood and cost of government failures, which are serious. Furthermore, all regulation, whether environmental or otherwise, deserves to be scrutinized by a cost-benefit analysis. However, libertarians still manage to routinely over-exaggerate the cost of government failures and underestimate the cost of market failure]. Libertarians often act as if admitting the reality of climate change would require turning away from their principles of limited government. What’s up with that? My theory: Libertarianism is still stained by its alliance with conservatism during the Cold War. The Cold War split up libertarians and liberals (remember – libertarians were a big part of the early New Left), and merged libertarians with conservatives in their alliance against socialism and communism abroad. Libertarians have yet to peel themselves away from conservatives and return to their own first principles.
Matthew Yglesias has a similar, but more institutional, analysis: “At any rate, I do think this is the issue that’s been underplayed in a lot of recent discussions of the institutional right’s funding sources. We’ve reached a point in the history of the world when the regulation of air pollution has become a first-tier political issue. And it’s naturally a controversial one since a lot of money is at stake. But there’s simply no support anywhere in the classical liberal tradition for the idea that an unrestricted right to pollute the air is part of ‘free markets’ or any coherent conception of liberty or property rights. And yet opposition to carbon pricing and emissions regulations has become an article of faith across the American right. Some of that is political opportunism, some of it is ignorance, but a lot of it is the impact of corporate cash, especially from the extractive industries.”
The issue of climate change is ripe for an overlapping consensus between different political ideologies. Yet, the issue was almost unmentioned in the last election. This needs to change. Liberals need to make this issue much more of a priority, and libertarians need to be truer to their principles than to their funding sources.