Obama’s problem is that he has no experienced central economy planners on his staff. If he really wants to micromanage the economy he needs to hire some of the many experienced, and un-employed, central planners in Russia. What could go wrong?

Nor do investors (whether or not they are the government) need to be perfect. Government subsidies for the transcontinental railroad are often held out as an example of a project that worked well, and yet that was fraught with corruption.

However, in the case of cap and trade, I agree that this is not the right strategy. Far too complex and for too unlikely to get it right. That’s why straightforward carbon taxes are gaining favor with even some who in the past would have lauded something that uses market processes.

The issue is how we are to deal with a negative externality. This is not something where individual decision can provide a solution that I can see.

“Cheaper”!

The problems are: “For whom?” and “When?”

It’s very difficult to make such estimates for a global population – and for that population, at various times in the future. But that’s just what’s required!

A decision to accept business as usual until 2100, is quite like junking a new car to stimulate the auto industry; it only looks at a ’small’ piece of the problem.

You – and those you criticize – and almost all of us usually make this same ‘mistake’.

Everyone recognizes that the glazier (or auto manufacturer) welcomes the broken window (govt subsidy). Bastiat was trying to get everyone to recognize that society as a whole was worse off.

Destroying a working automobile does not make society better off. It makes society poorer.

Remember the idiots who said that Hurricane Andrew was good for the Florida economy? Algore also defended the govt regs on refrigerant change on the grounds that forcing businesses to scrap all their working A/C systems and buy new ones was good for the economy. By that same type thinking, one would argue that a flood which wiped out New York would also be good for the economy.

Keynes fell for the same fallacy.

Currently in Washington we have people claiming that all that matters is govt spending and the object of the spending doesn’t matter. They assert that waste, fraud, etc. make no difference to the economy, only the amount spent. Of course, the recipients of the largesse are always happy to get it and willing to debate whether it constitutes waste.

The keys are productivity and wealth. Increasing productivity improves the standard of living. Destroying property makes us poorer and reduces our ability to be productive. Even Christina Romer, the Chair of President Obama’s Council of Economic Advisers, did a study a few years ago which showed that tax cuts are far better for improving the economy than govt spending. Individuals do a much better job of allocating resources productively. That shouldn’t be a surprise. That transactions freely entered into produce greater utility than transactions coerced by govt should be obvious to anyone.

If someone went to the parking lot where you work and played demolition derby, I don’t think your co-workers would have much sympathy for the argument that the demolition was good for the economy. And even if the govt made someone else (i.e. taxpayers) pay for the damage, the negative impact to the economy as a whole would be the same.