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Cap and Trade

Peter Barnes: Capitalism 3.0 — Chapter 3: The Limits of Government (pages 33-48)

Consider, for example, the Federal Reserve Board, created in 1913 to manage the nation’s money supply. The Fed is a hybrid entity. Technically, it’s a corporation whose stock is owned by member banks. However, the seven members of its board of governors are appointed by the president and confirmed by the Senate to staggered fourteen-year terms. The genius of the Fed is that its governors can make tough economic decisions without risking defeat at the polls. In particular, they can raise interest rates, which means higher borrowing costs for businesses and higher mortgage and credit card payments for millions of voters. No politician wants to do this, and thanks to the Fed, none have to. When constituents complain about high interest rates, Congress members point to the Fed and say, “Talk to them.” This model is so sensible that, nowadays, almost all countries use it.

One can imagine similar entities for managing carbon and other pollutants. Their governors would serve long terms and have a fiduciary responsibility to future generations. They could make tough economic decisions — such as raising energy prices — without committing political suicide. Such entities might appeal to elected politicians precisely because they permit a shifting of responsibility and blame.

And that’s not the only alternative to political price-setting. We know from “cap-and-trade” programs that markets can set prices for pollution. In such systems, politicians have an important task — they set up the system and assign the initial property rights — but once they do that, they can be off the hook on prices. ... read the whole chapter

As you consider whether the privilege to pollute the air should be given away to current polluters, auctioned off forever to those who would bid for them today, or auctioned off annually with the benefits going to the public treasury, read this, substituting the rent on pollution rights for the rent on physical land:

H.G. Brown: Significant Paragraphs from Henry George's Progress & Poverty, Chapter 5: The Basic Cause of Poverty (in the unabridged: Book V: The Problem Solved)

The truth is self-evident. Put to any one capable of consecutive thought this question:

"Suppose there should arise from the English Channel or the German Ocean a no man's land on which common labor to an unlimited amount should be able to make thirty shillings a day and which should remain unappropriated and of free access, like the commons which once comprised so large a part of English soil. What would be the effect upon wages in England?"

He would at once tell you that common wages throughout England must soon increase to thirty shillings a day.

And in response to another question, "What would be the effect on rents?" he would at a moment's reflection say that rents must necessarily fall; and if he thought out the next step he would tell you that all this would happen without any very large part of English labor being diverted to the new natural opportunities, or the forms and direction of industry being much changed; only that kind of production being abandoned which now yields to labor and to landlord together less than labor could secure on the new opportunities. The great rise in wages would be at the expense of rent.

Take now the same man or another — some hardheaded business man, who has no theories, but knows how to make money. Say to him: "Here is a little village; in ten years it will be a great city — in ten years the railroad will have taken the place of the stage coach, the electric light of the candle; it will abound with all the machinery and improvements that so enormously multiply the effective power of labor. Will, in ten years, interest be any higher?"

He will tell you, "No!"

"Will the wages of common labor be any higher; will it be easier for a man who has nothing but his labor to make an independent living?"

He will tell you, "No; the wages of common labor will not be any higher; on the contrary, all the chances are that they will be lower; it will not be easier for the mere laborer to make an independent living; the chances are that it will be harder."

"What, then, will be higher?"

"Rent; the value of land. Go, get yourself a piece of ground, and hold possession."

And if, under such circumstances, you take his advice, you need do nothing more. You may sit down and smoke your pipe; you may lie around like the lazzaroni of Naples or the leperos of Mexico; you may go up in a balloon, or down a hole in the ground; and without doing one stroke of work, without adding one iota to the wealth of the community, in ten years you will be rich! In the new city you may have a luxurious mansion; but among its public buildings will be an almshouse.

In all our long investigation we have been advancing to this simple truth: That as land is necessary to the exertion of labor in the production of wealth, to command the land which is necessary to labor, is to command all the fruits of labor save enough to enable labor to exist. ...

... For land is the habitation of man, the storehouse upon which he must draw for all his needs, the material to which his labor must be applied for the supply of all his desires; for even the products of the sea cannot be taken, the light of the sun enjoyed, or any of the forces of nature utilized, without the use of land or its products. On the land we are born, from it we live, to it we return again — children of the soil as truly as is the blade of grass or the flower of the field. Take away from man all that belongs to land, and he is but a disembodied spirit. Material progress cannot rid us of our dependence upon land; it can but add to the power of producing wealth from land; and hence, when land is monopolized, it might go on to infinity without increasing wages or improving the condition of those who have but their labor. It can but add to the value of land and the power which its possession gives. Everywhere, in all times, among all peoples, the possession of land is the base of aristocracy, the foundation of great fortunes, the source of power. ... read the whole chapter


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Wealth and Want
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