Monday, June 19, 2006

Kling, Gore, and Pascal

Arnold Kling writes:
I do not think that economists ought to be bullied into believing in human-caused global warming. Paying a big carbon tax "just in case" is sort of like an agnostic making a big contribution to a church "just in case."
I am not a scientist and am therefore agnostic about a lot of issues surrounding global warming. Suppose I assign a probability p that Al Gore is right. The optimal policy from my perspective is not to oppose a carbon tax unless p exceeds some threshold. Instead, the optimal tax is increasing as a function of p and is positive for any p>0. A person who thinks p is small would not want a big carbon tax but should endorse a modest one.

On giving money to a church "just in case," Pascal might argue with Arnold, but I won't offer an opinion. I want to stay clear of religion on this blog. Economics is controversial enough.

Update: Bryan Caplan notes that a positive tax for all p>0 need not hold if there are fixed costs of setting up the tax system. Point taken. I was implicitly making some standard continuity assumptions that ensure that small taxes have small effects. A fixed cost would be a counterexample to those assumptions.