The Hidden Cost of Not Having a Carbon Tax

One of the costs of not having a carbon tax is all the energy, air time, moralizing and moral posturing that goes on as a very ineffective alternative to a carbon tax. By taking people’s willingness and desire to be good for this purpose, we may exhaust it for other purposes. G.C. Archibald, in his book Information, Incentives and the Economics of Control, p. 5 writes:

We owe to Adam Smith the insight that matters go more smoothly if institutions are such that private and social interests coincide. D. H. Robertson (1956) put it clearly. "What do economists economize on?," he asked. This was not a rhetorical question. His answer was: Love. He explained that is scarce and that it is wasteful to depend on it for everyday arrangements that depend, or can be made to depend, simply on self-interest." 

Here, he cites Dennis Holme Robertson's essay "What Do Economists Economize on?" in his book Economic Commentaries.

Experiments also suggest that if people are “good” in one way, they may feel entitled to be bad in some other way. Here is Dan Ariely’s explanation of this principle in the article flagged above:

The basic principle operating here is what psychologists call “moral licensing.” Sometimes when we do a good deed, we feel an immediate boost to our self-image. Sadly, that also makes us less concerned with the moral implications of our next actions. After all, if we are such good, moral people, don’t we deserve to act a bit selfishly?

Moral licensing operates across many areas of life. After we recycle our trash from lunch, we’re more likely to buy non-green products. After we go to the gym, we’re more likely to order a double cheeseburger. This is probably why the person who found your wallet and decided to return it felt justified in taking your cash.

If we could just have a carbon tax, then in our day-to-day activities we could just use our normal self-interest brain cells in order to behave in a way that will keep the planet from frying, and could use our generosity of spirit for other things—like, say, feeling compassion for those who desperately want to be Americans.