- ...I think most economists are so used to being locked in their university bubbles that they don't realize what the consequences of a carbon tax would be. People in the middle class or lower would be taxed into the stone age where they wouldn't be able to afford heat, fuel for their cars, or electricity while politicians and celebrities would keep living lavish lifestyles.
So yes, a carbon tax WOULD decrease consumption and would also roll back the technological clock over 100 years. This is what annoys me when I'm sitting in Econ classes - the fact that the professors are only concerned with numbers and equations and don't bother to think about the real world consequences of what they propose.
Mike's Response
It is a bit ironic that this was written in response to something I wrote since I do not consider myself to be an "academic" economist. I do private sector consulting work and I am one of the owners of a company in Canada. Unlike most economist, I have had to meet a daily payroll.That being said, I agree with the sentiment. Some of the most effective professors I know in business schools have extensive industry experience. It can be too easy for us to forget that real-world firms generally do not know what their demand curve looks like and do not set their prices by taking the first derivative of a total revenue function.
Does This Mean Academic Economists Should Spend More Time in the 'Real World'
Not necessarily. I do think that academic research would be more useful if economists were required to spend a term a year working for a company. I don't mean as a consultant; I mean an actual employee of the firm. Having both worked in firms and done consulting work, I realize that the perspectives are vastly different.The difficulty with this proposal is the opportunity cost involved. A term spent working at a firm is one less term spent teaching or doing research. Unless teaching responsibilities were vastly reduced, there would be little time to do research if professors were spending a third of their year in industry. And if teaching responsibilities were greatly reduced, then universities and colleges would have to hire more lecturers. As with most other things in economics, there is no such thing as a free lunch.
For the complaint registered above, though, I fail to see why economists would fail to recognize what the consequences of a carbon tax would be. Any economist worth his salt recognizes that a carbon tax would take money away from lower and middle income earners. That is why any discussion of a carbon tax is usually coupled with a discussion of reducing payroll taxes and/or monetary transfers to lower income households.
Letters writers, such as the one above, I believe are also locked in a bubble. It's a bubble where fear mongering and hyperbole are superior to careful study and examination. I am not suggesting that there are no intelligent critiques of the carbon tax; for instance, my Facebook friend Garth Brazelton has provided several very good ones. I would normally recommend that this letter writer dial down the rhetoric, but I recognize that seeing shades of grey makes it difficult to maintain such a self-righteous tone - so there is an opportunity cost in doing so as well.