Today’s New York Times has an article that claims that “leading economists” (paragraph four) and “environmental economists” (paragraph eight) are upset with Francis for the economic portion of his encyclical “Laudato Si”. Their sole source for this is Harvard’s Robert Stavins, who is quoted as saying that the Pope “is out of step with the thinking and the work of informed policy analysts around the world, who recognize that we can do more, faster, and better with the use of market-based policy instruments...” Later he compares the Pope’s line of thinking to a
small set of socialist Latin American countries that are opposed to the world economic order, fearful of free markets, and have been utterly dismissive and uncooperative in the international climate negotiations....
That’s quite a put-down. Francis is one of these south-of-the-border pinkos, an enemy of freedom, and out of step with educated opinion. That’s Stavins’ side of the story.
What’s the other side? Well, as a matter of fact, the encyclical (paragraph 195) strongly endorses the polluter pays principle and argues that economic growth needs to be viewed as a means, not an end—which would not be regarded as blasphemy in the halls of today’s World Bank, among other places. As for carbon trading, on this the Pope is right and Stavins is wrong: this is a misguided approach in theory (it fails the incentive compatibility test) and has proved disastrous in practice.
More generally, the two mechanisms that could form the basis of an effective climate strategy, a stiff carbon tax or a system of mandatory carbon permits, are vehicles of public control, not private initiative. The one puts you in jail if you don’t pay the government-mandated tax on fossil fuels, the other if you extract fossil fuels without a permit. They are market-using instruments but in themselves not market-based. Either will rapidly increase the cost of energy and energy-intensive goods, which means that social justice requires that action on climate be coupled with substantial resource transfers from rich to poor. The result will be less luxury consumption by the few so that the many can survive.
Come to think of it, the Pope would be a better choice to teach environmental economics. Maybe they could switch jobs: how up is Stavins on the last two thousand years of Catholic doctrine?