Tuesday, February 19, 2019

3,300 Establishment Economists and Their Mad Support of a Carbon Tax

(graphic via FEE)
By Robert Wenzel

The Financial Times headline says it all: "Surge in US economists’ support for carbon tax to tackle emissions."

Former Federal Reserve Board head Janet Yellen is now even in favor of a carbon tax.

Get a load of this.

“Global climate change is a very serious problem and it calls for immediate national action,” Yellen told the Times. “If you were to start around $40 a ton and then raise this over time, by more than the rate of inflation, this would be a very effective way of reducing carbon emissions and would more than meet the Paris commitment.”

Marty Feldstein, a  former chief economic adviser to Ronald Reagan, said that economists agreed that carbon emissions were a serious problem. Well, Marty most of them also are also supporters of Keynesian economics, which Henry Hazlitt smashed 60 years ago in The Failure Of The New Economics: An Analysis Of The Keynesian Fallacies.

So if economists can't get economics correct, and don't even understand competing economic theories, why should we consider their opinions on a subject they haven't even been trained in?

And I do mean they are poorly trained in economics and don't understand competing theories that go in a direction different from Keynesian economics.

From my book, The Fed Flunks: My Speech at the New York Federal Reserve Bank:
As soon as I finished my speech, and to defuse the tension, I asked an immediate question of [the two senior New York Fed economists] McCarthy and Peach. I had used Austrian Business Cycle Theory as the foundation for my speech and so I asked them if they thought ABCT had a legitimate case to make...

I then asked Peach ( a 20 year plus veteran of the Fed) if he was familiar with Austrian economics. He said that in college he had taken two history of economics courses and then said that the Austrian school is part of the classical tradition...

Later on during our discussion, Peach remarked that he understood the Austrian school and that they were the group that wanted a constant increase in the money supply and developed the equation PV=MT. This, of course, is not the Austrian view, but a view held by the Chicago school. Thus, in one swoop, Peach demonstrated not only his lack of knowledge of Austrian views on monetary policy, but also confusion about Austrian school versus Chicago school theory. 
But that is not going to stop Marty, he is taking climate change as "settled science" (by economists!) and has moved into his role as technocrat for the state.

He is even trying to fake a free market spin to the mad scheme as if a carbon tax isn't a government super-coercive regulation.

“Our current method of trying to control carbon emissions by complex regulations is a bad idea, we think it is better to use a price mechanism to do it,” Feldstein said according to The Times

A group of economists across the US (3,300!) have signed a letter supporting a carbon tax proposal developed by the Climate Leadership Council, including former Treasury Secretary Larry Summers, former Fed chairs Paul Volcker, Alan Greenspan and Ben Bernanke, former Clinton economic adviser Alan Blinder, former CEA chairs Laura Tyson, Jason Furman, Austan Goolsbee and N. Gregory Mankiw, Christina Paxton, the president of Brown University and, naturally, the Nobel laureate Myron Scholes who played a key role in blowing up Long-Term Capital Management, one of the biggest hedge fund disasters in history.

Yellen is a founding member of the Climate Leadership Council and, get this, corporate founders include ExxonMobil. Shell, GM and BP.

This totally smells like establishment crony plotting.

Here is the full statement, I have highlighted in bold the clause I suspect is at the epicenter of the deal and why big oil and big auto are supporting the deal:
Global climate change is a serious problem calling for immediate national action. Guided by sound economic principles, we are united in the following policy recommendations. 
I.          A carbon tax offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary. By correcting a well-known market failure, a carbon tax will send a powerful price signal that harnesses the invisible hand of the marketplace to steer economic actors towards a low-carbon future. 
II.         A carbon tax should increase every year until emissions reductions goals are met and be revenue neutral to avoid debates over the size of government. A consistently rising carbon price will encourage technological innovation and large-scale infrastructure development. It will also accelerate the diffusion of carbon-efficient goods and services. 
III.        A sufficiently robust and gradually rising carbon tax will replace the need for various carbon regulations that are less efficient. Substituting a price signal for cumbersome regulations will promote economic growth and provide the regulatory certainty companies need for long- term investment in clean-energy alternatives.
IV.        To prevent carbon leakage and to protect U.S. competitiveness, a border carbon adjustment system should be established. This system would enhance the competitiveness of American firms that are more energy-efficient than their global competitors. It would also create an incentive for other nations to adopt similar carbon pricing. 
V.         To maximize the fairness and political viability of a rising carbon tax, all the revenue should be returned directly to U.S. citizens through equal lump-sum rebates. The majority of American families, including the most vulnerable, will benefit financially by receiving more in “carbon dividends” than they pay in increased energy prices.
"Enhance the competitiveness of American firms"! I bet!

Indeed, an article in the Federalist notes that some  firms support carbon taxes because they want to create hardships for their competitors (via Daniel Mitchell)
…carbon taxes do not affect all fossil fuels equally. So just as some fossil fuels are much more carbon-intensive than others, here we can begin to understand how, beyond the benefits of predictability, a carbon tax might actually help some fossil-fuel providers… As a recent National Bureau of Economic Research working paper illustrates, for example, in the United States a tax on carbon would disproportionately impact the use of coal relative to natural gas for energy production. …Don’t be surprised, then, if some domestic producers of natural gas end up promoting a carbon tax, not only out of concern for regime stability but also out of a concern to make their product more competitive in the energy marketplace
The cronies are selling the proposal as kind-of Green New Deal-lite. That is, it is better than the insane deal just put forward by the 29-year old socialist congresswoman Alexandria Ocasio-Cortez.

“I think it is fair to say that America has two choices, one is the route of the Green New Deal, one is the route recommended by the entire economic establishment, which is the carbon dividend plan,” said Ted Halstead, founder of the Climate Leadership Council, according to the The Times.

Oh, and if you still think there might be something to say for the plan, think about this.

The co-author of the plan (along with James Baker from oil country Houston) is former Treasury Secretary George P. Shultz, who was totally hoodwinked by the 30-something Elizabeth Holmes in the multi-billion dollar Theranos (soon to be a major motion picture) scandal.

From a letter to Silicon Valley's The Mercury News:
The recent stories on the fall of Theranos (“SEC fines Theranos founder Holmes for ‘massive fraud’,” Page A1, March 15) overlook the key factor in its rise and fall other than Elizabeth Holmes: George Shultz.

Only after Shultz got involved did Theranos raise its hundreds of millions. Unlike other directors, Shultz actively promoted Theranos in major forums. See, for example, the Youtube video of Shultz and Holmes at the 2015 SIEPR Conference at Stanford. See also Shultz telling The New Yorker in 2014 that he met each week with Holmes. His praise was lavish. But this blind ardor was the prelude to his refusal to heed his grandson’s warnings...

His 2017 deposition in one case shows that he never inquired about reported laboratory deceptions of Theranos.
Between Theranos and his support for the Iraq war, he’s having a rough 21st century.
Yes, quite the team to be warning us about global warming, a bunch of high-level cronies that can't get finance or economics straight, and a bunch of 3,000 plus sheep.

Robert Wenzel is Editor & Publisher of


  1. Paul Volcker! The Fallen Idol. Shame.

  2. So more ultimately government employed intellectuals tell us why we need government to take more of our wealth and why we should obey it. It's like the sun rose this morning and the sky is blue. This has been the job of government's intellectual class for thousands of years. They wouldn't bother taking the hours upon hours it takes to understand how the mainstream climate "scientists" arrive at their findings. Climate change is nothing more than of of the most ancient cons repackaged anyway. If we just sacrifice and obey the weather will be good. If we don't the weather will be bad.

    Another obvious thing they are doing is framing the debate between two "plans" where the government and those who control it win either way.

  3. The hours upon hours of time needed to understand how mainstream scientists arrive at their findings is well explained in many books. One of the least painful is called "How to Change Minds about Our Changing Climate" by Darling and Sisterson.