Wednesday, February 6, 2013

Woerdman on False Alternatives in Energy/Climate Policy

Over at CommentsVisions (here), my friend Edwin Woerdman (Groningen) has an excellent post about the way policy advocates often engage in faux, instead of real, comparative institutional analysis. Instead of addressing both the strengths and weaknesses of each policy alternative, there is a tendency to compare the weaknesses of a policy on opposes to the strengths of a policy one prefers. So, to borrow, Edwin's example, economists and others who prefer carbon taxes to the existing system of emissions trading under Europe's Emissions Trading Scheme, compare the problems of the existing system with the theoretical advantages of their preferred scheme without paying much (if any) attention to problems that would likely impede a successful set of carbon taxes, including the same political dynamics that led the EU to institute emissions trading rather than a tax-based scheme to begin with. And I might add that such either-or analyses also tend to ignore the prospects for combining the best features of emissions trading and taxes, e.g., by adding price floors (which essentially constitute a tax) to ensure that auctioned allowances create incentives to minimize emissions even in circumstances of economic recession.

Edwins "model-versus-muddle" framework is consistent with Neil Komesar's (Wisconsin) long-standing efforts to get scholars to engage in real comparative institutional analysis, instead of comparing real, existing, inevitably flawed systems with idealized versions of alternatives. See, for example, Neil's 1997 book, Imperfect Alternatives: Choosing Institutions in Law, Economics, and Public Policy.

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