Thesis Number: #8 (Page 2 of 9)

Barriers to Realism

Realistic policies need to be framed within a market context (to which the Left objects) by obliging those who use the resources of nature to pay the full price (rent) into the public purse (to which the Right objects). Examining the issues within the current philosophical paradigm will continue to lead policy-makers down cul-de-sacs. Meanwhile, the emission of CO₂ continues unabated, except when temporarily reduced because land speculation causes economies to implode, causing unemployment and cutting the demand for energy.

Carbon taxes, and the market in permits, illustrate the failure of policy when framed within the current economic paradigm. The OECD claims that these are the cheapest ways to reduce CO₂. And yet, the Paris-based think-tank’s secretary-general, Angel Gurria, declared when their Effective Carbon Prices report was published in November 2013:

There has been a huge amount of taxing and regulating around carbon, with prices established too high or too low, and the outcome has been far from optimal. This is a chaotic landscape that sends no clear signal, and must be addressed.

This outcome was inevitable, because taxes are framed in ways that preclude the effective pricing mechanism being applied. The value of nature’s services and resources are measured as economic rent. If governments had levied rents – which are not taxes – for the use of those resources, the world would not have endured 200 years of systematic abuse of natural habitats. But rent pricing was not applied because the law-makers were the land-owners.

From Day 1 of the Industrial Revolution in Britain, technology was shaped to maximise landlord interests. Engineer-inventors settled for “dirty” technologies (spewing waste into the atmosphere and damaging people’s health) because there was no financial incentive to invent clean technologies. Users of fossil fuels were not required to pay rent for the right to emit toxic waste into the atmosphere, where nature would absorb it. Why were they not charged? Because that would have left them with less net income to hand over as rent to the owners of the coal seams – the policy-makers in Parliament. There was no reason for the early inventors to develop clean technologies when cheaper versions of the steam engine yielded higher rents for the aristocratic landowners. Today, governments are failing because their efforts are confined within that rent-seeking paradigm.

Winston Churchill understood the wrecking dynamics of rent seeking. During his early career as a Liberal Member of Parliament, he declared in a speech in Edinburgh:

A portion, in some cases the whole, of every benefit which is laboriously acquired by the community is represented in the land value. If the opening of a new railway or a new tramway, or the institution of an improved service of workmen’s trams, or a lowering of fares, or a new invention, or any other public convenience affords a benefit to the workers in any particular district, it becomes easier for them to live, and therefore the landlord and the ground landlord, one on top of the other, are able to charge them more for the privilege of living there.