Economists really like economics. Which, I guess, is a good thing, but when they really get into it, dancing around the flaming computer as it blows regressions into the air late at night, they can be a little unbalanced. This article, for example, leaves me genuinely uncertain whether it’s a piece of incredibly dry self-teasing, or serious. (The author is deploring the waste entailed by giving out trick-or-treat candy to which the recipients would prefer money, in a tradition that started with a 1993 article showing that we should give money instead of presents generally.) I am ready to deplore almost anything about Hallowe’en, but surely this guy isn’t serious?
The familiar jab at economists, that they know the price of everything and the value of nothing, can only be repeated by someone who knows nothing of economics (or economists). But a related charge, that the discipline is so seductive and illuminating that you can easily forget about all the things that aren’t traded in markets and whose value is thus invisible if you don’t pay attention, has some force. The idea that, for example, a homebaked cake or a hand-made sweater is an inferior gift to money with which to go shop at the baker’s or Macy’s, is just embarrassingly ignorant, and anyone who holds it needs to get a life and some friends. Come to think of it, Michael Spence explained this in economic terms many years ago (any gift chosen with a lot of thought, and the home-made sweater, are market signals); you just have to recognize that affection has value even though it has no price. And what about the present you would never know to buy with money if your friend didn’t find it and realize it was just your style?
One of the very good policy ideas for global warming attenuation is a tax on fossil (ie, not plant-captured) carbon emitted into the atmosphere (actually a tax on a variety of things, including not only CO2 but also (for example) methane, that cause global warming is what’s wanted). The idea comes from Pigou, and such a Pigovian tax to a first approximation gives everyone steady, gentle, tireless incentives to figure out how to emit less. Ideally, the tax is the money value of the damage to everything caused by another unit of carbon emitted at current emission levels. (Note: Mark says almost correctly but tacitly that auctioning the optimal amount of carbon emissions is equivalent to a carbon tax, and then incorrectly and out loud that the carbon tax is equivalent to a tax on energy. It isn’t; the whole idea is that untaxed nuclear energy will be cheaper relative to coal with a carbon tax.)
So far so good, and (i) ceteris paribus I would very much like to see such a tax in place (ii) I owe it to my economist friends and their patience with me over the years that I understand how and why it’s such a good concept. But for that tax to get us to lower carbon emissions at reasonable cost requires, I have lately come to realize, some complements to carbon reduction, especially in the 25% of energy used for transportation, and it simply does not do to show that ” there’s a price elasticity of energy demand” and leave it at that.
The problem is that I may be motivated to the skies to use less gasoline driving my car,and willing to walk or ride a bike or take a tram, but none of those is available to me individually. I can buy a bike or a nice pair of comfortable shoes, but I can’t buy a safe bike path from my house to where I want to go, and even if I and all my neighbors would chip in enough for it, we can’t buy it without formal action by government. Same for convenience shopping within walking distance of my house, which is probably in the middle of a very large no-commercial-zoned bedroom suburban area. And especially the same for the tram, and redisposition of destinations to be near public transportation.
These are public goods (non-rival up to congested levels) and properly provided for next to nothing (the marginal cost of sitting in an empty seat in the tram is pretty much zero), which means to get them right requires very large public subsidies, not to mention a lot of social learning (for example, learning not be afraid of encountering strangers as pedestrians). Especially in the US, we have a long way to for political realization of how this part of the system really works.
I was in Singapore last week at an international conference, and most of the male attendees were in suits and ties. The air conditioning demand entailed by this ridiculous convention three degrees north of the equator is not trivial, indeed, most of the women had sweaters. However, the men were trapped by a social convention that a jacket signals respect (for everyone else) and status, so only a few of us, liberated from this version of good manners by being tenured and/or devil-may-care, dared to wear what is actually appropriate Singapore business dress, namely a short-sleeved shirt and tie. This is a little positional arms race (recall Schelling and the hockey helmets), the kind of social vice and vise that cannot be loosened without the kind of coordinated social and governmental leadership that has changed smoking from a right to a grudged, locationally constrained, privilege in thirty years. I know, Schelling is an economist; I just wish more of his tribe had his instinct to widen the beam of the searchlight and look around, rather than cranking it down to superspotlight setting (where instead of illuminating, it just fries off all the texture and context from the phenomenon you point it at, never mind that you also can’t see but a tiny circle of interesting stuff).
UPDATE: A reader writes to assure me that the Hassett article I linked to is a joke. Perhaps; but I also found a piece he wrote around last Christmas including the following passage:
Fortunately for those who love Christmas presents, some of the most interesting work at the frontier of economic research suggests that holiday gift giving may be far more beneficial than economists had previously believed. The key insight of this new line of research is that people do not always behave like the super-rational automatons that traditional economic analysis makes them out to be. If you want to understand why holiday gift giving persists, psychology may be more important than economics.
Hassett then points at experimental evidence of an endowment effect whereby gifts received are only sold for more than their original money price. Experimental evidence! This desperate positivism is, in the end, a little sad. Is there anyone who really needs an experiment in a laboratory to see that gifts are not just wasteful in-kind transfers? Who gave his friends and family money until List and Shogren, AER 1998 clued him in? The world is full of stuff that is obvious but not so, and science is a good way to ferret it out, but this kind of thing just feels like driving the researchmobile around a track to watch it go fast, not a way to get beyond where we already are.