I tend to get increasingly grumpy as I get to the fag end of final exam marking. This morning provided a classic example. I received in my email inbox a typically sanctimonious, patronising communication from someone in another School who is in the habit of sending frequent unsolicited “environmental sustainability tips” to the entire faculty bulk email list. There is no way to unsubscribe.
I failed to resist the temptation to fire off a retaliatory email (addressed only to the Head of School who I know shares my views) titled “sustainability tips for the non-credulous”:
- Don’t recycle domestic waste in Darwin. It’s uneconomic. Darwin City Council pays $47 million per year for “waste and recycling services”. It’s unclear from their audited annual returns how much of that is paid to make it feasible for the recycling contractor to sort recyclables and transport them to somewhere where they actually have some economic value. If it made sense the taxpayer wouldn’t have to pay anything at all.
- Don’t buy “fair trade” coffee or any other fair trade product. Apart from the fact that it tastes dreadful, the only sustainable way to help third world prosperity is genuine free trade and Ricardian comparative advantage.
- Oppose the plastic shopping bag ban. All it does is force people to buy expensive garbage bags instead of using shopping bags as free bin liners. Moreover the Productivity Commission found that plastic bags don’t present a significant environmental threat anyway (the same report also debunked recycling – see 1. above).
- Don’t be skeptical about all carbon tax opponents. A carbon price only makes sense if most other countries impose one, which currently looks quite unlikely. In the absence of an international price in the next few years all we’ll be doing is exporting jobs in return for a warm inner glow of self-righteousness.
Unfortunately the HoS didn’t resist the temptation to copy it to the entire School of Law and Business bulk email list. I am keeping a watchful eye out for a Green Lynch Mob.
“Don’t be skeptical about all carbon tax opponents. A carbon price only makes sense if most other countries impose one, which currently looks quite unlikely. In the absence of an international price in the next few years all we’ll be doing is exporting jobs in return for a warm inner glow of self-righteousness. ”
Talk about a flip-flop! ;-) But it’s good to see all those sensible points.
“Talk about a flip-flop!”
It’s not a flip-flop at all. You obviously haven’t carefully read my assorted contributions on AGW over the years (not that i can blame you). My position has long been that establishing a modest, reasonably well-designed carbon pricing regime (which the experts say the Gillard model is) is a good idea as long as we’re prepared to abandon it and move to an adaptation strategy if an international carbon price doesn’t emerge within a few years. Some will recall that I even curated a discussion board interaction where a number of us including Patrick and others (possibly even Joe Cambria) achieved a significant level of consensus along those lines.
I only differ from Paul Frijters’ position in that I’m slightly less pessimistic than he is about the prospects of a workable international carbon pricing regime emerging, and therefore think it’s worth setting a best practice example for the moment, while being careful not to inflict pointless economic damage on ourselves. I may be wrong, but my general understanding is that Nicholas Gruen’s stance is not dissimilar to this.
We’ve been setting best practice examples in many more important areas for decades and the world has taken absolutely no notice of our little backwater country. What makes you think it will be any different with the carbon price?
All it’s about is making people feel excellent about themselves. We would save a lot of money by just buying every greens voter a blue ribbon that says “concerned citizen”.
hilarious! We should perhaps have a competition for additional such things. “Use as much water as possible so that more river water is cleaned”?
I’ll be waiting by the mailbox.
Good one – I’m sure they’ve never heard any of those arguments before!
Agree with all except perhaps 1, where I am wondering how “uneconomic” means the same thing as “bad for the environment”.
Unlike the carbon tax, where it’s quite easy to see how it could mean jobs moving offshore (and the pollution just continuing there), I can’t see any similar rationale for recycling.
stephen
New Scientist a few years ago reported that the transporting involved in the recycling of paper in the UK consumed more energy i.e released more net carbon, than burning it ‘on site’ for heating purposes.
Moreover, transporting recyclables from Darwin to any centre large enough to process and re-use involves moving the stuff around 4000 kilometres, which is a hell of a lot further than any conceivable UK journey. It’s a paradigm example of what the PC talked about:
1) Agree that publicly funded recycling may well be unproductive in Darwin. The situation obviously improves drastically in larger cities.
Disagree that your average environmentalist is not up to speed on the problems with government-run recycling programs. As a simple example, take a typical Friends of the Earth spiel: http://www.foe.co.uk/press_for_change/home_index.html Notice how pretty much none of the tips advocate simply putting something in your recycle bin for the council to take away.
2) Well Cadbury have gone hard on the fair-trade chocolate thing recently and I generally find their chocolate to be the better tasting of the lower end brands, so I disagree that fair-trade is necessarily worse tasting.
But more seriously – think about it from the point-of-view of the shopper. On one hand you have a coffee bean that was grown by people who were paid fairly and had fair work conditions, on the other hand you have a coffee bean grown by people who were paid next to nothing with work conditions akin to slavery. Are you advocating that people should choose the latter? Based on what information?
Whilst purchasing coffee at their local shopping center, I don’t think the average shoppers is offered the ability to advocate for free-trade agreements that may indeed help coffee growers. They are however offered the choice, after-the-fact so to speak, between buying coffee that was produced ‘fairly’ and coffee that was produced ‘unfairly’.
3) Agree that plastic bags are small peanuts and a ban on plastic bags is not necessairly the way to go, but I think that you would find the majority of non-recycled household rubbish is made up of: packaging, meat waste and vegetable waste. Your typical environmentalist would have you go vegetarian, compost your vegetable waste and reduce your reliance on packaged food, which lo-and-behold would largely eliminate the need for plastic bags to put your rubbish in.
4)But you do know that this particular argument is only the beginning for carbon-tax opposition. Starting from there it gets all types of crazy.
What’s more, the argument is completely circular. If everyone around the world listened to environmentalists more then the argument would fall apart wouldn’t it?
Are you saying that the “free trade” organic coffee grown in East Timor which I buy from woolies (I assure you it is delicious) is an unsustainable crop for East Timor and of no benefit to any Timorese? How so? By virtue of what measures?
I don’t really understand the objection to fair trade coffee. If a particular segment of coffee consumers want to purchase coffee based on some kind of ethical criteria, and a particular segment of coffee producers caters to that demand by producing coffee based on those criteria, how is that inconsistent with “genuine” free trade or Ricardian comparative advantage?
sorry “fair trade” it was. Free trade is another thing entirely.
One of the ways “fair trade” hurts the poor is the restriction on child labour. It really is a dreadful concept. I won’t buy the coffee or chocolate on principle. Only we right wingers really care about the desperately poor.
You’ll get wrist strain if you keep doing that.
Sally/Tim
My reference to sustainability in relation to “fair trade” products is to economic rather than environmental sustainability. It’s highly unlikely that more than a tiny proportion of western consumers will be persuaded to pay a significant premium on a normal market price for the intangible benefit of feeling they’re supporting fairness to the third world. To the extent that consumers accept that message and are prepared to pay more, the market price is affected (just as it is by consumers prepared to pay more for an essentially identical thing due to the perceived prestige/snob value attached to a particular brand or product).
There’s no problem with that IMO (it’s just an element of free trade in any event), I simply doubt that it’s a viable path out of poverty for most third world world countries. It might be viable for East Timor because it has quite a small population who are so dirt poor that even a small premium paid by a relatively small group of consumers like Sally can make a measurable difference. But the real heavy lifting out of poverty comes from exploiting more fundamental comparative advantages. Thus hundreds of millions have already been lifted from extreme poverty in China and India through producing goods and services that are better value for money through harnessing comparative advantage.
Shame you resisted the temptation, and good on your head of department!!
I think we previously agreed that there was ‘a consensus’ as follows but subject to some significant qualification by James Farrell:
I’m not sure that I actually agreed that the carbon tax effectively served those purposes in such a way as to make it a good idea. Actually I didn’t, nor did Pedro I suspect. In particular none of us (not you, not Nick, not no-one) was actually willing to say that they thought purpose ‘a’ had a hope in buggery.
PS: you ‘curated‘ the discussion??
PPS: In retrospect I am amazed that that thread wasn’t derailed into the pits of doom.
Pedro@14
Most right wingers turn a blind eye to when they do not explicitly support child labour, on free market principles. What a furphy to pretend otherwise.
Ken, thanks for your response. But what in your opinion are the preconditions and then mechanisms that could enable small-medium producers in countries such as East Timor to both earn a decent living for themselves and their employees as well as contribute to and boost, even if in a small way, the economic growth and position of their country vis-a-vis other countries?
cpb!
That’s a hell of a qualification. Besides I thought everyone preferred Nestle Plaistowe from the lower-end brands?
Not really they aren’t. This isn’t dolphin-free tuna. The ‘fair’ in question is quite subjective and the economic case against is pretty reasonable iirc.
I’ve read it three times and I still can’t work out if this is parody or principle…gone amuck!?!
“In particular none of us (not you, not Nick, not no-one) was actually willing to say that they thought purpose ‘a’ had a hope in buggery.”
It’s certainly true that I’m not optimistic, but from my reading of Paul Frijters I think I’m significantly less pessimistic than him at least. I reckon it’s worth a careful try for a while. The world managed to achieve meaningful agreement on eliminating CFCs to repair the hole in the ozone layer, on mostly eliminating DDT, and on numerous other things that were neither simple nor cost-free. Admittedly none of them were as ubiquitous or economically central to growth as dramatically reducing energy production by burning fossil fuels, but you never know …
As I understand Paul’s arguments, they essentially amount to treating the “free rider” effect as conclusive and decisive against any possibility of achieving an effective international carbon pricing regime. I’m not expert enough in economics to argue a detailed contrary case. However I am aware that such a case DOES exist. For example John Quiggin briefly canvases some of the arguments here. With a bit of luck he might wander past Troppo in the near future and expand on them.
As for “curate”, I’m sure I could find a dictionary that lists an alternate meaning matching my usage, if I could be bothered looking. Anyway you knew what I meant!
Ken, I disagree with you on the carbon tax point for most of the boring old reasons (just for starters, quite a few countries are acting to reduce carbon emissions, though few as efficiently as us). But your recycling and rubbish bag points are spot-on.
The fair trade coffee issue, on the other hand, is genuinely complex. The issues were aired in 2007 by The Economist, though the magazine misssed a few angles. I don’t think the problem is that fair-trade coffee can’t solve all of East Timor’s problems. But several other drawbacks are visible. Fundamentally, when you mess with markets, you get a bunch of second-order effects.
The commonest criticism, popularised by Tim Harford, is that if farm-gate prices for coffee rise across coffee-growing nations, more growers will be attracted into the industry, pushing up supply and reducing prices again. Then again, the fair-trade premium seems to be paid in a few local markets (like East Timor), whereas the free-market price is set globally. If fair-trade coffee merchants pick their markets well, they might be able to do some good. Let’s hope they all understand economics.
But it does seem arguable that as soon as fair-trade principles have effects on a large scale, they will probably cease to deliver the end they seek. Raising the global price will attract more growers and push the price down again. Also note that if fair-trade coffee merchants then cease promoting fair-trade coffee, prices can be expected to temporarily fall back below their long-run market price until enough impoverished growers exit the market. When a society exits a failed price-maintenance scheme, the withdrawal pains are usually awful. (Ask an Australian woolgrower.)
Meanwhile, the premiums paid to poor fair-trade growers seem tiny in comparison to what some rich consumers pay. But this could simply be an argument for making fair-trade coffee schemes more generous to growers.
Fair-trade coffee gives me a headache.
Whoops, missed a fair-trade coffee problem. Tyler Cowen notes that fair-trade coffee likely diverts demand from what we might call “exploitation coffee”. For that coffee, farm-gates prices may well fall. So, presumably, may profits and wages.
“Do not buy the products of exploited workers” sounds like an effective moral claim. “Push down the wages of exploited workers” sounds morally awful. Yet economics warns that in many circumstances, the two statements may be the same.
Exactly David W, closing down sweatshops removes jobs from people who really need them. Fair trade tends to exclude the most marginal farmers because they can’t meet the standards.
This is the simple description from wiki:
“Fairtrade Standards for hired labour situations ensure that employees receive minimum wages and bargain collectively. Fairtrade-certified plantations must also ensure that there is no forced or child labour and that health and safety requirements are met. In a hired labour situation, Fairtrade Standards require a “joint body” to be set up with representatives from both the management and the employees. This joint body decides on how Fairtrade Premiums will be spent to benefit plantation employees.”
If you can’t see the problem that will cause then you must be blind. (So I guess it is Tim Macknay with the strained wrist.)
A kid who can’t go to school is better off working than just lazing around starving. And don’t take my word for it if you are too lazy to think it through.
http://www.slate.com/articles/business/the_dismal_science/1997/03/in_praise_of_cheap_labor.html
It’s only fair to point out that the Montreal Protocol came into force in 1989 and the current ozone “hole” is much bigger now than it was in 1989. Mind you, many of the reductions in CFC uses were phase outs and some of them are still being phased out even today, so the only fair conclusion is that we don’t have any idea what the actual effect of our efforts will be, and we won’t have an idea for at least another few decades.
On Fairtrade coffee, I’ve seen reasonably compelling evidence that corruption can take a cut out of the nominal profits of Fairtrade farms because corrupt officials ensure that “approvals” to operate are only sold to the highest bidder. (Possibly I’m thinking more of the cocoa trade than the coffee trade?)
But for a balanced assessment of the marginal economic benefits of Fairtrade coffee, see the paper by Booth and Whetstone.
The big advantage of a price on carbon is the extra investment in low CO2 technologies. Given that many countries are effectively putting a price on carbon, there may be unexpected benefits to Australian high tech firms even without a international price.
Are you trying to say that the Rainforest Alliance or Fairtrade Association’s standards are ‘quite subjective’? I was led to believe that they are reasonably thorough. In fact another commenter here is arguing against such standards on the basis that they are overly strict. Or are you saying that what constitutes ‘fair’ for me might not constitute ‘fair’ for you – well fair enough, but if the difference is truly subjective, I don’t see how you can then go on to say ‘Don’t buy fair trade’.
There may well be an economic case against fair-trade, but I think David Walker’s comment sounds much more reasonable than Ken’s (which, as with some of Ken’s carbon tax arguments, comes across unimpressively as “X won’t solve everything all at once, so therefore X is bad”).
Well its tounge-in-cheek but this is the point: if by banning plastic bags people are “forced to buy expensive garbage bags”, as Ken claims, then it seems sensible that people would also to start to look at ways they could reduce their household garbage in general, in order to save money on expensive garbage bags, with the environmental benefit of banning plastic bags being thus two-fold.
Now I stated before that I am in agreement that banning plastic bags is not necessarily sensible. So in both this case and the fair-trade I don’t necessarily disagree with Ken’s conclusions. I am simply pointing out that Ken needs to work through some of his arguments a lot more before they will sound as impressive as he wants them to.
Total reliance on fossil fuel and resource taxing could well have the desired effect without the need for ubiquitous plastic shopping bag bans and the like. It’s just a matter of how you constitute the marketplace and the means of taxation can have a major impact on outcomes. You only get the maximum social pricing effect by substituting all other forms of taxation for resource taxing and we know from extensive experience price is superior to quantitative rationing.
..and that’s because like Ken, we all eventually get fed up with being told what to do all the time.
Pedro, If you re-read my comment you’ll see I was responding to your other piece of guff, not your remark about fair trade ‘restricting’ child labour.
Personally I don’t buy fair trade coffee because, like Ken, I haven’t come across any that I like the taste of. I think the observation that fair trade is an ineffective method of large scale poverty alleviation is on the money, but the claim that it’s morally reprehensible is risible. It seems to rely on a conflation between fair trade arrangements and some kind of government regulation or enforcement (like that in the Slate article).
Trying to enforce labour standards in societies that can’t afford them will probably reduce welfare rather than enhance it, but it’s difficult to see how that’s relevant to fair trade arrangements, which are private deals between buyers and sellers which make up a tiny portion of the market.
It may be the case that the children of workers involved in fair trade schemes are worse off than their peers who are not, but I doubt it. I also doubt they are that much better off.
But cbp, reducing rubbish is not a pricelessly good thing.
The idea that consumers buying only “fair trade” products is just the market working would be fine were those consumers reasonably well informed about the effects of the choices, but in fact they may not be.
There is the case cited by the ILO, for instance, of a boycott of Walmart products made with child labour, which resulted in some of the kids being dismissed and ending up on the streets of Dhaka, working as beggars and prostitutes.
Most first world consumers have little understanding of the labour market realities facing people in the third world and would probably be horrified if they were to learn that their well intended consumer choices had such effects.
I agree with all except the last point in this post.
Even without global warming a carbon tax does less economic damage than the income tax it replaces (that’s why tax experts used to refer to it, way back when AGW was genuinely uncertain, as the “no regrets option”) and the dynamic effects of the tax in developing domestic carbon substitutes puts us in a much better position if the rest of the world does belatedly get its act together. The downside is extremely low, the upside high – it is prudent risk management.
Mind you “prudent risk management” is a lot less attractive as a slogan to run on than “make the big polluters pay”. In politics your rhetoric has to aim at exactly the “warm inner glow” moralism that this post was a reaction to.
Yes, it is a Pigovian tax, a straight-up sensible pricing of externalities, so should be easy to accept especially, but not only, if you accept what the climate scientists are telling us). It’s supported as such by even orthodox, right-wing economists like Greg Mankiw.
*missing parenthesis before ‘so should’ – apols
But that’s true of much, if not most, consumer behaviour. “The market working” in reality is not the same as “the market working” in an idealised model of perfect information.
Another example of conflating fair trade schemes with something else, in this case a boycott.
Probably. But no one (on this thread at least) has actually shown that fair trade consumption decisions actually have negative effects. At best, they’ve shown that the positive effects are relatively minor and limited to small communities, and that there could be negative effects if fair trade became large enough to significantly affect the overall market. Personally, I doubt that will happen.
I think the real reason people don’t like fair trade is that they think it’s irritating do-gooderism that implicitly judges them. I think that’s an understandable reaction to it, and I don’t really see the need to cast about looking for “rational” reasons to object to it.
Why does it have to be free to be economic? I would have thought that recycling waste is only uneconomic if it cost more than the alternative (eg. dumping the waste in a landfill)
Tim at #36, some people may dislike do-gooderism, but I for one find it useful. Free range chicken products are an example where do-gooderism has, as best I can tell, done plenty of good. But unintended consequences really do exist, and in relation to “fair trade” they have the potential to be a real problem. Intervening in labour markets to enforce above-market wages, in particular, is not free of repercussions.
That said, you make a terrific point when you suggest that some of the economic commentary around fair-trade coffee seems designed to write it off too quickly. For instance, I suggested above that promoting fair-trade coffee will push down the demand for “exploitation coffee” and hence lower the wages for workers producing exploitation coffee. Noted economists like Tyler Cowen make this point too. In fact, on reflection, this argument seems wrong: wages for workers producing “exploitation coffee” are almost certainly set in a broader market than just the market for coffee laborers.
Tim M, if you buy fair trade thinking you are helping the poor, then you have only part of the story. To the extent that fair trade preferences exclude the most marginal farmers and workers they are obviously harming the most needy. So you can totally ignore the scamming opportunities and whatever and simply recognise that refusing to buy something made with child labour is most harmful to the children who consequently don’t get employed. Your conscience might be satisfied but their hunger won’t be. What’s more, getting a job and some money will likely be the only opportunity to start on the ladder out of poverty.
DD and Dan, sure, a carbon tax is a consumption tax and so is more efficient than an income tax, but more regressive as well. The problem though is that the carbon tax does two things that have a cost, one is the prejudice to trade exposed companies and the other is the consequence of the tax actually working as planned.
If the tax does work as planned there will be a cost, in more expensive energy and money shipped off-shore for credits. The gain for that cost is an unnoticable reduction in global CO2 emissions. So, if you want to increase consumption taxes generally, then fine, just increase the GST rate and reduce income taxes accordingly.
I’ll bet Greg Mankiw wouldn’t support our carbon tax in our circumstances.
Tim@36, ‘fair trade’ is often promoted as trade in products made in compliance with ILO core labour standards. Along with union rights and freedom from slavery and discrimination, the core standards include freedom from child labour. Thus, the anti-child labour boycotts were so-called ‘fair trade’ in action.
Having said that, I accept that the term ‘fair trade’ may have different and/or narrower meanings in some contexts, but I do not accept that I was conflating concepts when I including a consumer boycott of imported goods made using child labour as an element of a free trade consumer action.
Re: your point that markets often suffer from less-then-complete information, they of course do. However, the fact that the point applies to some extent more generally does not mean we can ignore its application in the case of fair trade – particularly when an important part of the consumer’s rationale for purchasing a fair trade product is the effects of the product on a third party whose true circumstances and options they know little about.
Marek
sydneys waste is transported about 250Ks to the old Woodlawn pit ( near Tarago).
To the extent that recycling reduces trips to the tip it provably reduces net transport fuel emissions , but doubt if its by much.
A more effective approach would be to reduce the amount of packaging in the first place ,.
Pedro,
The reason Mankiw would support it is because it is an ETS with a fixed price.
He strongly believes in a carbon tax however.
If my memory is correct he thought both candidates were wrong in the last President election because they favoured cap and trade not a carbon tax.
Pedro, KB, shall we write to him? (Just curious, but also serious).
Dan
I encourage you guys to write to Greg Mankiw. I for one would be really interested in what he thinks of Australia’s carbon pricing regime if he could be bothered replying.
Ok, let’s do it. I’ll draft a letter to agree and send.
that is a bit of a pigou in a poke but it might mankiw a difference
Awesome, thanks.
Here’s a link that might be useful, describing the specifics:
http://www.cleanenergyfuture.gov.au/clean-energy-future/securing-a-clean-energy-future/#content04
Ken, Nicholas – are you up for posting Mankiw’s response (with his permission)?
Dan
Yes for sure.
If you don’t think i would overburden the email, it’d probably be interesting to include the secondary effects of the plan, i.e income tax cuts as DD points out at 33. The lowering of the EMTRs for low earners is very good stuff regardless of the effects of the tax on climate change, but political economy dictates that its a package deal..
That’s one reason why I think that the probability of it helping spur a global agreement need be very very low before the scheme becomes unworthwhile.
I think you have to include the package as the tax is clearly not in isolation. I said that he would not support our tax in our circumstances and so you can’t assess the claim fairly without the surrounding policies.
The link should be provided and probably some other surrounding facts, like that treasury says the economy won’t grow as much and that there is no exemption for the trade exposed. Oh, and the way the reduction mainly come from OS credits at a cost and that the actual reduction in co2 is miniscule.