Crises Need Immediate Common Sense, Not Distant Promises

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We have evidently witnessed crises of confidence in political leadership in recent times. Whether it’s concerns over the ability of governments to deliver on potentially fantastic commitments to tackle global warming, racial bias in sovereign enforcement, or riots on Capitol Hill. To address these concerns, it is vital that officials carefully consider their understanding of how policies are formulated. This includes efforts to establish social policy goals, choosing regulation that appeals to common-sense, and the acceptance of uncertain outcomes. In doing so, it is possible to support a focussed and creative environment for further social development.

Policy Goals

There is no issue like sustainable development to inspire present leaders to commit future generations to action. The UN Sustainable Development Goals set out to inspire international governments to achieve progress towards 17 policy consequences by 2030. Many of these goals appear quite incredible and not practically achievable (“zero hunger” for example), other goals appear essential to any conception of a life worth living (such as “life on land”). How the UN might prioritise support amongst the various projects aligned with these goals is unclear, particularly those vital social projects that explicitly have other interests. Such initiatives distract from considerations of how to support robust systems of justice immediately. The present generation may not be willing to wait another 10-years to be included in a fair and just society.

Yet it is the issue of climate change where our leaders seem most determined to commit future generations to severe policy constraints. Carbon is an essential good for life on Earth and has a vital role in combustion processes for energy release and most activities. Many governments have pledged to be carbon neutral by some arbitrary deadline (UK by 2050 and China by 2060, for example). Such targets are technically extremely challenging to achieve whilst residents enjoy a standard of life that is comparable to that of the present generation. Compliance with these policies places considerable limitations on the demands and behaviours of children and their offspring, in particular. Further, governments are now using these deadlines to develop shadow prices for Carbon Dioxide emissions that are used to set today’s value-added-tax (VAT) on fuel consumption. Such ambitions do not result in particularly expensive shadow prices to challenge the present generations private behaviour. In fact, by taking advantage of their earlier position in time such initiatives tend to justify present VAT rates for fuels that are most questionably low.

In this way, such emission targets are little better in promoting action than the social cost-benefit evaluations adopted by environmental economists used historically to justify VAT rates for fuel. These influential economists understood that the environmental damage caused by greenhouse gas emissions may be treated as a policy options marginal surplus from a present-day Utopia. It seems fanciful to assume that natural disasters attributable to future atmospheric warming be the sole governance externality of an essential good such as Carbon and the elements role in combustion processes.

Whichever of these two approaches is taken, it is unrealistic that a leader expects to have such tremendous power as to set a definite pathway for so many people over the longer-term. Such policies tend to be more appropriate when dealing with private concerns only.

There is an alternative basis for developing public policy. Through applying a basic understanding of the social contract one can establish rates of VAT for fuels that may act to mitigate pressures on systems of justice in response to changing or growing demands. Such policies set immediate goals for the present generation to commit to stability, peace and rule of law within the present state-of-affairs. They are not contingent on any one particular constitution for sovereign states, just a tolerance for a minimum of controls to provide assurance. The actions of future generations are not accounted for in justification of such a policy. The methodology is grounded in the understanding that Carbon is an essential good and that a sovereign’s primary purpose is to maintain a state of peace within a community by enforcing promises and defending against competing externalities that may be quite natural. The issue becomes of no concern when Utopia is achieved and there is no need to enforce a promise.

A present-day Common Social Cost of Carbon is arrived at simply through dividing global gross enforcement costs by gross greenhouse gas emissions, to be added to private delivered fuel costs (including food) for optimisation of consumer demand. When calculated in this way, the results are quite a challenge to today’s leaders.

An initial anchor returns $180tC in 2016, through dividing public EU accounts for global military expenditure (~$1.8trillion) by a Kyoto Protocol figure for global emissions (~10GtC). However, we might need to double this anchor to arrive at a Common Social Cost of Carbon in 2016 so that it ranges somewhere between $300tC and $400tC, when adding global expenditure on public order and safety to military expenditure in the global gross enforcement cost total. Unfortunately, accurate global figures for these expenditures remain difficult to obtain and involves considerable uncertainty.

These figures are an order of magnitude greater than the $51tC attributable to the Biden administrations promise of 2021 and a much more compelling call to action than is evidently reflected in governments central planning.

United States Interagency Working Group estimates for the Social Cost of Carbon

Common Sense

The arguments presented here concern best taxation for optimal demand, not necessarily a condition of higher taxation and a greater role for the state overall. There seems no reason why a central governments income gained from a Common Social Cost of Carbon scheme may not be be used to fund expenses that were previously covered by taxation in other forms. Any concerns of fuel poverty could be addressed by simple (perhaps automated) exemption from the scheme for state dependents.

One of the major difficulties with arriving at a rate of VAT for delivered fuels, either through social-cost benefit analysis or alignment with a trajectory to meet an arbitrary deadline, is the degree in which public trust hangs on the experience and intellectual property of a small community of established “experts”. The result is a disconcerting feeling of the commons being shepherded by black-box models of systems that are contingent on gross assumptions for the future.

Alternatively, the proposition here for a Common Social Cost of Carbon is a figure that can be quickly estimated using publicly available figures and a basic understanding of mathematics. It is possible that all who have an interest may be included in assurance as a result of an auditable record that allows anyone who graduated from high-school the ability to check the sums themselves. A Common Social Cost of Carbon represents a powerful signal for the people to hold their leaders to account on the relative stability of their environment.

Uncertain Outcomes

If governments adopted the Common Social Cost of Carbon scheme, our leaders would find themselves in the enviable position of having developed a system that naturally achieves the consequences of their promises as far as practicable. Our leaders would have demonstrated good faith and potentially greatly enhanced their reputations. This all having been achieved without committing their successors to any particular conception of the good, other than a minimal arrangement for assurance and performance of contract.

A most attractive quality of this new perspective is the acknowledgement that there is no need to commit future generations to any particular long-term plan. Anything that is plausible may be allowed to happen and this domain may be highly creative. These seem fair arguments for an equal liberty of conscience in management of the commons. They allow for choice of regime of moral liberty and freedom of thought and belief, and religious practice, whilst being regulated as always by the state’s interest in public order and security. Particular associations may be freely organised as their members wish, and could have their own internal life and discipline. Maintenance
of public order is understood as a necessary condition for everyone’s achieving ends whatever they are and to fulfil their interpretation of moral and religious obligations. A reliance on particular metaphysical doctrine or theory of knowledge is not required. Therefore, it appears that a Common Social Cost of Carbon has good grounds for adoption.

Implications

The indivisibility and public nature of the element Carbon and the state of the Earth’s atmosphere, give rise to externalities that necessitate collective agreement organised and enforced by states. Once goods are indivisible over large numbers of individuals, their actions decided upon in isolation from one another will not lead to the common good. Some collective arrangement is necessary and everyone wants assurance that it will be adhered to if willing to take part. A remaining challenge exists in ensuring that all parties have the necessary assurance to follow through on such commitments. This involves members giving promise and a reciprocal recognition of their intention to put themselves under an obligation. Through reciprocal recognition and common knowledge such arrangements can be enabled, started and preserved.

Without adopting these principles in formulating policy, the least advantaged groups may plausibly be the institutions that uphold societal values themselves— including central governments and foreign embassies. The crises of confidence could continue and policy-makers remain unprepared to adopt the necessary controls to responsibly assure the present state-of-affairs in the common interest.

What could happen?

Whatever the policy, it seems clear that committing future generations to the promises of our present leaders may be considered a behavioural tool best suited to land the most challenging problems on one’s successors shoulders.

It is hard to underestimate the critical nature of these considerations to social demands and the principle is simple. When communities (including other species) become externalised from decision-making in the interest of supporting the status-quo, the party becomes increasingly fractious and there is a need to slow down so that responses can be more adequately jusified. We have a substantial, clear and present performance gap now for central planners to come to terms with to regulate demand. Perhaps, now is the time to finally appeal to common sense?…

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Aidan Parkinson

Aidan Parkinson

Senior Engineer working for Arup. I have experience providing assurance in building performance and digital projects for real estate organisations.