Global warming

Global warming is the claim that the earth's average surface temperature is rising, and that human emissions are a substantial cause. Whether that claim is true is a question for the physical sciences, and nothing in the Austrian School bears on it. What the Austrian literature addresses is the question that follows it: given some quantity of diffuse harm, by what institutions may it be identified, priced, and remedied, and what happens when a state undertakes to do that centrally.

This article treats the economics and the law. It takes no position on the physical claim, which cannot be settled by economic reasoning and is not settled by it here.

Why economics cannot answer the first question

Ludwig von Mises held that economics is a value-free science: it establishes what means attain what ends and cannot pronounce on ends. Two consequences follow, and both are routinely ignored in the public argument.

An economist has no professional standing to assert or deny a physical claim about the atmosphere. And even granting the physical claim in full, economics does not by itself yield the conclusion that emissions ought to be reduced. It can establish what a given policy will do to production, prices, and the pattern of investment, and leave the ranking of outcomes to the people who bear them. The common move from "warming is occurring" to "therefore this tax" skips both steps.

The externality framing and its Austrian critics

The standard treatment classes emissions as a negative externality: a cost imposed on parties outside the transaction, which the market therefore fails to register and which the state should internalise through a tax set at the marginal social cost, or through a quantity of tradable permits.

Mises had already located the source of the problem in incomplete property rather than in exchange: where the damaging use falls on resources nobody owns, the actor is not confronted with the cost he imposes, and the remedy lies in the definition of the rights rather than in the suppression of the activity. The same reasoning governs the tragedy of the commons generally.

The Austrian objection to internalisation by tax is a calculation objection rather than a dispute about whether the harm is real. Setting the rate requires a figure for the social cost of a ton of emissions, and arriving at that figure requires summing damages across persons and discounting them across generations. Costs in Austrian theory are subjective and attach to the individual chooser, so no such sum exists to be discovered, and the number a regulator uses is not a measurement but a choice presented as one. Permit schemes face the same problem one step removed, since the regulator still fixes the quantity.

The property-rights and liability approach

Murray Rothbard set out the libertarian law of emissions in "Law, Property Rights, and Air Pollution". Emission is not wrong because it is unpleasant or because a body of opinion disapproves; it is wrong when it invades another person's property, and the invasion must be proved by the plaintiff to a strict standard of causation against a specific defendant. Rothbard rejects both the regulatory standard, which permits by licence what would otherwise be a trespass, and any relaxation of proof that would let a general grievance stand in for a demonstrated injury. He also rejects the defence that an emitter was there first only where the emitter has actually homesteaded the easement by open use.

Applying this to a global and cumulative harm is where the difficulty concentrates, and the forum literature and the academic literature reach the same impasse. A given ton of carbon dioxide cannot be traced to a given loss; the interval between act and damage runs to decades; the plaintiff class is everyone and so is the defendant class. On Rothbard's own standard that is a case which cannot be brought, and the honest statement of the position is that a strict causation requirement leaves diffuse harms unremedied rather than that it remedies them.

Related proposals, argued on the same property-rights grounds, include private ownership of previously unowned resources so that an owner has standing and an incentive to defend them, and insurance pricing, in which underwriters who bear the losses have a direct interest in estimating the risk correctly and price it into premiums without needing a legislature to agree on a figure.

Adaptation, cost-benefit, and the political incentive

A separate strand, not distinctively Austrian but prominent in the same debates, argues that resources spent preventing warming buy less than the same resources spent adapting to it or spent on other problems entirely, and that the comparison should be made explicitly rather than assumed. Austrians add that wealth is itself the principal defence against a variable climate, so that policies which slow accumulation have a cost measured in resilience and not only in output.

The interventionist objection is about incentives rather than intentions. A measure justified by a projected harm decades out cannot be falsified within the term of the officials who impose it, the benefits accrue diffusely while the revenues and the permits accrue to identifiable parties, and an agency's budget grows with the size of the problem it reports. None of this shows a physical claim to be false, and it is a mistake to treat it as though it did; it bears on how much weight a projection issued by an interested party should carry, not on what the atmosphere is doing.

See also

• Externality
• Pollution
• Tragedy of the commons
• Property
• Economic calculation problem
• Interventionism
• Cost-benefit analysis
• Risk
• Insurance