One major red flag in any reform movement is if they try to reinvent economics without knowing what it said before. Such as the new enthusiasm for “circular economics” where things are not wasted, as opposed to the old free market system where, driven by the relentless logic of profit and loss, entrepreneurs tried desperately not to waste anything. Euronews.green emails “Green Week: Be part of the circular economy”. But you already are, and don’t even know it. Then they say “Green Week: Stop the ‘take-make-waste’ cycle”. But remember, as just one example, ever since the invention of agriculture people repurposed almost all their trash, even dung. And before that skin, bones, guts, you name it, it got reused. Unfortunately bad economics also gets recycled.
People who don’t study history tend to repeat it and economic history is no exception. Except in that it is, if anything, even more neglected than other kinds. Thus when we read that “Global Carbon Market in Turmoil After Zimbabwe Grabs Offset Money/ A government claiming half the revenue from privately-backed efforts to protect forests and cut emissions might throw carbon credit projects around the world into doubt” the only thing that surprises us is that it surprised anybody.
Dangle booty before bandits and they seize it. You really didn’t know? Bloomberg adds:
“The global market for carbon offsets is worth about $2 billion today and projected to grow to as much as $1 trillion in 15 years even as it faces fundamental questions about credibility and effectiveness. Add government appropriation to the list of risks for this climate solution.”
We add “Fools rush in”. Government appropriation dates back to the invention of government, and Zimbabwe’s government has been a leading practitioner of it as well as of umpteen other proven disastrous forms of intervention. How did you not see it coming?
Lots of practice might be the answer. For instance another classic, courtesy of the Wall Street Journal:
“In July 2020 Italy began offering tax credits that covered 110% of the cost of energy-efficient upgrades such as thermal insulation on residential buildings. The Superbonus scheme also covered concurrent installations of solar panels, electric-vehicle charging stations, or other energy-efficient measures.”
Quick, now: if you get back more than you paid for something from the government, aka your fellows, what will happen? Right. You’ll spend as much as you can, to the point that you’ll ask suppliers to increase their costs so you can cash in more. And you’ll spend it as fast as you can, because you’re in a race to empty the treasury with your fellows who are trying to get your tax money before you get theirs.
Why wasn’t it predicted? Actually it was:
“because of these perverse incentives, ‘the customers will not go around asking builders for a discount but – on the contrary – an increase in price,’ Luciano Capone, a journalist for Il Foglio, predicted in May 2020.”
And by January 31, 2023, the Italian government had spent over €71.7 billion in Superbonus tax credits, more than half the €127.8 billion it spent on public health in 2021. And when banks ran out of tax room and stopped buying them, tens of thousands of businesses were left holding unsellable credits and facing ruin. Some greener, better economy this turned out to be.
Watching the so-called best and brightest struggle with these basics, we are reminded of Lord Melbourne’s complaint, quoted in slightly variant forms, that “Nothing the wise men promised has happened, and everything the d--d fools said would happen has come to pass.” And he was Queen Victoria’s first Prime Minister, speaking of not learning from history.
Including about beggar-thy-neighbour policies having a remarkable tendency to do the entire neighbourhood. As the Financial Post observes, or rather the Canadian Press via FP:
“The International Monetary Fund warns that Canada’s green subsidies could stoke an international race to the bottom, even as it credits the country for a ‘multipronged’ approach to addressing climate change.”
Arguably given our current global irrelevance, our pretentions to the contrary notwithstanding, even starting a bad international thing would make us feel important. But notice that the IMF feels obliged to praise us for our supposed good intentions, as if “multipronged” were not in fact a euphemism for jumbled, contradictory, cross-cutting and counterproductive. (As they go on to state in econo-bureaucratese, “the design of some incentives could pose some risks.” You don’t say.)
It also warns that:
“the current strong focus on electric vehicles — and their batteries in particular — as key to Canada’s green industrial development will require a cautious approach given rapid technological change”.
But good luck convincing our politicians they’re not smarter than the marketplace, like every other central planner who ever lived, none of whom they seem to have heard of.