Categories
Economics Politics & government

[1061] Of global warming in the 2007 State of the Union

After years of denial and under pressure from growing green presence in the Congress, the Bush administration is expected to finally give global warming the attention it deserves:

George Bush is preparing to make a historic shift in his position on global warming when he makes his State of the Union speech later this month, say senior Downing Street officials.

Somehow however, I feel Bush is only happy to touch on global warming instead of discussing further on Iraq. Iraq has been such a failure that it has become a good policy to divert public attention away from Iraq.

Nevertheless, finally, perhaps this is the way forward. This u-turn by the Bush administration might set the momentum we all need to formulate an globally inclusive post-Kyoto plan to combat global warming. Bush’s proposal might be insufficient but a change is still a change.

Earlier this week, ExxonMobil of whom had developed a reputation as the staunch denier of global warming, abandoned its denial stance and joins the fight against global warming. Also, this week, major companies called for a carbon trading system, putting President Bush under pressure just hours before his address:

NEW YORK (CNNMoney.com) — Chief executives from such major corporations as General Electric and DuPont teamed up with environmental organizations Monday, urging U.S. lawmakers Monday to pass sweeping legislation that would ultimately cut greenhouse gas emissions.

This will be an exciting address for us, the greens. The snowball is now an avalanche.

Categories
Economics

[1060] Of tax reduction, not subsidy increase please!

Crude oil prices have been falling lately and certain quarters are calling for the reduction of fuel prices in Malaysia. That call includes implicit demand for increase in subsidy. Anwar Ibrahim is one of them.

I oppose any subsidy increase that distorts the market. In fact, to combat externalities caused by fossil fuel consumption, I advocate the imposition of tax to internalize the externalities. Unfortunately, taxation is politically unpalatable. As an alternative to subsidy increase or taxation, I propose a policy better than subsidy increase as well as pragmatic at the same time; a third way — a proportionate decrease in taxes.

That means any saving made by the government through the reduction of subsidy as well as the fall in crude oil prices should be fully used to fund tax cut across the board.

The term saving here needs to be defined. Saving means the amount would need to be paid by the government for subsidy if crude oil prices had not fallen from the price level when the latest subsidy regime was announced.

Why is this policy better than the call to increase subsidy?

This policy is less distortionary. Not only it does not increase distortion caused by subsidy, it also reduces distortion caused by taxation through tax reduction. Apart from economic consideration, tax reduction might have favorable impact comparable to the political effect of subsidy increase effect — it would please the mob, for better or for worse.

Categories
Economics Environment

[1056] Of Exxon surrenders!

After being attacked from all sides by the greens and allies, one of the great global warming deniers surrenders (via via via):

Jan. 12, 2007 — Oil major Exxon Mobil Corp. is engaging in industry talks on possible U.S. greenhouse gas emissions regulations, a move experts said could indicate a change in stance from the long-time foe of limits on greenhouse emissions.

Why does Petronas plan to act on global warming?

I wonder, where does Petronas sit in the climate debate?

Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reserved Mohd Hafiz Noor Shams. Some rights reservedp/s — from Making Waves of Greenpeace:

A couple years back, our intrepid Greenpeace US research team — through their work on the ExxonSecrets website — exposed the role that Exxon-funded Competitive Enterprise Institute (CEI) was playing in trying to ensure Global Warming didn’t impact US energy policy — absurdly in one case being asked to play political assassin by folks in the Bush Administration’s Council for Environmental Quality who thought the Bush Administration EPA chief wasn’t skeptical enough about climate change. (They uncovered a nice little smoking gun memo exposing the collusion.)

Two years ago, I blogged about ExxonSecrets.

Categories
Books, essays and others Conflict & disaster Economics Liberty

[1054] Of Immanuel Kant, free trade and peace

By virtue of their mutual interest does nature unite people against violence and war… the spirit of trade cannot coexist with war, and sooner or later this spirit dominates every people. For among all those powers… that belong to a nation, financial power may be the most reliable in forcing nations to pursue the noble cause of peace… and wherever in the world war threatens to break out, they will try to head it off through mediation, just as if they were permanently leagued for this purpose

— Immanuel Kant, Perpetual Peace, 1795.

Categories
Economics

[1041] Of Malaysian government spending and private investment in 2007

I was reading the Business Times and I saw this:

In 2007, Malaysia’s GDP is estimated to grow at more than 5.0 per cent. The two key drivers of demand will be higher government spending and an increase in private investments, particularly with the implementation of the 9th Malaysia Plan.

Quiz for students of macroeconomics: with ceteris paribus, what will happen to private investment when the government increases its spending?

Answer: See crowding out at Wikipedia.

Nearly four months ago, the Malaysian Domestic Trade and Consumer Affairs Minister announced that his ministry planned to combat shortage with — drum roll please — price ceiling!