Wednesday, October 10, 2007

Good old sheperd is back (fg)

Today, the conference of the "Verein für Socialpolitik" just opened its doors with a speech by Hans W. Sinn (please find Sinn's paper linked on the NBER site) about climate change and implications for public policies. To him, insecure property rights of resource owners and the externality of global warming distort the private incentives, leading both to overextraction relative to the criterion of intertemporal Pareto optimality. His advice is to

  • implement useful policy measures that mitigate the problem of global warming by flattening the carbon supply path in the world energy markets. Taxes on carbon consumption or switching to alternativ energy sources might not help flattening the supply curve of the resource owners.
  • use unit taxes on carbon extraction and source taxes on capital income as feasible policy options that satisfy this requirement.

I bet, Greg Mankiw would firmly introduce Mr. Sinn to his Pigou Club.