Michael Livermore 0:10
Welcome to the free range podcast. I’m your host, Mike Livermore. This episode is sponsored by the program on law communities and the environment at the University of Virginia School of Law. With me today is Shi-Ling Hsu, a professor at the Florida State University College of Law. We’re here to talk about his new book, capitalism and the environment, a proposal to save the planet, which was recently published by Cambridge University Press. Shi-Ling thanks so much for joining me today.
Shi-Ling Hsu 0:40
Well, thanks so much for having me on.
Michael Livermore 0:43
Before digging into the book, I’d be interested to hear a little bit about what drew you to the intersection of law and environmental economics. You know, you have a JD, and an economics PhD, which is common enough, as you know, for law professors, but not so much in the area of environmental law. So I was just curious what brought you to this somewhat unusual background that you find yourself with.
Shi-Ling Hsu 1:07
You know, before, after law school, but before going to graduate school, I practice law. And I was a deputy city attorney for the city and county of San Francisco. And it’s a pretty good job. In most cases, we were kind of regulate, but we’re representing the city as a regulated party. And it struck me that a lot of the things that we did to comply with environmental regulations were okay, but not fabulous, there certainly seem to be better ways of achieving environmental outcomes. And that was the beginning of my own journey to coming to the conclusion that lawyers didn’t always have the best answers to solving environmental problems. So I kind of cast about for another way of thinking about things and eventually hit upon economics, went to graduate school, got my PhD, and you kind of know the rest of that, I just kind of started to build my academic career around blending my two areas of training.
Michael Livermore 2:16
Yeah, it’s really interesting. Starting with that law practice and grounding the economics in that practice, it actually strikes me that that would have been really an interesting background to have in an econ graduate program.
Shi-Ling Hsu 2:32
I would. It was true. When I went to graduate school, not many people were there with JDS, everyone kind of said something like, couldn’t you make more money in practicing law? And I could it just, I had a story similar to many other lawyers of my cohort. It wasn’t a lot of fun. Studying economics and the environment. That was fun.
Michael Livermore 2:58
Yeah, that’s cool. Well, thanks so much for the wonderful book, capitalism in the environment. You know, as you might guess, I’m pretty favorably disposed to most of the arguments in there and what you’ve written, so I’m going to try to play the devil’s advocate a little bit today. But it’s, you know, these are arguments that I’m really very, you know, amenable to, but maybe just before we kind of, you know, really get started, you could give the kind of elevator pitch, what’s the what’s the 90 second overview and the, kind of the high level message of the book?
Shi-Ling Hsu 3:35
You know, I think I was, I was driven to write this book, in part, because there’s a lot of misunderstanding about what capitalism is. And for that matter, as a fellow environmental law professor, you also kind of appreciate there’s quite a lot of misunderstanding about economics, generally, in our Professoriate. So part of the reason for writing this book was to try and set the record straight about a few things. And the biggest thing I wanted to get across was that capitalism is not an ideology. People seem to think that capitalism, once you have the system set up makes people do things that they don’t want to do. My book is about trying to explain how capitalism isn’t steering people’s decisions. People make decisions, and capitalism has a way of amplifying the impacts of those decisions, but it doesn’t actually drive the economy or people’s behavior in any particular way. The only reason capitalism has gone bouncing off in one direction is because we never kind of had- made a conscious decision that this is what our society should look like. And so we have a lot of pollution problems. We have a lot of social problems, and people blamed it on Capitalism, but it’s not capitalism that caused these things to happen.
Michael Livermore 5:06
So I think, you know, part of what strikes me is in the book, and as you kind of reading through it, and obviously, your part of your big pitch, not obviously, but part of your big pitches that, you know, one of the ways that we need to deal with environmental problems, a major way that we should be dealing with environmental problems is through environmental taxation, internalizing externalities rather than through, you know, a shift to centralized planning. So maybe, maybe just to get the background on the table, explain what is the what is the relative advantage of a of something like environmental taxation? Why is that consistent with a capitalist system? You know, capitalist economy and, and what? Yeah, kind of what are the advantages? And, you know, why does that makes sense, as opposed to something more like a centrally planned approach?
Shi-Ling Hsu 5:59
Yeah, I think capitalism is so efficient, because decisions are not made centrally. Decisions are made on the basis of prices. And it’s really amazing, I think Hayek got a lot of things right when he centered his own writings on the power of prices. But it’s, it’s amazing what you can do if the prices are just a little bit different. So capitalism is kind of something that I think can change our fossil fuel based economy very quickly. If we tax the pollution, and the greenhouse gas emissions from fossil fuel combustion, then I think we’d get a very quick changeover from a fossil fuel based economy to something else. Central planning, like legislation that seems to make its way to Capitol Hill, all the time, I consider it central planning, when we, when we spend a lot of money trying to pay actors to do certain things. I mean, we’re kind of making this decision in Congress, or in the White House, that this is something good that we like, that is sometimes okay. I mean, we, you, we oftentimes hit the right mark, or aren’t too far off the mark. But we miss a lot of things. While we do that, I’ve always felt, this is kind of a libertarian message, that markets have a lot more ability to suss out the things that work best, we just have to kind of tell the markets, what we want them to do. And a system of environmental taxes that’s kind of telling markets what we want them to do in a way. So in a way, I’m kind of getting away from this idea of a Pigouvian tax, that we’re actually internalizing harm, but we’re just trying to steer the economy in a different direction.
Michael Livermore 8:13
And so we could get into that, it’s an interesting distinction between the the notion of internalizing harm versus steering, the steering the economy via prices. But one of the things that that struck me was just, you know, 20 years ago, and then this isn’t this is partially in reading your book, and partially just observing the broader kind of scene around environmental politics. You know, 20 years ago, 10 years ago, I think a lot of the arguments that you make would be pretty well received amongst many leaders in the environmental community that, you know, the idea that environmental law, environmental policy can be consistent with a vibrant market, the notion of using market incentives versus command and control or a central central planning, industrial policy kind of approach. You know, this was the bread and butter of many environmental groups. But it it does seem that the politics on a lot of these issues has changed. So what do you think happened? What what how did we get from the point where, you know, most of if not all of the major environmental groups supported a cap and trade system to deal with greenhouse gas emissions to where we find ourselves today?
Shi-Ling Hsu 9:28
You know, that’s a great question. What happened to kind of market based mechanisms in environmental law? You know, I think part of it is that environmental law has gotten caught up with a broader growing suspicion of all things economic. I think that’s kind of a misunderstanding to or based on a misunderstanding too, but I’m not sure or environmental law, the professors, the policymakers, the think tanks have actually grown sour on the role of economics or on market based mechanisms. I think that there is a swelling, distrust of economic analysis and of economists and environmental law has kind of gone along for the ride. And in the meantime, you know, it becomes easy. There’s the social problems that also seem very pressing, I think it’s kind of easy to say, See, I told you, so economics was never going to provide the solutions for our problems. And now look at everything that’s going on, the environments the worse off for it too.
Michael Livermore 10:44
So just kind of see think what’s going on as a more general antipathy towards economic reasoning, economists. And, you know, capitalism writ large?
Shi-Ling Hsu 10:59
Yeah, I think so. I think maybe maybe, in the last five or 10 years, just upset over economic inequality has gone up several levels. And that just has raised the temperature of everything, I think. So environment. Yeah, I think that’s that that becomes part of what’s wrong with something that people don’t like.
Michael Livermore 11:31
So yeah, so I mean, I think there’s a lot of interesting questions that we could kind of get into, but just raising the issue of inequality and broader kind of critiques of capitalism or a thoroughgoing market based economy. You know, what are your thoughts there? I mean, obviously, you’re focused in this book on the intersection of capitalism and the environment. That’s right in the title. And so, you know, what I take your claim to be in part is, look, whatever the ills of capitalism or whatever the ills of a market based economy, that it leads to environmental destruction is not one of them. Right? That’s just contingent on on our politics. Yep. So but there are these other issues that that, you know, that are part of our political culture, around things like inequality, you know, the accumulation of massive amounts of wealth, that’s kind of now easily transferred across generations, kind of building up this economic aristocracy in the in the States, obviously, you just have hyper wealthy people who, who are just very productive or have managed to earn a lot of money in their lives. But then there’s also the intergenerational wealth changes. There are, you know, consistent concerns about poverty. You know, again, intergenerational poverty, people have complaints or concerns about economic insecurity that is very bound up with the operation of the marketplace, right. Part of what you discuss in the book, and the value of market capitalist based approaches is that they’re disruptive, they can make big changes very quickly. But of course, you know, that leads to people losing their jobs, it leads to leads to communities being hollowed out, so what are your thoughts more generally on these concerns about economic insecurity or inequality? And, you know, do you see them having purchase or any relationship to environmental policy? Or should we think of these broader critiques is just kind of different, not really related to concerns about environmental quality?
Shi-Ling Hsu 13:38
I think these critiques do have to relate to the environment. I mean, that’s I think we’re going is that, you know, you can’t embrace capitalism to solve environmental problems while still ignoring that it creates other social problems, right? Is that kind of- Yeah. Well, you know, I’ll say this. There’s some merit to that, because I think that they’re absolutely does not have to be any correlation between capitalism and environmental degradation. But I do think there’s going to be inevitably, some tension between capitalism and social or economic inequality or some tension between capitalism and equality, that though, I think it’d be managed, you know, capitalism is not just an American thing. It’s, it’s a Scandinavian thing. It’s an Asian thing. It exists in many different forms in different countries. It’s even an authoritarian thing in China and in Singapore and i–nequality may be, to some extent, a necessary part of capitalism. But I think it can be managed, I think if certain social policies are in place, the social safety net, then the tension can at least be politically reconciled between kind of an energetic robust capitalism. And the kind of the downsides, the wreckage left behind.
Michael Livermore 15:30
So this takes us- I think it’s a kind of a broader set of questions around the intersection of, of economics or the marketplace. Commerce, which we’ve kind of, again, we’re, we’re really thinking about when we’re thinking about environmental issues is what are the negative environmental side effects of industrial activity and cause consumer choices and so on. And the world of law and politics, and, you know, I think one of the critiques that you address in the book, but is, is a is a powerful and, and serious one to deal with, is the claim that, you know, the marketplace or, you know, kind of capitalism, in general, is going to necessarily infect politics in ways that are undermining of broader social goals, but including environmental protection. So you deal with this in a pretty serious way. So one of the concerns that you’re you discuss is around what I would kind of think of as path dependency,- sunk costs, and that idea of grandfathering, in kind of existing incumbent actors. And so the idea here, generally, is that once capital has been invested in certain industries, here, where, you know, in the context, we’re talking about fossil fuel consumption or extractive industries or whatever, then there’s going to be a concentrated group of relatively wealthy folks, companies, individuals, families, who will use the political process to protect their status as incumbent actors, and will therefore undermine the marketplace, undermine the operation of the capitalist economy, in order to preserve their preserve the status quo, and preserve their place, and ability to kind of reap the profits, even if it’s inefficient to do so. So, and I think the the concern, the big picture concern is that this is like, a necessary or a, it’s a process that’s just gonna happen. It’s a predictable process, it’s very hard to disrupt, it’s very hard to build institutions that are not going to fall prey to this kind of process. So so this is the kind of capitalism might be great in the short term, but over the long term, it undermines your political economy in a way that leads to something that isn’t capitalist, and is kind of generally very harmful.
Shi-Ling Hsu 18:04
You know, it’s interesting that that was a great summary of the arguments I’ve made part of the book, to hear you tell it almost sounds kind of Marxian, doesn’t it? It’s a story of inevitability, and the end is not a good outcome. I think that it’s true, that there is this necessary infection. I liked that kind of phraseology that you’ve adopted, of capitalist winners, infecting politics, I think that’s probably always going to be the case. Now, that’s a hard one to solve. And this is where I think it gets back to my, my kind of libertarian instincts is that if we could focus on having governmental agencies like the EPA identify things that are harmful, and tax them, just tax them, then we can at least not move government in the direction of that necessary infection that you were talking about, because a lot of that infection happens. When there’s an industry that says, you know, we’re creating jobs, we’re doing good things. You want to support us by kind of subsidizing us by giving us trade protection against competitors by doing these things that are economically inefficient and not really good for the public welfare. That’s I think, where a lot of that infection comes in. So you know, if we could kind of orient government towards preventing bad things from happening instead of trying to make good things happen, that that’s a step. I recognize it’s kind of a modest step. But you know, I don’t know, another way to address it, I think what you describe is probably human nature. People get rich, they want to protect their status as rich people. And I’ll say this, it’s not an easy problem to solve. But if you look to socialism, as a way of solving it, I think, you know, you can kind of look at the history of socialist countries and see that that’s, that’s not going to work out either. That’s not a better way of preventing a an infection of capitalism into politics.
Michael Livermore 20:53
Right. So and, of course, some of these terms get used in ways that are, you know, kind of all over the place, right, when, you know, capitalism, socialism and terms like these, you know, Bernie Sanders and other folks in the, in the broad Democratic coalition will refer to themselves as socialists. But presumably they’d be pretty happy with an economy like Sweden’s right. I don’t think the idea is that they wanted to go and and turn that turn the US into a Stalinist state. I mean, I don’t take that to be their arguments. It seems that even on the left, yeah, even on the left of the political spectrum, what we’re taught what people are talking about, is more like a Scandinavian model than than anything else.
Shi-Ling Hsu 21:38
Yeah, I think that’s right. I mean, is it socialist? I don’t think so. I mean, really, fundamentally, socialism is when resources are allocated by central fiat and not market forces. And that happens even in a pretty authoritarian state, like like China, I mean, market forces is still kind of moving. Yen in one way, one direction or another.
Michael Livermore 22:08
Yeah. So when I, you know, when I interpret some of the language used by folks in the, in the progressive community, when they talk about socialism, what I often see that as being, I mean, there’s, it’s multifaceted, but one of the big parts of it is about economic inequality. And it’s about things like taxing wealth, increasing taxes, on, you know, on capital, on corporations, on wealthy individuals income, you know, and then that gets described as cap as socialist and anti capitalist. So one is, I guess, I’d be curious what your thoughts are about that. And then if there’s an intersection there between, you know, economic inequality, and then the political undermining of capitalism, that, you know, we see as a potential problem.
Shi-Ling Hsu 23:01
Yeah. The way that that term gets used, taxing is not socialism, that has a pretty long history to people kind of equating this, equating taxation with something kind of more sinister. It happened in Canada, when the federal government tried to levy high taxes, pretty high taxes on petroleum. And the province of Alberta, the oil rich province of Alberta, you know, took this to be an affront and an assault on their provincial sovereignty, and the federal government backed down. You know, politically, that might have been what had to happen. But what wasn’t true was that, you know, this is kind of a socialist ploy that the government is making a central decision. It’s true. If a tax gets high enough, it becomes government Fiat. Right. But, you know, that seems to me, that seems like a slippery slope argument that you can make about a lot of things. And if we’re not at a place where a tax is so confiscatory, that it becomes, essentially, the central government making decisions, then let’s not call it that, let’s not say this is socialism, when it’s really just something else. A way to steer an economy that’s still driven by, you know, decentralized decision makers.
Michael Livermore 24:42
Yeah, so I mean, that’s part of the issue. I think, too, is that the- on both sides, folks are kind of mischaracterizing what socialism even is and what capitalism is and so on. And it’s very confusing, I think for you know, for folks who follow this stuff, one point I’d like to just return to a little bit that you that you raise is the relationship between kind of a libertarian impulse and concerns about capture and, you know, strong market actors affecting politics, you know, kind of the the winners of capitalism then seeking to protect themselves from future competition. So, so this is, I think, a fairly common argument amongst folks with somewhat libertarian tendencies is, is exactly this, that we need to limit government, because government can become captured by period, the government can become captured by just some political party, it can become captured by some faction of people, it can become captured by powerful economic interests. And because of all of these of this risk that the government can be captured, we should just shrink the government down, reduce the number of tools that the government has at its disposal, because ultimately government’s going to become is going to fall into the wrong hands. What is this kind of along the lines of your thinking? And I guess, the kind of related question is taxation is a very powerful tool, ultimately, as you note. And so if we’re really worried about government capture, then taxation seems like one of the tools that people would want to take off the table. Yeah. Or like high taxation, right. And you’d have to you have to have some limited amount of taxation to run the government.
Shi-Ling Hsu 26:39
Yeah, no, I think you do, you have to have some taxation, just for revenue purposes. I think, you know, the phrase shrink tools makes me nervous. I think what we want to have some discipline about is spending money and government assistance to industries that’s at bottom, what I think is unhelpful. Shrinking government is not necessarily kind of the goal, at least not if we need the government to find out bad things that are happening and tax them. I also hasten to add that a little bit of government does a lot of good, EPA is a big agency, about 13,000 employees. But I’m not sure I would say it’s a behemoth given all the things that EPA does. I wouldn’t say this is like such a big thing that we have to kind of consistent with a libertarian view, make it smaller. Just to give you an idea of EPA’s kind of value in the global community. When I worked in Canada, I had occasion to talk to many people in Natural Resources Canada, which is kind of their resources agency, and Environment Canada, which is their EPA. And hardly anything ever got kind of pushed without some resort to EPA. Back in 2011, Canada became the first country to impose some regulations on coal fired power plants. No one ever talks about it, because, you know, there are only about, you know, 20 or 30 of them in all of Canada. But it was a monumental decision. And it was driven. I swear, I don’t have the kind of the documentation for it. But it had EPA fingerprints all over it, just the way that kind of the standards were set and the way it was written and kind of how they would develop a threshold for regulating it just it’s not something that seemed to me was within the capacity of Environment Canada. So, you know, it is kind of a good thing to have a big government agency like EPA around what I think and you know, what EPA kind of does what I think a good libertarian would want to do. EPA, doesn’t- it spends some money kind of doing things but it’s mostly spending money to build like local government or state government capacity. It’s mostly finding things that are bad and taxing them. What I think we could have less of are, you know, Commerce Department programs to kind of incentivize construction or development in certain kinds of industries, I’m a little bit queasy about kind of a push for electric vehicle, charging stations and developing a big network, there are positive network externalities. Now, let’s hear that. So maybe that’s a good thing. But I’m a little bit unsure that we should be kind of pushing greenhouse gas reduction in this direction. But, you know, I would say, I’m not sure it’s about shrinking government, it’s about making sure that it’s doing what we actually want it to which the identify bad things and try and prevent them or tax them.
Michael Livermore 30:51
Right. So just thinking of right, in some ways to make to take a simplified version of this, you are more inclined towards thinking that taxes are less likely to be misused, environmental taxes are less likely to result in, you know, kind of protection of income and actors in the creation of these special interest groups, well funded special interest groups that affect the political process. That taxes are in some sense, better than something like subsidies. Right? Yes. Yeah. So so I’m just wondering about this, right, because I kind of I’m not apt to think a little bit about it. But it seems that one could structure taxes so that they operate a lot like subsidies, and vice versa. So take renewable energy, you could tax carbon, or you could subsidize clean energy production. It sounds like you’re much more positively disposed to the former rather than ladder, but in a lot of ways there have similar economic effects. You know, like, for example, we could tax clean energy generation. Now, it’s not a good idea. But fossil fuel companies could say, look, they’re intermittent. They’re less consistent. And so you know, we’re going to tax intermittency. Right, we’re going to tax Oh, they use a lot of land. So we’re going to tax that, you know, there’s ways that taxation can be used to harm, you know, an upstart disruptive industry and protecting incumbent actors.
Shi-Ling Hsu 32:27
Yeah, absolutely. I think there are a lot of libertarians would kind of be wary of that. You know, what I would say to that is, it’s true, you could do it that way. But if you’re going to have a tax on intermittency, I think we would have some sort of a process where you have an agency, like EPA, or interior, kind of engage in a hopefully transparent process of saying, Oh, this is the harm from intermittency. These are the costs for intermittency. I think that conversation is susceptible, the challenge, as long as it’s kind of out in the open, that seems to me different from an administrative law conversation. That never even takes place. If we make a political decision to subsidize clean coal or carbon capture, then we don’t have this kind of hearing on the merits about whether or not this is harmful or that. So part of an emphasis on tax and understanding, the point you’re making is that you could kind of make a tax work like a subsidy is that what I would hope is that the conversation would be different. That administrative law will provide some guardrails against the kind of rent seeking or rent preserving that that we are rightly worried about.
Michael Livermore 34:11
Yeah, let me- so I’m going to continue playing devil’s advocate on this one. Because what I’m thinking about is honestly, devil’s advocate, but I think, you know, partly it could be about administrative law. But partly, I think you’re my instinct is that you’re right, is that the conversation would be different around taxes, rather than around subsidies. But that’s exactly because taxes are politically unpopular. Right? And so they need more justification, where if you go say, look, we’re gonna spend money to promote this new technology and to make sure that people have access to you know, reliable electricity, blah, blah, then that’s fairly politically palatable. And people don’t ask too many questions. Whereas when you say, Oh, we’re going to tax this, that or the other thing. There’s kind of a higher standard in the political process to to explain why you’re doing the taxation, so that that strikes me is as at least part of what’s going on. But then we kind of run right into the problem of, well, environmental taxes and taxes in general, but specifically, including environmental taxes are politically unpopular. That’s exactly part of the reason why we haven’t seen more of them. Economists have been telling us for 30 years, we should be using environmental taxes, there’s extremely strong arguments for why they’re good policy tools. But we, you know, we just haven’t gotten very far because exactly because of the political opposition to environmental taxes. So on the one hand, you know, the tax versus subsidy, dimension, you know, is, you know, taxation is a kind of a, quote unquote, good tool, because it’s less likely to be misused. But exactly the reason it’s less likely to be used is because it’s politically unpopular. And the fact that it’s politically popular means that unpopular means that it’s very difficult to use when we should be using it, such as in the case of greenhouse gas emissions. So so how do we, you know, how do we reconcile the what we like about environmental taxation, which is that it might be less amenable to a manipulation by special interests with the big challenge, which is that we don’t seem to be able to get them deployed in any serious way.
Shi-Ling Hsu 36:18
Maybe, yes, that’s absolutely true. Unpopularity, its continuing unpopularity is why, you know, legislation seems to still centered around kind of subsidizing building, investing, you know, maybe a compromise would be to say, we’ve got to subsidize certain nascent technologies. And once some of these technologies have taken off, then there might be a political economy that is more favorable to taxation, right. So that it could be that certain renewable energy industries just need a little bit more political power, before we start to embrace a carbon tax, or, you know, other taxes, it could be that, you know, meat alternative products, meat alternatives, have to be a little bit more politically powerful. Before we start saying, we got enough cattle, people can get the equivalent amount of protein and other nutrients from something other than cows. So maybe that is a way of reconciling this very real, political problem with what I think you know, you and I share, is the notion that kind of taxation is probably the right way to go on the merits.
Michael Livermore 38:00
Yeah. I mean, what I often will say in class, it’s just like, I mean, look, it’s the internalizing externalities thing. Like it’s creating harm. And like, that’s how you get to efficiencies, you tax it, there’s really, you know, that’s it. Subsidies just don’t don’t get you there. But, again, just to, you know, just to make this as complicated as possible, if once we put subsidies on the table, yeah. And then we say, Oh, we’re only going to use them for, you know, politically unpopular small, you know, you know, small industries. Well, you know, is that really realistic, because subsidies are now on the table, and you know, who’s going to be in the position to take advantage of those subsidies? Who’s going to be in a position to, you know, direct those subsidies in particular ways? I mean, like, the coal folks would say, Well, you know, Coal Capture and Storage is a nascent industry, right. It’s, it’s, you know, how do you define these things? And, but what, you know, they lawyer up, and ultimately, the subsidies ended up, you know, helping incumbent actors and then don’t get directed in ways that actually lead to, you know, facilitating competition.
Shi-Ling Hsu 39:04
Yeah, yeah. That’s a tough one. I don’t know, maybe that’s just kind of the cost of living in, in a democracy. And maybe that’s just a political problem I can’t solve. You know, further to your point, while I think about kind of a response is we think about renewable energy subsidies. And I believe that Exxon Mobil was just knocked out of the Dow Jones, Industrial Index by Next Era, the parent company of Florida Power and Light, which now has the highest amount of renewable energy generation capacity in the country by a lot. That’s not you know, subsidizing a vulnerable whole company. But I don’t know, I think it’s true kind of taxing is just this enormously unpopular thing. You know, one thing we might do is work on education. I know that sounds kind of like pie in the sky. But maybe part of this endeavor is all about getting people to understand that costs matter. So here’s one thing I, I believe that Senator Manchin probably knows this. But we could have a carbon tax, and mining industries in his home state will be driven out of business. We could subsidize renewable energy and mining industries in his home state are going to be driven out of business, either way it’s going to happen. It’s just that with a carbon tax, you know, there are certain things you have to go through to to get it done. And Senator Manchin could well have grabbed a share of those carbon tax proceeds as a cost of his support. Maybe, maybe this is the sort of conversation that just has to have, we’ve been kind of having it in our kind of environmental law and policy Cognizant it for a long time, but maybe what has to be done is just to really impart upon people, you know, there are real merits to having attacks and real costs to subsidizing kind of technologies that we think is just so ingrained this idea that government should be doing good things, and it’s so it’s such an anathema for people to think, oh, government should be focusing on preventing bad things from happening.
Michael Livermore 42:07
Yeah, I mean, I think a couple of things there. So one is obviously the question of how you spend the revenue on, you know, with, with environmental taxes, and that’s come up quite a bit, and people talk about, you know, well, we should focus on the spending part, not on the tax part, as a matter of political messaging. You know, my own view, is that, ultimately, people are not tricked by this. I mean, we saw this in Washington State, you know, with the, with the multiple efforts to get some kind of carbon tax, you know, promoted. And you could say, we’re going to lower the sales tax, and that’s going to be, you know, it’s gonna lower people’s tax burden, we’re just shifting around how the tax burden works, we’re going to take, we’re going to increase this tax rate or lower that tax, and actually, people will be better off, more people will be better off, that actually doesn’t fly, for whatever reason, people are not interested in it. You could say, oh, we’re going to do a carbon tax, or we’re going to spend all the money in all these wonderful ways that people want to see. And it turns out that that’s not all that politically popular either. So it seems that it’s it’s just very difficult the politics of these taxes, again, in some ways, that’s a feature rather than a bug, because it’s less likely to be captured by special interests. But but when we really need to change the status quo, the fact that the policy tool that we’re kind of putting on the table is, is very unpopular. You know, maybe that’s a problem. You know, and that’s a problem that we’ve seen play out in real life in the last, you know, couple of decades. I mean, I think the idea of education is interesting, maybe we could put some flesh on the bones of that, like, you know, do is the proposal that we reformed that grade school curriculum, or is it a matter of trying to, you know, improve the quality of civil and political discourse, which that seems like an awful, awfully heavy lift?
Shi-Ling Hsu 44:02
Yeah. Right. This will make critical race theory look like algebra.
Michael Livermore 44:06
Right. Exactly. So then what do you do?
Shi-Ling Hsu 44:10
Yeah, you know, I think part of it is, maybe we should be curious about why carbon taxes work, or have been implemented in a handful. It’d be fair, a handful of other developed wealthy Western countries, political culture is different. We can’t just kind of graft political strategies from Sweden or the UK or Germany, on to the United States, but maybe we can be curious about how that actually happens, why people think differently about that.
Michael Livermore 44:53
Now, of course, just in all fairness, if we take you know, other, you know, looking at Europe, they have a lot of industrial policy over there. If you take, you know, Germany, how do they have they reduce greenhouse gas emissions? I mean, a huge amount of that they’ve been they’ve been subsidizing and building, you know that industry for decades.
Shi-Ling Hsu 45:12
Yep. Yep. You know, what, I think is the one candid answer to your question, I guess your the problem that you’re posing is, maybe we’re not just there yet, maybe we haven’t actually reached a moment of crisis, where people are clamoring for something. And maybe that’s the point at which, you know, we just say, we don’t even have the money anymore, to kind of subsidize things that we think are good. All we could do is tax things that we think are bad, maybe, like, we just climate change is not sufficiently of concern to people. Maybe it’s just something that they’re more worried about than five years ago, 10 years ago. But we’re just not ready for attacks.
Michael Livermore 46:16
We might be ready for subs. I mean, I think that’s the argument of the of the folks in the Green New Deal Camp is that, you know, that we tried the cap and trade stuff, we tried pricing the externality, the politics just haven’t worked. And so, you know, we have a better shot, because taxes are unpopular. And because subsidies are actually, you know, and industrial policy more generally, is popular, like, why do we, as the environmental community have to take that politically attractive solution off the table, whereas the, you know, the folks on the other side, are more than happy to take advantage of every, you know, handout from the government that they could get their hands on.
Shi-Ling Hsu 46:59
Yeah. You know, truth be told, I think a lot of things in the Green New Deal. Maybe we should do them. It’s not what I would do, if I were an authoritarian, environmental czar, right. But it could be that the climate crisis is such that the harm is going to climb so steeply, that some of the things that are in the Green New Deal some of the subsidies as inefficient, and distasteful as they are, it’s just things we have to do. And, you know, again, maybe that would be part of a glide path towards taxing maybe once we subsidize desirable technologies and industries. And once we diminish the political power of fossil fuel industries, along the way, we’re going to discard worthy alternatives to kind of utility scale solar and wind. But you know what, that’s kind of the way it goes, maybe in another cycle of capitalism, socialism, authoritarianism, democracy, that maybe in an in a future cycle will rediscover the merits of some technology that you kind of we left on the shelf while we were pursuing utility scale solar. But maybe that’s just kind of the way it has to be.
Michael Livermore 48:34
One analogy is, in the, in the case of smoking, I think where you’re just thinking of the regulation versus prices kind of thing. I mean, if in 1985, a big tax was proposed on cigarettes, doubling or tripling the price of cigarettes, you know, there wasn’t going to be a whole heck of a lot of support for for a measure like that. As as like a primary tool to address smoking. So instead, we start to see a regulatory regime put in place around labeling, and then around, you know, restricting age and then restricting advertising, and then restricting smoking in the workplace and restricting smoking and certain other, you know, indoor spaces, airports and etc. And it’s kind of building you know, this quite a substantial regulatory regime around and then kind of the last thing that happens. And actually, then we have tort liability, even before and then finally, at the end, you start to see a tax regime in place where prices are being used to tamp down on cigarette consumption. And is there analogy there? Is that a, is that a good enough? I mean, is that an optimistic story?
Shi-Ling Hsu 49:59
Yeah, I know it’s sad. But that’s an awesome analogy. I wish I thought of that. I wish we had this conversation a year and a half ago. That sounds a lot like that glide path compromise that I have been talking about when you’ve pressed me to have that conversation. I think that’s right. And, yeah, it’s too bad. It took such a long time. But you know, things take a long time in democracies, they don’t in authoritarian regimes. So if that’s what we want, then, you know, I think we’ll have to accept some of the other losses, like in civil liberties. But I think if we’re going to keep government in the form that I think we want to keep it, it just may take a while to do some of these things. I think that we might have to settle for the second bests that you’re talking about. But I’m kind of reminded that this is a quote from Milton Friedman, that I have in my book, it’s become something that I like a lot. Whenever I say something that seems politically controversial, maybe even unpalatable is that Milton Friedman himself once thought he was an underdog and he wrote, only a crisis produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around, I believe our basic function is to develop alternatives to existing policy and keep them alive and available, until the politically impossible becomes a politically inevitable. That’s something Milton Friedman used to think that his ideas were kind of way out of the mainstream, that he was just trying to keep them on kind of, kind of a respirator and still, somehow they could explode until a president like Reagan could bring to the fore. Maybe that’s maybe that’s kind of what I was trying to say, when I think, gosh, we might not be there yet. And what I’m trying to do is to kind of keep this idea alive.
Michael Livermore 52:15
And I think it’s interesting, you know, I wonder if Milton Friedman’s ideas, were really anything other than an underdog in the sense that, you know, maybe he got tried it out to justify certain certain things. But, you know, kind of essentially, when it was politically convenient to do so. And I think this is part of part of your project is to show all the ways that people who argue that what they’re doing kind of promotes the market or promotes capitalism actually, is exactly the opposite. It’s just protecting incumbent actors and actually undermining market competition. So that’s one of the you know, I do worry sometimes that, you know, these ideas get trotted out when they’re when they tend to favor the politically powerful and then get put on the shelf when, when they don’t.
Shi-Ling Hsu 53:03
Hmm, yeah, interesting. It’s kind of true that there are these economists that have stood for they had first principles, and they were faithful to them. And sometimes they were convenient to some industries and inconvenient others. But I guess I, you know, I, I’d be inclined to think about where their ideas go after that. It’s true, like it’s inevitable in a democracy, like, ideas get co opted and distorted. But, you know, those ideas, and those of Bob Miscanon, I think they adore, you know, they’re both dead. But I think there are certain things that we remember, because of them. I’m not, I’m not going to rise to the level of Miscanon or Friedman and of course, but but if I could be part, and I know you’d be a soldier in that one, too, Mike, have kind of a conversation of an assertion of a school of thought about environmental economics. That I think that would be, I think that will be okay. I think that would be I would be happy if that were kind of the legacy of of this book.
Michael Livermore 54:31
Yeah. And a part of what I see the project here, too, is kind of reading through the through the book is really maintaining and supporting a perspective that is a little bit out of favor these days, but has been more in favor in the past, like kind of the market based mechanism, market driven approach. I mean, this in a way as we started the conversation, represented a mainstream a point of political compromise, at the intersection of kind of where the moderate forces within the Democratic Party who are and moderate forces within the Republican Party. And what we’ve seen is this is this divergence, right? Where on the one hand, there’s kind of the argument that we’ve been going through where many in the environmental community has said, look, let’s actually wrap up environmental concerns, there’s a lot of concern about climate change there’s concern about other environmental harms. Let’s wrap those up in a broader critique of capitalism, around things like inequality and economic insecurity, to make up political package that will sell to the American public and hopefully gain, you know, gain enough political power to implement a policy agenda, which isn’t going to include environmental taxes, but will include subsidies and industrial policy, and this that, and the other thing, on the other hand, we’ve seen the Republican Party basically, which used to carry the torch for market based mechanisms, cap and trade and the like, at least some people in the Republican Party, you know, has kind of totally gone off the almost entirely gone off the out of the range of kind of what I would think of as sensible political discourse around environmental issues, and climate denial and all that stuff. So that middle ground, there seems to have been lost. So part of what I take your you know, the quote from Freeman is that maybe we’ll can find that middle ground again. But in the, in the interim, you know, just as a matter of, of, of politics, you know, is your book pitched to people on the on the right to say, look, you know, if you think capitalism is inconsistent with environmental protection, you know, you’re completely wrong about that? Or do you see your, and therefore, you ought to kind of come back into the fold and re embrace market based mechanisms and environmental taxation as a way of addressing environmental problems? Or do you see yourself arguing to folks on the left to say, Look, don’t wrap up environmental protection in a broader critique of capitalism? Because, you know, that broader critique is never going to get traction politically? Or it’s just kind of substantively wrong? You know, or is it just kind of a placeholder to say, look, there is a middle ground here to be had, no one seems interested in it. But, you know, at some point, when folks are interested in moderating their views, and moving to the middle here is here’s some territory that you might occupy.
Shi-Ling Hsu 57:27
I think the placeholder is entirely consistent with the two scenarios that you’re painting about who I’m appealing to, yes. I’m appealing to progressives. And trying to get progressives to say, capitalism is not the problem. We make different political choices, but capitalism is not the problem. And you know what, frankly, I don’t know that anything in any policy area is going to get better until the Republican Party changes back to something more like it what used to be when that happens, I’m appealing to the quite substantial number of, you know, let’s call them establishment Republicans, not in the derisive tone that extreme Republicans call them, but in the sense that they were willing to make compromises in something of a less idealistic world than the one we live in today. I’m trying to appeal to both of those camps. And, yeah, I think to pull them into this place that you’re kind of describing as someplace where we need a placeholder. That’s, I think, where we can meet up.
Michael Livermore 58:55
Yeah, well, it’s it’s a wonderful project. You know, obviously, these are ideas that I find very attractive. And it’s, it’s a wonderful book, I encourage folks to buy it and read and I hope it is discussed and taught, you know, as part of that broader educational process that we were talking about, maybe even in high school, environmental economics classes that maybe that’s the future that that we can hope for. But thanks so much for joining me today, Shii-Ling it’s been a fun conversation.
Shi-Ling Hsu 59:25
Thanks so much, Mike. It has, as it always is with you. A fun conversation. Thanks for having me on.
Free Range Podcast 