Janet Daley worries that combating environmental damage through taxation of pollution, may re-create a class divide that technology has helped destroy.
If politicians are planning restrictions on these “polluting” aspects of private life, to be enforced by a price mechanism, they had better accept they will be reconstructing a class divide that will drastically affect the quality of life of those on the wrong side of it.
Ms Daley belives environmental doom-mongers suffer the same failure as Malthus, who did not see how prosperity limits population growth and technology creates more efficient ways of producing food. Her conclusion therefore:
Warnings of catastrophe come and go: whatever their validity, we cannot and should not ask people to go back to a more restricted and burdened way of life. The privations would not work anyway, because they are impracticable. To the extent that they were enforced, they would be grotesquely unfair and socially divisive. If we really are facing an environmental crisis, then we are going to have to innovate and engineer our way out of it.
The message appears to be: don’t tax because it will take us back in time. Innovate instead. But Janet is suffering the same failure of imagination as Malthus. Why would taxing dishwashers or aviation fuel lead us back to the 1950s? Wouldn’t the taxes spur innovation into alternative fuels?
And Pigouvian taxes help internalise external costs that firms and consumers don’t pay themselves, but impose on others. Such a measure is only getting the price system to work properly. Only then will the correct signals emerge in the marketplace, directing investment to (hopefully) better technologies.
As far as environmental damage is concerned, are there strong enough incentives for firms to innovate and consumers to change their behaviour, in the absence of internalising the costs of pollution?
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