The road-user pricing to serfdom

Gridlock is coming, is both a literal and a figurative sense, and only Douglas Alexander can save us. If that doesn't send a shiver down the spine (or perhaps send you off into peels of laughter), the alternative should cause you to break into a cold sweat.

The petition to “Scrap the planned vehicle tracking and road pricing policy” has now received over 1.4m signatures. It says something of the pace and popularity of this petition that the editorial in today’s Times referred to just 1.3m signatories. Like the proverbial snowball, this is gathering ever more size and momentum as it cascades downhill.

I have explained before that the thinking behind this petition is confused and wrong. At the time I also warned, in passing, that no government could ignore a petition that garnered more than 30m signatures: the majority would have spoken, and to deny it its head would be all but impossible. The question, however, is whether a government can even ignore one with 3m signatures, or (the imminent test) half that. The pressure is clearly great: how often have opponents of the war in Iraq – Liberal Democrats among them – argued that the government should have changed its policy when a million people marched through London on 15 February 2003. But where would such a policy lead us?

If just 3.5 per cent of the voting public – just 2.5 per cent of the population – can divert a democratically elected government from its course, is this a sign of direct democracy in action, or is the government caving into a well motivated and vocal minority. It strikes me as no surprise that millions of people object to this, or indeed any other, government scheme – especially one that involves taxation. Every change has winners and losers, and both winners and losers will be numbered in millions. The question should not be whether the losers bleat most loudly, but whether the overall social benefit is greater than the cost, and (for those of us of a liberal bent) whether the proposal represents an abuse of the minority by the majority. Where road-user pricing is concerned, it is clearly a case that the social benefit outweighs the cost without the minority being unduly coerced. The government (in the form Mr. Alexander) should continue to make the case for road-user pricing and face down the protest.

This move towards “Direct Democracy” is in fact a dangerous trend. There is a good reason why we practice an alternative, “Representative Democracy”. We cannot all be experts in every field; decision-making is a full time business, and few of us have read the parliamentary committee reports, research institute papers and academic studies that underlie much of the decision making of government. Government also needs to be strategic, whereas the will of the majority (an amorphous body, constantly in flux, the make-up of which is constantly changing as it coalesces around new ideas and opinions) is momentary and fickle, precisely because the majority has no permanence.

More sinisterly, it can be anti-democratic. As both public choice theory and the petition about road-user pricing tell us, it is easier for minorities to mobilise than for majorities. Because minorities are smaller, they are easier to pull together, while the benefits of successful lobbying are shared less widely, so for any individual the spread between cost and benefit is closer than for a majority, where the benefits are spread broadly and the costs of mobilising high. This is why single-issues of dubious popularity often capture the media’s attention and bend governments to their will.

But if Direct Democracy lends itself to minorities, it lends itself to populist demagoguery even more. Caesar dominated Rome through plebiscites, a practice that was aped my Mussolini. To this day the German constitution bans federal referenda because they were the tools of Nazism.

And here I can see the real nightmare emerging. If the government backs down in the face of opposition form just a tiny fraction of the polity, it will set a trend that will lead to more than just motoring gridlock. Almost all important government policy is controversial, and all controversial policy will be paralysed by petitions and polls. A situation akin to that in Switzerland, where votes for women were blocked until 1973, or the United States, where differently-constituted majorities simultaneously try to cut taxes and increase public spending, would be the least of our fears. A government unable to legislate has a certain appeal to the libertarians among us, but it would undoubtedly be only the beginning.

As important and popular social and economic reform was stymied, and the government was rendered increasingly unable to respond to real problems, a new popular opinion would rise: that a strong government, a strong leader, was needed to push through change; to break the gridlock. We have seen it before. Popular frustration leads to the election of a strongman who offers to over-rule petty objections and push through progress. At first it is welcome, and the benefits are tangible: Hitler built the autobahns and Mussolini made the trains run on time; no need for road-user pricing when you have slave labour and threaten to shoot the train drivers! The benefits of today are paid for tomorrow, as freedom is lost and democracy forgotten. It is the road to serfdom.

…and what should be done to tackle climate change.

The European Commission has produced another daft and damaging proposal in their efforts to combat climate change. This is regrettable both for the commission’s image and for the climate cause.

My efforts to comment on this have produced an essay, so I am going to post it in three parts, which readers may read from as they will. In Part 1, I explained why I believe that Europe is the right forum in which to address climate change. In Part 2 I looked at Wednesday’s announcement and explained why I feel it is misjudged. I also touched upon the failing of the EU’s existing cap-and-trade system. In this part I will offer a liberal alternative to the authoritarian socialism that has suffused much of the environmentalist debate.

The European Commissions proposal highlights a far broader problem that infuses the climate change debate: that it is a Trojan horse for authoritarianism and socialism. The commission’s plan is a classic example: to save the planet we are to be told how to drive. Other examples are legion: subsidies for favoured industries and technologies (wind power, trains); protectionism (dressed up as reducing “food miles”); rationing (aka. “carbon quotas”); population control (which needs no explanation); over-regulation (housing and vehicle standards). The list could go on. These methods may or may not curb climate change, but in the process they will curtail freedom and condemn millions – perhaps billions – to poverty.

The Left was quick to see the opportunities presented by global warming and environmental degradation, and have moved quickly to occupy the commanding heights of the debate, from where they will once again seek to control the economy and curtail individual freedom. Climate change may be the justification now, but the techniques are the same, and the desires within the rationalist-progressives are also the same, rooted as they are in a belief that a few intelligent people with the time to think it through can create and manage a better society than we all can as individual actors perusing our interests.

So what’s a liberal to do? Nobody wants to fiddle while Rome burns, but neither do we want to place our writs willingly in the state’s shackles and accept the slavery that we fought so long to resist. Fortunately, there is a liberal alternative. In fact, there are two.

The first, and one that appeals most to me, is a carbon tax. Rather than ration supply by issuing quotas, or picking particular egregious sources of emissions and stamping down on them, we set a price for carbon and let the individual decide how much to pay for. After all, there is nothing wrong with a 4x4 emitting exhaust, or with a skier jetting off to Aspen; what is wrong is the global excess of carbon emissions. Reducing the emissions produced by power stations is not an end in itself; the end is reducing all emissions. Focussing on individual types of emission is arbitrary, because it squeezes some more than others, and it also harms us all more than it needs to because uneven economic meddling reduces the efficiency of economic activity, which means less wealth to go round – wealth that may pay for my holiday, your school or a Gambian’s dinner.

A carbon tax, by comparison, allows us all to continue to make the same individual decisions in our own best interests that we have always done, but forces us to bear the cost of our pollution. If I drive inefficiently or fly to Aspen my activity carries a cost; if I fit solar panels to my house or buy a bicycle my carbon-tax bill will fall. It is easy to apply and hard to avoid (it would be like VAT). It would be easy to control emissions: if they are too high, the tax rises, if they are well within tolerable limits, it can be reduced. But most importantly, it would not hand power to state officials who are at best fallible and at worst arrogant, capricious or venal. Neither will it admit the command economy through the back door. At worst, there is a danger that it could simply be used as a new tax to fill the coffers of some grasping finance minister, but any government of principle would seek to make the change revenue neutral, and voters would be able to judge their politicians against their tax burden and the state of the world.

The alternative method, favoured in both Europe and the United States (due to the visceral reaction that the word “tax” engenders) is a “cap and trade” system, whereby companies buy permits to emit and then either use them – and hand the costs onto the carbon-consumer – or trade them on the market. While this has had some serious problems (caused in Europe by allowing national governments to issue too many permits, and by the decision to give them away rather than selling them – a licence to companies to print cash) it still has the merit that it leaves individuals in the position to allocate their resources as they see fit, perhaps by driving a big car (which they may need if they have a big family or a big farm) but never flying, or doing both but buying solar panels, or making any number of choices that would see their overall “carbon footprint” reduced, while allowing them to reduce it in the manner that best suits their needs and their lifestyle.

In a seminal essay, Friedrich Hayek explained that the bipolar view of the world as divided between Left and Right wings is inaccurate, a result of conservatives and socialists associating liberals with the other camp because liberals may share common ground with other groups on certain issues. The environment is a classic example of where liberalism is clearly distinct from the other two creeds.

For socialists, global warming requires interventionist measures, complex planning and more power to the bureaucrats. It provides the excuse that for a decade and a half they have lacked for implementing the policies that until the 1980s they advocated on the grounds of economic efficiency. Conservatives for a long time denied global warming; now their responses are typically authoritarian. Liberals are open to the evidence of global warming, but not to the autocratic solutions that most environmentalists propose. The solution is to encourage and enable individuals to find their own way of reducing the negative impact they have upon the environment, rather than force centralised solutions down from above. For liberals, a world in which we are subject to the state is not much better than one where we are subject to the elements.

…why the European Commission is doing more harm than good…

The European Commission has produced another daft and damaging proposal in their efforts to combat climate change. This is regrettable both for the commission’s image and for the climate cause.

My efforts to comment on this have produced an essay, so I am going to post it in three parts, which readers may read from as they will. In Part 1, I explained why I believe that Europe is the right forum in which to address climate change. In this part I will look at Wednesday’s announcement and explain why I feel it is misjudged. In Part 3 I will offer a liberal alternative to the authoritarian socialism that has suffused much of the environmentalist debate.

I have explained in a previous post (probably to the boredom of many of my readers) why economics compels us to treat carbon pollution as a European phenomenon (efforts to create a world-wide approach having failed). Sadly, European solutions are not promising.

The proposal announced by the commission on Wednesday is aimed at improving the efficiency of our driving. Apparently, we are all driving inefficiently, and this is causing our cars to emit more carbon-laden exhaust than is necessary to get us from A to B. Late gear changes, sloppy breaking, stop/start driving, the speed at which we drive and low tyre pressure make our driving inefficient. Something needs to be done.

In the worst traditions of untrammelled bureaucracy, the solution proposed by Industry Commissioner Günter Verheugen is to micromanage our driving. Manufacturers are to be required to fit new cars with electronic stability control, emergency braking systems and warning lights that tell drivers when to change gear or pump up their tyres. The commission also plan to make it compulsory to use headlights even in broad daylight – a policy that might have some merit on grey days in northern Europe, but which will baffle Spaniards in the blazing sun of June.

The commission is not alone in this sort of enviro-economic engineering. Mayor of London Ken Livingstone is expanding his congestion charge by creating a Low Emissions Zone. Richmond Council is to penalise drivers of “gas guzzling” cars through a graduated price for parking permits. These, too, are blunt tools that unnecessarily obstruct freedom of choice. There is something particularly egregious about the European Commission’s plans, however.

While there is probably some merit in encouraging people to drive more efficiently, doing so in this interfering way is likely to generate anger and derision in equal measure. The car is a symbol of freedom for many, and its operation an art. To have it reduced to a science and guided by a bank of irritating lights on the dashboard is likely to infuriate drivers; rather than improving driving quality, it will simply cause drivers to curse the European Union while sticking black tape over the lights. The danger of flicking lights distracting drivers needs also to be considered – I would prefer drivers near me watched the road rather than the dashboard.

As I will explain in Part 3, there is no reason why efforts to curb carbon emissions need to involve bureaucratic control of the minutiae of decision-making. What matters is the aggregate amount of carbon mankind emits; individual decisions as to the source of those emissions are unimportant.

Ironically, the proper solution to car emissions – as a result of both the quality and the quantity of our driving – is revealed in the Commission’s own case. In response to industry criticism that the new bells and whistles may add up to £2,000 to the price of a new car, the Commission argues that drivers will save more in the long run due to lower fuel bills. If this is true then it is surely in the drivers’ own interests to drive more sensibly, in which case this intervention is not needed.

What is needed is a system that makes polluters aware of and bear the costs of their pollution, but one that does not arbitrarily punish some emissions or emitters over others, instead letting individuals continue to make decisions about how to allocate their resources (including the carbon they are prepared to ‘buy’) as they see fit. In Part 3 I will set out the options.

Why carbon emissions need to be dealt with at a European level…

The European Commission has produced another daft and damaging proposal in their efforts to combat climate change. This is regrettable both for the commission’s image and for the climate cause.

My efforts to comment on this have produced an essay, so I am going to post it in three parts, which readers may read from as they will. In this part, I will explain why I believe that Europe is the right forum in which to address climate change. In Part 2 I will condemn the announcement that was made yesterday. In Part 3 I will offer a liberal alternative to the authoritarian socialism that has suffused much of the environmentalist debate.

Let me be clear about where I stand from the outset. There are things which should be settled at a European level, and there are things which should not. One of those that should is carbon emissions.

Pollution is a classic “free rider” problem. Firstly, pollution is an “externality”, dull econospeak for a cost which an individual (business or person) can place on society while reaping the benefits themselves; I gain from driving my car, whereas the cost of the exhaust is shared equally by all of us. Secondly, reform costs the producer a lot and the benefits are shared across everyone; I give up a lot if I decide to forego the car, but the benefits are spread very thinly across lots of people. Consequently, as Jean Jacques Rousseau pointed out so eloquently in the C18th, the rational choice for the individual is to encourage others to do the right thing while being selfish oneself.

Producing energy from carbon is cheap, because the producer bears only some of the “social cost”, the rest being “externalised” to the wider population through pollution. If we are to curtail pollution, we must make individuals (be they businesses or people) bear the full social cost of what they are doing. However, national governments cannot be trusted to do this, again, due to the free rider problem: restricting activities that generate waste carbon dioxide will reduce short-term and localised economic efficiency, while the benefits are long term and widely distributed. Consequently, it is in any one country’s interests to let others confront climate change while the country in question carries on in the most individually-economically efficient manner; so China may burn coal like there’s no tomorrow, while hoping that the USA joins the EU in sweating about climate change.

The economic principle behind the European Union (not always treated with due respect by its member states) is that no country should seek economic advantage by trading unfairly. This is why we are faced with sometimes baffling European directives: it is only if a German customer knows what a Portuguese manufacturer means when they say “widget”, and what has gone into producing it, that the German customer can make an informed choice as to whether the Portuguese widget is worth buying in comparison to the (perhaps more expensive) German variety. Sometimes this goes too far: if the rules require that everything going into the widget be the same, including (for example) the cost of labour, then the Portuguese lose their competitive advantage and, potentially, if over regulated to the point of uniformity, the whole point of competition is lost. Thus not everything needs to be regulated at a European level.

Carbon emissions are one area where European collaboration is required. No individual nation-state can be relied upon to curb carbon emissions if it requires the government to cut off the nation’s economic nose to spite the world’s polluting face. In truth, as this is a global problem, this probably requires a global solution. The flawed Kyoto protocol aside, however, this remains a pipe-dream – or perhaps a nightmare, if too much universal government is the price that must be paid. However, in the absence of a global solution, a multilateral scheme among some of the world’s largest economy’s, which between them form the largest single economic union in the world, seems like a good place to start.

France (say) will never cut carbon emissions if it fears that Italy (for example) will thumb its nose at such efforts and gain an economic advantage by carrying on as normal. But if enough major economies take a stand, the costs will be spread, the benefits tangible, and other nations may just be shamed into pulling their weight.

Only through working together can climate change really be addressed. Collaboration is essential, but it alone is not sufficient. The right policies are also required.

Slightly less authoritarian than the Dalai Lama

I have been looking at the Political Compass website again. For those of you unaware of this interesting site, it asks the reader 64 politically-oriented questions and then tries to place him/her on a grid where the x-axis is a line between “left” and “right” (by which I expect they mean collectivism verses the market) and the y-axis represents liberty verses authoritarianism.

Jock Coats says in his blog that he feels that “some of the questions are a little awkward.” I think this is if anything an understatement, though having done quite a few of these questionnaires in my time (on occasions when I have been tempted to enter the Government bureaucracy) I recognise that they are always rather poorly phrased, and I suspect that they are difficult to get right.

· The very first statement one must assess is “If economic globalisation is inevitable, it should primarily serve humanity rather than the interests of trans-national corporations.” There is no option to point out that thriving trans-national corporations are our means of generating the wealth and jobs and transmitting the goods and services necessary to serve humanity.
· My favourite, however, is that “"From each according to his ability, to each according to his need" is a fundamentally good idea.” to which I always reply that I Strongly Agree. It’s a brilliant idea, but totally impractical in the real world. Thus the Compass erroneously pushes me slightly more towards the Marxist camp than I deserve.
· An even more extreme example is “A significant advantage of a one-party state is that it avoids all the arguments that delay progress in a democratic political system.” I strongly agree, but I also strongly believe that the negatives far outweigh the positives. However, I am now pushed towards the Fascist camp. I see myself landing next to Stalin at this rate.
· “Mothers may have careers, but their first duty is to be homemakers.” This is true. It is also true of fathers, but nobody asks about them!
· “Astrology accurately explains many things.” Yep! But not in the way they mean!
· “No one can feel naturally homosexual.” No matter what one thinks of this, it is irrelevant. What matters is whether you think those who feel homosexual (naturally or not) should be treated equally within society.

Nonetheless, I think overall the test works okay. In the end I appear to be a true liberal – as the Libertarians say, people should be free of Government both in the bedroom and the boardroom. Rather than rubbing shoulders with Stalin or Ghandi, I’m nearer Murray Rothbard. Readers may not consider this a good thing!

I think my wife got the best result, though. She turned out to be slightly less authoritarian than the Dalai Lama!

I urge you to give the test a go. It’s fun and enlightening at the same time, and that’s a rare and valuable combination.