A Must-Read: Krugman’s Building a Green Economy

Sometimes I agree with him. Sometimes, passionately, I don’t. But after reading Paul Krugman’s “Building a Green Economy” in the Sunday New York Times magazine, mostly I just wanted to hug him.

Klugman begins in a matter of fact way by observing that in the debate over climate economics, the “casual reader might have the impression that there are real doubts about whether emissions can be reduced without inflicting severe damage on the economy.” He then goes on to explain in significant detail why among environmental economists there is widespread agreement this is not so, regardless of country of origin or political persuasion.

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After detailing the emissions problem, Krugman moves on to a dispassionate and detailed explanation of the costs of correcting the effects of climate change. His conclusion: “We know how to limit greenhouse gas emissions. We have a good sense of the costs — and they’re manageable. All we need now is the political will.”

I would have been satisfied if the article ended at this point, but Krugman moves on to detail the basics of the case for a market-based program to combat the problem carbon emissions represents. I have always had personal reservations about the potential for any significant impact resulting from a so-called cap-and-trade program. As a long-time believer in the power of many small acts by individuals, I had difficulty accepting the idea that my individual acts like walking instead of driving would simply free up additional carbon credits for large corporations to purchase so they could pollute more. Yet Krugman moves on to make a convincing case for the greater benefits of cap-and-trade, in particular when combined with a carbon tax and additional regulation for coal.

But this is a lengthy article worth reading. Krugman continues on to explore the key question of how to impose limits on carbon. He posits that the difficult question isn’t, as you might imagine, whether to opt for a carbon tax or cap-and-trade. Rather, it is whether in either of those systems, the carbon price should be ramped up quickly or slowly. It’s easy to agree with Krugman that politicians lack the courage to impose a carbon tax substantive enough to effect change, nor will the public demand it until the effects of climate change are so advanced as to be irreversible. In comparison, the alternative of major investments in green infrastructure and a push to encourage research into alternatives to carbon-intense activities will seem reasonable. These activities wouldn’t be cheap, but they’d be easier to bear than an immediate price of $200 per ton of carbon. And politically, such measures should go down easier, given that they entail the doling out of government resources rather than the imposition of a tax on a negative and intangible externality.

The entire article progresses step by step into a full-blown green economics primer 101. Each term is defined; every key concept addressed. Krugman builds his case in a convincing, neutral frame, which preempts marginalization or premature rejection by the reader on the grounds of obvious bias. There’s a communication lesson here as well as an economic one for those interested in affecting public opinion or systemic change. A quick thank-you hug seems appropriate.