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goal of raising the price of CO
2
emissions to cover their social costs. This
sounds like a good approach.
I wonder what conservative economists think. I look at the writings
of Martin Feldstein (chief economist to Ronald Reagan), Michael Boskin
(chief economist to George H. W. Bush), Greg Mankiw (chief economist
to George W. Bush), Kevin Hassett (American Enterprise Institute), Ar-
thur Laffer (of Laffer curve fame), George Schultz (economist and diplo-
mat in the Reagan administration), and Gary Becker (Nobel Prize-winning
Chicago-school economist). They all favor a carbon tax as the most effi -
cient approach to slowing global warming.
13
In discussing this question with some conservative friends, I fi nd
that they are unenthusiastic about carbon taxes. They contend that such
policies are just another sad example of an antigrowth “tax and spend”
economic philosophy. One argues in
The
Wall Street Journal
, “Taxes cre-
ate artifi cial incentives that misdirect capital formation from productive
market applications.”
14
On refl ection, I recognize that this argument fundamentally mis-
understands the economic rationale of carbon taxes. Those who burn
fossil fuels are enjoying an economic subsidy—in effect, they are graz-
ing on the global commons and not paying for what they eat. Raising
the carbon price would improve rather than reduce economic effi ciency
because it would correct for the implicit subsidy on the use of carbon
fuels. European countries have found that they can levy energy taxes,
reduce taxes on labor and other worthwhile activities, reduce CO
2
emis-
sions, and improve overall economic performance. Moreover, carbon
taxes can help reduce the government debt without harming the incen-
tives to work and to save.
I also think about governmental policies in other areas. Do I like
the government giving away the country's oil or land? Do I like banks
running excessive risks with government guarantees and then having
the taxpayers bail them out when the investments turn sour? As a con-
servative, the answer to these questions is “No!” I realize that allowing
fi rms to put carbon in the atmosphere cost-free is a similar valuable
subsidy—it is the right to harm others. Just as we auction oil and gas
rights on public lands, just as we should end the privileges of banks that
