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Carbon taxes vs. Carbon credits

I don’t know for sure, but I think that I disagree with an explicit carbon tax. Why should the government be any good at deciding which industries have the best chance of improving their energy efficiency (which they are doing when they set the tax rate on a product-by-product basis)?

I suspect it would be better to go for carbon-credit trading system. Have a (declining) aggregate quota of completely tradable carbon credits, issuing them by open-market auctions on a rolling basis throughout the year. To be economically neutral (that is, non-distortionary), the issuer of carbon credits would need to government-independent (although operating within boundaries set by the government) and either work closely with the central bank or be a new branch of the central bank itself.

This last point would be necessary because if the proceeds from auctioning the credits were not going to be treated as government revenue (and in order to avoid being distortionary, that would need to be the case), any money paid for the credits would need to be recycled back into the economy by the central bank. This would ultimately have the equivalent effect of raising interest rates on carbon-intensive parts of the economy and lowering interest rates for the carbon-free sections while keeping the aggregate rate (and thus, in theory, the overall effect on GDP) unchanged.

In practice, I suspect that we would see some increased volatility in market interest rates and inflation pressures, with both settling down over a few years.

I could be entirely wrong on all this, though. It’s just the result of 20 minutes of thought. I’d welcome any corrections.

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History of US Legislative and Executive power

Following the recent (midterm) US elections and looking at this article over at the Economist, I was fascinated by the graphic they provided at the bottom detailing periods of Democrat and Republican control over the House of Representatives and the Senate. The obvious missing information was on presidential control, so I did one up myself. You can grab it (as an Excel spreadsheet) here.

It’s interesting to note that since 1901, the Democrats have generally been dominant in the House of Representatives (64.8% of overall control) and the Senate (57.4%), but the Republicans have maintained a slight upper hand in the Presidency (48.1% Democrat).

Americans do seem to prefer having just one party in control at a time (59.3% of the time all three are under the control of the same party rather than the 25% that would have been expected by pure chance).

Update: I have redone this following the 2008 election here.

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My entry into the world of blogs and web 2.0

In a recent outing to the pub, a couple of friends noted that we were three computer professionals without any real web presense. We might have attempted the odd static site over the years, but none of us had really embraced the whole web 2.0 thing. Realising that this is an embarrassing state of affairs, wanting some sort of common place to store my (public) thoughts and since economists all seem to blog these days anyway, I figured to give it a shot.

Hopefully it won’t turn into another empty, never-updated affair. 🙂

I’ve also created accounts on Facebook and Myspace, although both accounts are really just stubs at this point. I notice that facebook allows me to publish this blog directly into my facebook account (in the notes area), which is nice. Myspace seems to only allows me to publish (subscribe) to other blogs on myspace.

Are there any other networking sites I ought to be signing on to?