When the only tool you have is a hammer, everything looks like a nail. Surgeons want to cut, lawyers want to sue, and economists want to tax.

The economics of climate change is straightforward. Virtually every activity directly or indirectly involves combustion of fossil fuels, producing emissions of carbon dioxide into the atmosphere. . .

Emissions of carbon dioxide represent "externalities," i.e., social consequences not accounted for by the workings of the market. They are market failures because people do not pay for the current and future costs of their actions.

If economics provides a single bottom line for policy, it is that we need to correct this market failure by ensuring that all people, everywhere, and for the indefinite future are confronted with a market price for the use of carbon that reflects the social costs of their activities. Economic participants—thousands of governments, millions of firms, billions of people, all making trillions of decisions each year—need to face realistic prices for the use of carbon if their decisions about consumption, investment, and innovation are to be appropriate.

The most efficient strategy for slowing or preventing climate change is to impose a universal and internationally harmonized carbon tax levied on the carbon content of fossil fuels. . .

Some would argue that a carbon tax is just another sad example of a "tax and spend" economic philosophy. This argument fundamentally misunderstands the economic rationale. Those who burn fossil fuels are enjoying an economic subsidy—in effect, grazing on the global commons and not paying for the costs of their activities. A carbon tax would improve rather than reduce economic efficiency because it would correct for the implicit subsidy on the use of carbon fuels.

This is silly, just silly. That people do not now pay for the right to emit gases is not a market failure. The market works just fine. What Nordhaus sees is a market opportunity, a new market for emissions, and wants to nip it in the bud. This new market is arising since something that was for all of history too cheap to meter is now becoming valuable enough to sell, steal, and fight about.

The problem isn't just that the atmosphere is a commons, it is that it is an open access commons. There's no way for those who use the resource in common to establish behavior norms that maintain the value of the resource, as happens in the archetypical case of a community of herdsmen sharing a grazing commons. There's no opportunity for them to haggle and trade their interests, no incentive to maintain value. They don't even know one another and have no power to affect the behavior of unknown strangers.

Nordhaus recognizes this in a dim sort of way but doesn't investigate the implications. His tax wheeze - a universal and internationally harmonized carbon tax - is a fantasy notion, the sort of thing you get when playing with models or games that simplify reality into a flat cartoon and put you, the gamer, in the commanding heights. In reality, there will never be such a universal tax. Nations don't just complain and whine to authorities, they go to war. There is no community.

The tools of economics and politics are inappropriate for this problem. They are too small, too weak, and the wrong shape. The problem is, as Nordhaus notes, that "Virtually every activity directly or indirectly involves combustion of fossil fuels". That is what needs to change. This is an energy technology issue, not a tax and politics issue. It is in our interests to prevent politicians from using this problem as a wedge to gain more power. That's a bad thing in every case - politicians always do harm with power - but in this case it also is the road to collapse. It won't relieve the threat but will consume resources needed to deal with the threat. It isn't just material resources that are consumed, it is also our attention.

As Freeman Dyson explains in the same article [response to a previous Dyson article and his rebuttal]

The main reason why I oppose it is that the first decade of the twenty-first century has changed the world irreversibly in a hopeful direction. In that decade, China and India decided that money is more important than ideology. They decided to become rich. This was a decision similar to one made by Britain in the eighteenth century. The rulers of Britain decided that money was more important than religion.

The intellectual background of these decisions is described in a book, The Passions and the Interests, by the economist Albert Hirschman, who was my colleague for many years at the Institute for Advanced Study. In the eighteenth century, "the passions" meant the theological beliefs that drove religious wars in the seventeenth century. In the twenty-first century, "the passions" mean the ideological beliefs that drove nationalistic wars in the twentieth century. Through all these centuries, "the interests" meant the ascendancy of commerce and manufacturing that make countries rich. . .

The difference between Lord Stern's view of the future and mine is the difference between passion and interest, between ideologically imposed stagnation and free growth. Lord Stern would have us obedient to his passion. I would have us following our interest. I do not believe that stagnation, which would result from the costly controls proposed by Lord Stern to reduce greenhouse gas emissions, makes sense, either in economics or in climatology.

In the original article [discussed here] Dyson suggested that the energy and emissions technological problem should be addressed by technological solutions because it makes both economic and climatological sense. He mentioned some candidate tech applications but acknowledges their sketchiness. There is a lot of work to do to develop credible solutions. It isn't that this is an easy or certain approach, it is that it is at least possible while the hunker down approaches of those consumed by various passions are not. They would be happy to stagnate and fail so long as their beliefs dictated behavior, but those of us not carrying such monkeys would rather succeed.