An Associated Press “Fact Check” on statements from President Obama and Mitt Romney looks at the president’s claims that Republicans have abandoned their support for market-based solutions to environmental problems:
But in recent years, cap and trade failed when Democrats controlled the Senate and the House. Moreover, Republicans argued the legislation was not a truly market-driven mechanism. It would have auctioned off pollution allowances to companies, raising money for the government to help offset higher energy bills and invest in cleaner energy technologies.
Republicans wanted a system that would distribute the allowances for free, letting the private market determine their value. That's how it worked with acid rain.
While there’s nothing factually wrong with the above analysis, it might have gone a bit further to point out that the choice between auctioning and free distribution has nothing to do with whether the program is “market-based.” The market determines the allowance value either way. In fact, it can even be argued that certain types of free distribution are a bit less market-like in that they implicitly subsidize the output of firms.
- Allocation Expert John Locke
The difference between auctioning and free distribution actually has more to do with political theory than relative conformity to market principles. The real issue is underlying theories about the creation of property rights. Leigh Raymond’s book, Private Rights in Public Resources (RFF Press, 2003) examines how debates about the initial allocations in grazing rights and the SO2 market, for example, reflect distinct property norms.
More recently, Professor Raymond has traced the evolution of public thinking about public resources to a point where free allocation (based on the property theory of John Locke) is now viewed as generating a “windfall” for recipients. RGGI, the Northeast and Mid-Atlantic's Regional Greenhouse Gas Initiative, in his view, marks an important milestone in this transformation. You can see his presentation on this topic here and you’ll be able to read about it in a forthcoming book he is writing on allocation in the RGGI program.
A fact check that told readers that Republican criticism of Waxman-Markey really represents a Lockean counter-attack on Morris Cohen’s instrumental view of property rights might be a bit much, but this aging political philosophy major can always dream.
