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Brooks Wilson's Economics Blog: Bauman, the Stand-up Economist, Updated

Thursday, February 10, 2011

Bauman, the Stand-up Economist, Updated

(Edited 2/2/2011) Yoram Bauman, the stand-up economist, is a funny man and a good economist, and apparently, that is not an oxymoron.  Watch his new video for two reasons.  First, Bauman humorously explains Mankiw’s ten principles of economics, and second, he gives an example of an external cost and why markets cannot solve the problem.  The standard solutions are a tax on the good producing the pollutant or a cap-and-trade system.  He then pushes a carbon tax as a replacement to some part of the current tax system such as the corporate tax or the payroll tax. 

I am skeptical about some results that climate scientist reach.  Data may be corrupted by the urban heat island effect.  Proxies used to estimate past temperatures beyond fifty years do not seem to be statistically robust.  I also believe that the opportunity cost of alternative energy is well above the $.30 per gallon tax he seems to support, meaning that the cost of solving the problem is greater than the cost of the problem.  Finally, I doubt that unilateral action by the United States would significantly reduce global carbon emissions; it is a global emissions problem without a global enforcement mechanism.  With all my doubts, I still favor a carbon tax as a substitute to some other portion of our tax code.  It is a better, meaning less distorting tax.


  1. I disagree with a carbon tax. I think all most of the "global warming" awareness is another way to charge more when the products say it is "green."

    -Heather Harvard-Roth

  2. I liked this :)
    I thought I understood the ten principles pretty well, but I did not realize that opportunity costs change when the circumstance itself changes in a small way, like with the Snickers. That made me really have to think!

    - Arielle Harris

  3. James Emmele1/3/11 9:29 PM

    Bauman has way of explaining things that grabs your attention. Nothing helps digest material like a little humor mixed in.

    The example for a failing market seemed exceptionally easy to connect with. In his very simplistic sample market, we have a situation where all eventually end with a negative value. However, at any step before that, at least one individual retains a positive value from the trade: Orange and Pink in the first trade, Pink in the second.

    In this scenario, Pink has every motive to accept both the first and second trade, while trying to prevent the third. For the third and final trade, both Orange and Blue will benefit from their trade while Pink will incur the added cost of more pollution. As he relates this to carbon/pollution control amongst sovereign nations, who has the authority to prevent any of the two countries from trading? And given that an entity exists with that power (worldwide coalition? UN?), how could situations like this be handled where the hidden cost of free trade will remain unknown for some time and some parties might end up worse off than others?