Reading assignment for Tuesday Feb. 16
Read the following articles, 1. Economic Doctrines and Approaches to Climate Change Policy by Atkinson and Hackler, (pgs. 1 – 9; 15 – 16; 22 – 23 and 33 – 36) and 2. Why Emissions Trading is More Effective than an Carbon Tax by the International Emissions Trading Association and comment/answer any two of the following questions by 12 noon Feb. 7.
Why Emissions Trading is More Effective Than a Carbon Tax_session1
In pages 1 – 9, the authors discuss their views of how Neoclassical, Neo-Keynesian and Innovation Economics would design economic policies to address the issue of climate change. Discuss your answers to any two of the following questions:
1. According to Atkinson and Hackler, what do neoclassical economists view as the most effective policy in addressing the challenges of climate change?
2. What assumptions does neoclassical economics make about human behavior? Are these assumptions realistic? Explain
3. According to Atkinson and Hackler, what are two or three arguments made by neo-Keynesian economics? What policy does neo-Keynesian economics see as most effective in addressing the challenges of climate change? Describe
4. What are the principal problems the authors have with both neoclassical and neo-Keynesian economic proposals for resolving climate change? Clearly explain.
5. The authors discuss their theory of “Innovation Economics.” What reasons do authors cite as to why Innovation Economics offers a more effective framework for addressing the economic realities of the 21st century.
6. Describe the policy advocated by the IETA and why they believe this policy to be effective.
3. According to Atkinson and Hackler, economic growth in neo-Keynesian economics is due to three interconnected forces. The government spends money to support economic growth, which flows money into the less afluent producing a surplus of money for non-basic expenditures. The increase in consumer spending will encourage businesses to invest. This cycle produces economic growth.
Neo-Keynesian economics see the “equitable distribution of wealth and the achievement of social policy objectives. Neo-Keynesian policies focus on whom is receiving the benefit, preferring to be fair rather than to directly support innovation through allocative efficiency.
5. According to Atkinson and Hackler, Innovation Economics offers a more effective framework for addressing the economic realities of the 21st century. Knowledge, technology, entreprenuership and innovation is recognized as the primary economic factors for growth. Innovation economics does not seek to manipulate capital and/or labor to keep an economic equilibrium. It focuses on the institutional and technological factors that fuel growth in different countries during different time periods. It suggests an organization’s productive efficiency and an institution’s adaptive efficiency are the key components to understanding economic growth through innovation.
1.According to Atkinson and Hackler, what do neoclassical economists view as the most effective policy in addressing the challenges of climate change?
According to Atkinson and Hackler, one of the key ideologies of neoclassical economists addressing challenges of climate change is that by maximizing allocative efficiency, economic growth will be achieved. Neoclassical economists argue that regulations, taxes, market power, or other “distortions” cannot maximize allocative efficiency but in turn damage economic growth. Their doctrine on climate change is greatly explained as, “supply equals demand across all markets in the economy,” supply-side driven economy. What they mean by this is to always try to reach market equilibrium, when the amount of goods or services produced by a seller equals the amount of goods or services demanded by buyers. With that being said, market prices will be competitive and production of the goods or services will remain to a minimum to just satisfy demand rather than creating a big surplus, which will greatly benefit society and the environment.
2.According to Atkinson and Hackler, what are two or three arguments made by neo-Keynesian economics? What policy does neo-Keynesian economics see as most effective in addressing the challenges of climate change? Describe
The ideology of neo-Keynesian economics is a demand-side driven economic growth. They believe in climate change through three main methods: carbon caps, direct regulation, and subsidies. Neo-Keynesians are big on government policy involvement as describe in the article. They tend to say, “Sometimes it’s better simply to lay down some basic rules about what people can and cannot do.” In regards to carbon caps, neo-Keynesians believe that the market will provide an opportunity to change from high-carbon activities to low-carbon activities. This will be achieved by simply not allowing the production of high-carbon activities, with the help of the government. Not only regulating the carbon activities but also providing governmental subsidization to help with the huge expense to change over. With this being said, the market will move towards the “clean energy direction” by the combination of government regulation and subsidies.