Wednesday, 11 November 2015

“Bill Gate’s Solution to Climate Change Reveals His Misunderstanding of Capitalism and Free Markets”

Cavemen Cause First Global Waming cartoon

Bill Gates argued in an interview recently that since capitalism is unable to solve the problem of global warming that there should instead be world-encompassing government-business “partnerships” to save Planet Earth.

I commented here.

Austrian economist Richard Ebeling responds today:

Let us assume for the sake of the argument that the dire predictions were to be true. And that the projected and feared increases in average temperature around the globe threaten to have some or many of the negative effects that are often warned about.
    Is Bill Gates correct in his bad-mouthing of private enterprise and his praising of the superiority of government direction and subsidising of businesses to find solutions to the problem, if it exists?
    [H]is comments do raise the issue of the institutions of a market economy versus the workings of the political process.

Central to Ebeling’s argument is the contrasting incentives between incentives within market process,  the incentives of the players in the political process, a difference that Gates simply ignores. Political incentives, says Ebeling, are all short-term:

[Consider] the motivations and incentives of politicians and government planners and regulators. Those in political office or who manage the government bureaucracies have no “assets” to use and spend other than those that have been taxed away from the citizenry of the country.
    Their effective control over those tax funds and government-owned assets extends no further than the next electoral cycle, the outcome of which can see them removed from office and replaced from their senior positions of power. Hence, the politician’s horizon of personal interest and planning rarely extents beyond the next election, whether that be two, or four, or six years away in the American political system.
    And those who hold the appointed senior positions in the departments, bureaus, and agencies retain their power only for as long as they focus on and serve the interests of the president who has made them the head of a branch of the bureaucracy.
    Short-term pay-offs that offer vote-getting photo opportunities, or that satisfies the financial and related interests of individuals and groups whose pockets can provide the campaign contributions for the next run for re-election, or positive “images” for the media and future history books as part of the “legacy” of a president (or prime minister) are as far as those who guide and direct governmental policies and actions have as their decision-making time horizon.

Whereas planning horizons for businessmen investing their own money are typically much longer:

The private enterpriser in the marketplace invests his own money or borrowed funds for the use of which he has entered into legal obligations to pay back with interest. When the businessman plans the construction of a new manufacturing factory that once built can stand and be productively used for decades; or purchases land that has on it raw materials under the ground or timber on the surface, for instance, that have marketable value and profitability for even a century ahead if properly conserved and economized; or who buys expensive and durable capital machines, tools and equipment the productive lifespan of which may extent, with proper maintenance and repair, for many years into the future; when he does any or all of this, he must weigh the financial gains in the present with the profitable rewards that may be available in the future with wise use of the private property that he oversees, manages and owns.
    Who, therefore, has the greater personal incentive and financial motive to take the future into account before making decisions in the present? The market-oriented private enterprisers who must carefully weigh how his present actions will have a positive or negative effect on his abilities to earn desired revenues and profits in the future, depending on how they wisely use their own property? Or the politician who spends other people’s tax-collected money and has no permanent “skin-in-the-game” outside of his ability to pander to special interest groups before the next election to obtain from them campaign contributions and votes on election day?

Fair question, you’d think.

Yet, because some other businessmen may not share Bill Gates’ conception of desirable and profitable in terms of what he thinks to be important and should be invested in, those other businessmen are, therefore, short-sighted and “irrational” in their disregard of what should be done to “save the planet.”

Central to this, if course, is the system of private property rights that protects the investor in long-term plans, and protects property-owners against environmental predation by others. This was the historical cure to the tragedy of the commons; yet if ““climate change” and “global warming” are, in fact, problems facing people on Planet Earth, then it is due to an atmospheric tragedy of the commons” – so why is there so little discussion of private solutions?

When property rights are not clearly defined, people will often act in ways that do not take into consideration the full effect and cost upon others. Resources, or land, or the air are wrongly or excessively used because the users do not have to weigh or pay for the full consequences of their own actions upon others. This is the source of practically all of the environmental and pollution problems that are cause for concern today.If “climate change” and “global warming” are, in fact, problems facing people on Planet Earth, it is due to an atmospheric tragedy of the commons. The question, then, is, are there private solutions to this problem – if it exists as proponents claim – or does it have to be “solved” through the central planning of global governments and government-business “partnership” as asserted by some such as Bill Gates?

The simple fact is, Bill Gate’s Solution to Climate Change Reveals His Misunderstanding of Capitalism and Free Markets. That is the tragedy of his alleged solutions.

[Cartoon by Wilham Warren, from Epic Times]


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