I am 81 years old. Back in 1969, I was a 26-year-old graduate student having studied economics and history for nine years. In all those years taking all those courses, I had probably spent no more than a handful of minutes even THINKING about air and water pollution.
In the 1960s, introductory economics textbooks taught us about what were called EXTERNALITIES. Prices in free markets were determined by supply and demand. Supply was determined by the cost to the business of purchasing their raw materials, paying rent on the property where they conducted business, hiring workers and paying interest on borrowed money. The demand was determined by the incomes of the potential consumers and their tastes and preferences. If the business produced goods in a factory and in that process the factory dumped pollutants into the atmosphere, the business was not charged for any of the costs imposed on other people. For example, if the smoke from the factory dirtied clothes hanging on lines or houses or parked cars, no one billed the factory for the clean-up costs. If the smoke was somewhat toxic and people got sick, the sick individuals had to cover the costs of medical care (or that cost was covered by insurance, Medicare or Medicaid). In other words, the costs imposed on society when the business polluted the air were not reflected in the price charged by the business owning the factory. Those costs were EXTERNAL to the supply and demand which determined the price charged to consumers of that particular product. Result: there was no incentive for the business to adopt a non-polluting technology and no incentive for consumers to prefer to buy from a non-polluting firm. Pollution is a result of what economists call “market failure.”
We students of economics read about externalities but then went on to basically ignore them in all our future discussions of prices, profits and production. (The concept of “market failure” was relegated to advanced courses that dealt with Public Finance and other government – centered courses. But until the 1970s, the serious problems caused by air and water pollution did not warrant any separate treatment – neither in textbooks nor in the economics curricula). Because I did not take Biology at the college level, I never even knew about the book Silent Spring by Rachel Carson that had been published in 1962. That book made clear that DDT --- a so-called “miracle” pesticide -- was dangerous to life on our planet.
Imagine my surprise, then, in 1969 when I read an article that predicted the DEATH OF THE OCEANS sometime in the future from --- that’s right --- from pollution.
[It was published in RAMPARTS MAGAZINE in the Fall of 1969. It was written by Paul Ehrlich and entitled “Eco-catastrophe.”]
That article woke me up and I have been thinking about that issue ever since. When I began to teach economics, I made sure to make the environmental impact of the modern economy one of the issues discussed in my classes. Interestingly, during the second year of full-time teaching (the academic year 1971-72) I even found a Principles of Economics Textbook that had a whole chapter devoted to Environmental Economics.
[Milton Spencer, Contemporary Economics, Worth Publishing Company, 1971]
Meanwhile, President Richard Nixon made environmental concerns front and center in his 1970 State of the Union speech and that spring, the first “Earth Day” occurred. The economics profession followed suit and began to take that issue seriously. Courses in environmental economics began to proliferate. Research into the issue also began to be taken seriously. (In 2018, an environmental economist, William Nordhaus won the Nobel Prize in economic science.)
In 1974, I read Robert Heilbroner’s book, An Inquiry into the Human Prospect (NY: W.W. Norton). In that book Heilbroner introduced readers to the long run dangers from rising global temperatures. The public became more aware of that particular problem in 1988 when James Hansen of NASA testified about the danger before Congress. [The NY Times digitized version of the article describing his testimony is available here.]
In 1993, the Clinton Administration made the first government proposal to combat global warming. “They proposed a general tax on all energy forms, as part of a broader deficit-reduction plan and also to promote energy conservation. The tax was to be levied on coal, natural gas, liquefied petroleum gases, gasoline, nuclear-generated electricity, hydro-electricity, and imported electricity, at a base rate of 25.7 cents per million Btu, with an additional 34.2 cents per million Btu on refined petroleum products.” [Quoted from The Carbon Tax Center, “Some History,” available here.]
This tax had two great advantages. One, it would fit in with the kind of tax policy that had become popular in the previous decade under the Reagan Administration. According to a theory that became (briefly) popular, the graduated income tax (with higher rates paid by higher income people) was very destructive of incentives. If the tax you paid on your next increase in income (called the “marginal tax rate”) kept rising, people would not work hard to get that raise or take risks to make more profits. This analysis was called Supply Side Economics and it was what informed the Economic Recovery Tax Act in the first year of the Reagan Administration.
[For details on this approach to taxation, see Meeropol, Surrender, How the Clinton Adminsitration Completed the Reagan Revolution, (University of Michigan Press, 1998, pbk 2000): 46-48, 79-81.]. A BTU tax does not change with the income of the taxpayer. Thus, the marginal tax rate is zero and there is no damage to incentives that would have occurred if the same amount of revenue were raised by increasing income taxes. (On the other hand, those who do not think rising marginal tax rates damage incentives emphasize that a tax like the BTU tax takes a significantly higher percentage of the income of lower income people than higher income people which is unfair to people already struggling with minimal income.)
The second advantage of a BTU tax is that it would induce businesses to begin to shift production processes away from the burning of fossil fuels. Imagine how much closer we would be to a sustainable production process today if such a tax had been in effect for the past thirty years.
The tax passed the House but died in the Senate. The alternative to raise revenue was a 4.5 cents per gallon increase in the gasoline tax. That brought the tax to 18.4 cents a gallon and it has NOT BEEN RAISED SINCE. This last fact is striking. During this same period, overall inflation basically doubled prices (on average) with gasoline prices before tax more than three times as high as in 1993.
I bring this story up to argue that despite the fact that scientists and economists have known about the dangers of global warming for over half a century, the fossil fuel industry remains politically very powerful. In previous commentaries I have recommended the book MERCHANTS OF DOUBT by Erik Conway and Naomi Oreskes which began as an exposure of scientists hired by the Tobacco Industry to sow confusion within the public to prevent them from learning the truth about the dangers of smoking. They also focused on how the fossil fuel industry has hired scientists to fool the public about whether climate change is REALLY being caused by human activity. (There is also a film by that same name that develops some of the same themes).
The power of the fossil fuel industry is clear in the continuing campaign of former President Trump. Sometime in April, he promised oil executives that if he were elected to a second term, he would immediately begin to undo all the environmentally friendly activities of the Biden Administration.
[See Bill McKibben, “It’s a Climate Election, Now,” The New Yorker, May 15, 2024, available here. McKibben quotes the Trump campaign thusly: “Joe Biden is controlled by environmental extremists who are trying to implement the most radical energy agenda in history and force Americans to purchase electric vehicles they can’t afford.” Of course if the true cost to society were built into the price of gasoline powered vehicles, no one but the superrich would be able to afford them!]
Meanwhile, the elements of the proposed Green New Deal which are all absolute necessities to reduce the tremendous damage already built into our world’s future are routinely attacked mercilessly by right-wingers. “It will destroy the economy…” ---- meanwhile, of course, the current economy is destroying the habitability of the planet. The right-wing brainwashing machine has even succeeded in convincing too many of our fellow citizens into believing that global warming itself is a hoax.
It is in this context that I want to commend the young people in the Sunrise Movement. They are organizing at the grass roots and recognize quite clearly that the only way to overcome the incredible power of the vested interests, specifically the fossil fuel industries, is through politics.
They need to engage in the political process because government policies must subsidize sustainable energy and discourage the further burning of fossil fuels. There is already so much carbon in the atmosphere, that significant temperature increases are already inevitable. To stop things from getting worse, we must stop putting more carbon into the atmosphere. There are plenty of individuals who benefit from the profitability of fossil fuels and they continue to resist any effort to change things.
As noted when I told the story of the failure to institute a BTU tax back in 1993, the current generations have failed miserably to stem global warming when changes decades ago could have slowed and perhaps stopped global warming. Though these young people have no responsibility for the failures of the older generations, they are the ones who will have to survive the tremendous destruction the current generations have failed to avert. I am grateful that they have thrown themselves wholeheartedly into the struggle and pledge to help them any way I can.
Michael Meeropol is professor emeritus of Economics at Western New England University. He is the author with Howard and Paul Sherman of the recently published second edition of Principles of Macroeconomics: Activist vs. Austerity Policies.
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