Economics was memorable labeled “the dismal science” by Thomas Carlyle, but I’ve never thought it was dismal at all, particularly when considering its basic laws. It’s fascinating to explore the way government, human behavior, and the principles of commerce interact. One reason that small government and maximum private-sector liberty are so essential to prosperity is that such an approach is harmonious with the immutable laws of economics, while all other systems of governance amount to doomed efforts at repealing them.
Something as simple as the law of supply and demand is forgotten with surprising frequency by central planners. It becomes a rake lying hidden in the tall grass of history, which they keep stepping on as they march toward the distant horizon of a heavily regulated utopia. No one should ever be surprised that large groups of people, including corporate enterprises, generally seek to take advantage of incentives placed before them, without giving much thought to the high-minded rationale behind the creation of those incentives.
Thus we have a delightful New York Times report on the United Nations’ latest encounter with “unintended consequences,” which should have been easily foreseeable to anyone except an insulated trans-national bureaucrat.
The UN, you see, is still heavily enthralled by the discredited fantasy of “global warming,” and set out to control it by issuing “carbon credits” to industrial plants in developing countries. The idea was to reward them for generating reduced levels of greenhouse gas. Industrial facilities would be allowed to produce a certain amount of these gases; if they produced less than their quota, they could sell the unused carbon credits to other businesses.
But as the Times relates, manufacturers located primarily in China and India “quickly figured out that they could earn one carbon credit by eliminating one ton of carbon dioxide, but could earn more than 11,000 credits by simply destroying a ton of an obscure waste gas normally released in the manufacturing of a widely used coolant gas. That is because that byproduct has a huge global warming effect. The credits could be sold on international markets, earning tens of millions of dollars a year.”