In the wake of the BP oil spill in the Gulf of Mexico and now the hottest August on record, the calls come anew for some form of tax on emissions of so-called “greenhouse gases.” Whether a direct tax on carbon or a more convoluted system such as “cap and trade,” or simple government incentives for “green energy”, the politicians are conspiring to obtain more of our tax money and to exert more control over the economy.

In seeking to divert resources into favored technologies and sectors that otherwise would flow elsewhere in the economy, the politicians – Republican and Democrat alike (although they typically have different shopping lists) – claim to be “creating jobs,” promoting sustainability, and protecting the environment. Yet they continue to ignore a simple concept of economics: what is seen versus what is not seen. In diverting tax dollars and promoting investment in, say, wind energy, the direct effects are tangible: construction workers on the job building windmills and laying cables for transmission, for example. But if the windmills were really such a good investment, there would be no need for the government to incentivize their construction. If building windmills were an efficient use of resources, funding would come voluntarily from venture capitalists rather than forcibly from taxpayers.

Harder to see, however, is where the money the government uses to promote windmills would be otherwise spent. Perhaps the land would be used for agriculture, providing cheaper fruits and vegetables to consumers, who themselves might use their extra money to save for college, purchase health insurance, or invest in a small business. Perhaps the investors in the windmill farm would instead invest in a more efficient – if less favored by the government – power plant, using natural gas, providing consumers with cheaper electricity and leaving the utility company with more money to invest in other pursuits or perhaps to provide better salaries and benefits to its employees – or even on research and development for future innovations in power production and supply.

Another seemingly important question goes unanswered in the discussion on global warming and carbon taxation proposals: what is the cost/benefit ratio? Politicians and researchers consistently provide alarming predictions of the impacts of global warming, and cite these deleterious effects as evidence of the need to “do something”. Yet while the cost of a tax increase can be straightforward to estimate, and while it stands to reason that increasing costs on energy providers will lead directly to higher costs to consumers for goods and services, the benefits of various proposals is rarely defined. If cap and trade were to be enacted, how much would it lower global temperatures? (Assuming, of course, that the models are correct – a pretty major assumption, one would think.) What if we could spend half as much and achieve 75% of that reduction – what would the impact be on the climate? Even if one accepts at face value that the current warming trend is the result of greenhouse gas emissions, and that it is in our best interest as a society to reduce those emissions, it would still make sense to measure the amount of “bang for the buck” a specific proposal provides. With the various programs that have been proposed, I am yet to see one such analysis.

The economy is a vibrant, robust, dynamic entity. Unfortunately, politicians tend to treat it as a static object to be pushed, prodded, and manipulated at their direction – to be, as the common term goes in the media, “managed”. It is impossible, however, to manage something successfully and efficiently without taking into account unseen impacts and without examining relative benefit achieved for a particular cost. Nowhere does this seem more true than in the field of energy policy and global warming. Until the advocates of carbon taxes and green subsidies can provide concrete justification for their proposals, there would seem to be little reason to sacrifice money and freedom on their behalf.