(That's why the markets cannot solve global warming for example, and that's why free market fundamentalists are often unable to believe that global warming is happening.)
However, even a tax doesn't necessarily helps with the conservation of non-renewable resource. Since the tax is typically a percentage of the price, price going to 0 will still incentivize use of the resource despite tax being arbitrarily high. The same goes for cap-and-trade - which is how they actually failed - the emission quotas got very cheap and so everybody bought what they needed for business as usual.
The only way the carbon tax can work in case of carbon is that it becomes high enough that it's no longer efficient to produce energy from carbon sources compared to energy from renewable sources.
So the tax isn't really a punishment that would encourage conservation, it can just encourage substitute of different resource. If there isn't different resource.. you still won't conserve it even if you tax it a lot.
There's always a different resource that you can substitute if you look widely enough at the big picture.
E.g. for party balloons, sure, maybe only helium works, but it's only there as an entertainment option, of which there are many substitutes.
Same for say, helium for scuba diving—sure, there might not be an alternative, but the purpose of most forms of scuba diving may be fulfilled by alternatives (submersibles / robots / snorkeling depending on whether for practical or enjoyment purposes).
A tax would drive people to fulfilling the wider economic and societal need without using a product that requires helium.
> which is how they actually failed
Cap and trade did not 'fail', it succeeded in capping emissions at the number of credits + allowances. If you want to reduce emissions more, then reduce the total quantity.
Price targeting and quantity targeting are just different ways of stating what your goal is.
What is the different resource that can be used for studying low temperature physics?
For a duty tax, sure, but not not an excise tax. Those are often fixed rates. An NFA stamp for the transfer of banned weapons is a fixed rate ($200). Cigarette taxes [0] are also fixed values. Gasoline taxes have a similar fixed value [1].
[0]: https://taxfoundation.org/state-cigarette-tax-rates-2018/
[1]: https://taxfoundation.org/state-gasoline-tax-rates-2017/
This is not true. If you and I believe that the scarcity of a resource will rise tomorrow, we will try to buy it today so that we can sell it for a higher price after it becomes harder to get. All resource speculation (and boy, there is a lot,) is market-incentivised conservation.
Yes they will. And this increase in price will cause people to use less of it, because people don't like wasting money.
Nothing is being made illegal, so there are no black markets.
But I don't! If the resource is not to be used tomorrow, or any other day (that is, being conserved), then why should I believe it will be scarce?
The problem is that you simply cannot assign a finite price on something that you're never going to use.
There is an experiment in our lab (ADMX, an axion search) for which it is already financially more expedient to re-liquify.
In addition, new cooling technology is becoming more prevalent. Closed-cycle pulse-tube cryocoolers are becoming common throughout physics.
This is absolutely false. Even a basic understanding of supply and demand shows that a decrease in supply causes the equilibrium price to increase and the equilibrium quantity to decrease.
And you can't model the situation (of conserving a resource) in supply-demand model.. precisely because markets cannot do it.
The entire point of supply and demand models is for the exact purpose of deciding whether we should use resources now, or use them later (ie conservation), and decide how and who we should spend those resources on.
If you were to ask be to give a definition of economics or supply and demand, a situation exactly like this is what I would use to define those words.
Global warming and other environmental problems have nothing to do with this. The environment is a shared resource so market participants have no incentive to preserve it, on the contrary, they rush to "use" as much of the common resource as possible and maximize present gain, before someone else kills the planet and there are no more money to be made. The solution there is to tax the externalities and transform the public resource into a private cost that must be minimized, thus preserving the resource. Helium is not such a public resource, it's private to those who have it, produce it and store it.
(By the way, if you read the article, it nicely explains how the US Helium reserve works and how it has been dismantled in recent years; so you can in fact store huge amounts of helium, should it ever make economic sense to do so).
The fact that it's difficult (impossible) to store helium long term is an argument against government intervention because it disrupts present consumption for no clear reason and with meager future benefits.
The current price is not the best estimate of the future rate. It is distorted by people selling below it's true cost (typically, to pay off sunk costs, or to keep the lights on in their business.)
* It's hard to exclude people from whaling, so you can't "stockpile" whales.
* Markets had less global visibility and insight than we have now, so it's clearer what the speculation opportunity would be.
* Important financial instruments used in speculation (standardized forward and option contracts) had only recently been invented, and wouldn't be generalized out from farm commodities until after the collapse of whaling.
We went from having record-breaking harvests of cod to no cod, at all. There was a collective agreement, to prevent over-harvesting of cod - and all the participants in the agreement lobbied the Canadian government to lift its restrictions (Which it did, contrary to the advice of the scientists studying cod.) A few years down the road, the fish was gone, and the fishermen went broke.
The solution is to (1) internalize the externalities and (2) allow individuals to take over the property rights of a resource, i.e. privatize it. This shifts the game-theoretic equilibrium away from resource depletion.
At what price?
If the state owns land with a billion barrels of tar sands oil on it, should they sell it for $1/barrel? $2/barrel? Should it accept the highest bid that the market will put forward?
What if the state sat on the land for 10 years - would it get a better bid then? Maybe it makes sense to wait until the time is right to privatize?
Deciding when, and for how much, to put resource-bearing land onto the market is a highly political, non-market-driven process. You can't just say 'privatize it', and hope that markets will find the optimal outcome. (Optimal for whom?)
Setting the right level of royalties, or, alternatively, privatization for any particular point in time is an incredibly complicated economic question.
That is a great question. There are various types of auction systems that can be used. See [1] for an overview.
> If the state owns land with a billion barrels of tar sands oil on it, should they sell it for $1/barrel? $2/barrel? Should it accept the lowest bid that the market will put forward?
Why would they accept the lowest bid? Typically in an auction one accepts the highest bid (except a Vickrey auction, where the price paid is the second-highest bid). This is particularly true in the context of privatization because resources should be allocated to those who value them most and thus have the strongest incentive to use them efficiently [1].
> What if the state sat on the land for 10 years - would it get a better bid then? Maybe it makes sense to wait until the time is right to privatize?
It depends on the government's goals. The underlying assumption of privatization is that markets are better resource managers than central planners (e.g. due to the price mechanism solving the economic calculation problem). If a government wants to maximize efficient allocation of ownership rights, then it should privatize as quickly as possible using one of the aforementioned approaches. If a government just wants to maximize revenue for themselves (see Venezuela), well, then anything goes.
> Deciding when, and for how much, to put resource-bearing land onto the market is a highly political, non-market-driven process.
The issue is indeed highly political. However, it is by definition also market-driven. Unless by "non-market-driven" you meant not exclusively market driven, in which case I would agree.
> You can't just say 'privatize it', and hope that markets will find the optimal outcome. (Optimal for whom?)
Optimal for society at large, through efficient allocation of ownership rights. We do not have to rely on "hope" since there is a lot of empirical and theoretical evidence that markets are better resource-managers than governments.
[1] https://link.springer.com/chapter/10.1007%2F978-3-642-60825-...
I meant to say highest bid.
What if the highest bid that you receive today is not as high as what you would receive in 10 years? The government owning land, is by proxy, the public owning land. As a member of the public, and as such, a minority shareholder in that land, I want to either see the proceeds from its use be distributed to me, or, if it will be sold, to be sold at a good price [1]. If a buyer willing to pay such a price is not found today, then I'd rather sit on that land for a decade, then see it go for pennies on the dollar. As a shareholder, I don't give two rats asses about giving up my stake so that someone else could optimize overall economic productivity today. I want to optimize the overall gains for myself, overall.
> Optimal for society at large, through efficient allocation of ownership rights. I don't understand your use of the term "hope", since there is a lot of empirical and theoretical evidence that markets are better resource-managers than governments.
At its extreme, the most efficient allocation of ownership rights would lead to the government selling off all the oxygen in the country, and you having to pay some rentier, just so that you could breathe. Optimizing for situations like this is a fringe, highly ideological position.
[1] Markets aren't always liquid, there are, at any point in time, few buyers for billions of dollars worth of land, the few bids may not be competitive, you may not get your money's worth if you start a resource firesale tomorrow.
Theoretically, one could wait 10 years to maybe get a higher payout (if such a thing weren’t already reflected in the current market price). However, I can’t think of a real-world example where doing so would offset the opportunity cost of lost efficiency during the intervening years.
> At its extreme, the most efficient allocation of ownership rights would lead to the government selling off all the oxygen in the country, and you having to pay some rentier, just so that you could breathe. Optimizing for situations like this is a fringe, highly ideological position.
You find this bizarre because oxygen (at atmospheric concentrations) is not (currently) a scarce resource on Earth, so it makes no sense to assign property rights over it. In situations where oxygen becomes a scarce resource, like space stations or planetary colonies, you can bet there will be a market for oxygen. That is, unless technology makes it feasible to produce in such abundance that the price goes to zero.
There’s already a market for pure oxygen needed for industrial uses, so there’s nothing verboten about oxygen being priced. In that sense, it’s just a resource like any other.
What if it is lower?
And if the government has some special knowledge as to what oil prices will be in the future, it should instead buy a bunch of oil and openly trade on the market.
I simply do not believe that the government has this special knowledge or is significantly better than the market.
If you want to reduce risk, you could instead sell the land over time. IE, sell x% of the land every year, over the next 10 years.
The risk that prices will go down is just as a big of a problem as the risk that prices will go up. I see no reason why one should choose status quo bias in favor of keeping unused land that might go up or might go down.
[1] http://www.slate.com/blogs/moneybox/2012/05/14/america_s_hel...