Keep on Truckin'

Will Wilkinson is a libertarian economist, and sketches out a fairly compelling narrative of how we can save both the environment and humanity from going to utter shit in the future, as so many predict. Mostly he thinks we can just relax and keep on doing what we are doing - things will more or less fix themselves. Now, I am not quite as willing to just stop worrying and love the bomb as Will, but on the whole I think he's probably right. However, I think we need to do some serious work on what I see as the key element of his approach:

b) a well-functioning price system will shift energy consumption to (cleaner) alternative energy sources as prices for historical extracted sources of energy rise;

You guessed it - carbon tax!

On some level I think maybe I just hope this is right, because I don't really see any viable alternatives. Tyler Cowan, however, finds that the logical extension of this thesis to create a few problems of its own.

UPDATE:
Free Exchange finds Mr. Wilkinson's arguments a bit lacking. Mostly they lampoon him for assuming that we do actually have "a well-functioning price system" (this would be a price system in which the negative externalities of energy production, such as CO2-caused climate change, are properly accounted for). What I took away from Will's thesis, however, is that we NEED TO IMPLEMENT a price system such a carbon tax, in order to move forward.

At least one bad idea of Obama's...

A "windfall profits tax" on oil companies. Bad for a number of reasons, summed up by Megan McArdle (who else!). Besides the fact that consumers are likely to pay for almost the entirety of the tax, it has very broadly negative implications for the entire economy:

And the implications of any "windfall profits tax" are troubling for future growth. If you want an economy that continues to innovate and expand, it is not wise to send a signal to companies that they will be punished for doing too well. Very rarely, after all, do we offer special "windfall losses" tax rebates, where companies that do particularly badly get extra tax loss abatements. Thus, any windfall profits tax functions as a profit on risk-taking. And risk-taking is what the American economy does very, very well. Note that this effect will endure, economy-wide, even if in this particular case the oil companies are able to jam the taxes down onto consumers.

Having stable long-term incentives is very important.