The problem with {subject} 101

Recently I saw this old (by internet standards) video of Elon Musk explaining what we should do about Global Warming in 12 minutes.

The talk doesn’t spend much time defending the science behind global warming and instead works around the issue. First, Musk states that 97% of the scientific community believe that not changing global energy habits will result in catastrophic loss of life/wealth and 3% don’t. He then says that since oil energy is not sustainable, we will eventually move to a sustainable energy source. This is a tautology. In the long run we will need to be on a sustainable source of energy otherwise it won’t work for the long run. Since the choice becomes when – not if – to move to sustainable energy, he claims we might as well do it sooner.  He then suggests that a properly functioning market economy should price in negative externalities so as not to create incentives for bad behavior. He then says this is economics 101.

The phrase this is Economics 101, is a very misleading phrase. Presumably, the topics get more sophisticated as you progress through the subject. Those simplifying assumptions made in 101 are no longer true. For example, knowing the cost of a particular negative externality is hard, it is part of a class of problems known as the free rider problem. Does Elon Musk know the price of the negative externality of continuing to use fossil fuels? It certainly isn’t infinite, we can be pretty sure that we would not be able to fulfill the world’s current demand for energy even in 10 years with only clean energy, which means that this tax has to be gradual (he mentions this in the video, but where he chose 5 years as opposed to 7 or 3 is unclear). Furthermore, the tax that is collected strictly from fossil fuels must end up somewhere, we would like that it provide some public good, but we can’t be sure. In many oil producing countries this tax is a significant source of revenue for the government, so levying a tax sufficient to shut down the industry is not in their best interest. Many social programs in those countries would have to be curtailed. One additional point, in the short run any tax on energy is sure to harm poor people the most. Energy cost accounts for significant percentage of many products and this is very true of grocery items. When the price of energy goes up those impacted will be those whose incomes are disproportionately spent on items influenced by the price of fuel, namely the poor.

I am sure that Elon could answer all of these questions or knows people that can answer them. My issue is that complex problems are proposed as simple problems with simple solutions and base themselves on a rudimentary presentation of the subject. It would be like saying you just need to reach the escape velocity in order build a rocket, it’s technically true, but it wouldn’t have gotten Elon very far with spaceX.

So the next time someone says: it’s {subject} 101. Ask  yourself are there any simplifying assumptions that might be contradicted by {subject} 501.

 

 

 

 

 

 

 

 

 

 

 

 

 

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