Last April, Laurence Kotlikoff, together with three distinguished colleagues, published a long, highly mathematical working paper on how to make a carbon tax a “generational win-win,” that is, something that can benefit those of us who are alive to day as well as our great-grandchildren. Both Kotlikoff and I think the answer is “Yes,” but for different reasons.
Earlier, I published a commentary on Kotlikoff’s working paper here on Medium. In the meantime, he has written a shorter, much more readable version of his “win-win” thesis for the Milken Institute Review. The editor of MIR asked me for a comment on the new version, which has now been published. Here is what I said:
In his Milken Institute Review article, “Leaping the Divide,” Larry Kotlikoff identifies a key problem of political economy that complicates efforts to slow climate change: a large part of the costs of the transition to a low-emission economy must be paid upfront as the economy retools, while the greatest benefits will become apparent only decades, even centuries, down the road. That makes costly policies like taxing emissions to spur green investment a hard sell.
Kotlikoff would like to fix that. Somehow, he says, we need to make a carbon tax a “generational win-win” that would “give all generations an equal stake in the policy.” If so, we would not have to rely on the weak reed of intergenerational altruism to build a successful political coalition behind a climate action plan.
Can it be done? I agree with Kotlikoff that it can, but I have serious reservations about the way he proposes to do it. Let me explain.