Yoram Bauman Stands Up for “Cap n Tax”

Standup economist Yoram Bauman was on campus all day, talking in two classes, brunching with interested students, and finally knocking us dead with his material from convex hulls (don’t ask if you aren’t a math-econ major), exotic grains (I always suspected quinoa was funny; now I’m convinced) and the American political spectrum.  Bauman delivered what was certainly the funniest Povolny Lecture in the history of the series.

His primary work and his primary message has to do with climate change and the price of carbon.  Bauman argues that a carbon tax of about $30 per ton would serve the dual purpose of reducing carbon use and generating revenue that could offset the reliance on distortionary taxes (e.g., sales and income taxes).  His message is that this lunch isn’t free, the tax would translate into about $0.30/gallon on gasoline and $0.03/kWh on coal-generated electricity.  And here’s the key to the message — these price increases are necessary in order to reduce the quantity demanded for fossil fuels in rich western countries.  So, in that spirit, the idea of a cap and “tax” is perfectly consistent with the basic economics lesson: if you want to use the market to get people to buy less, then the so-called market signal is the higher price.

On behalf of the economics faculty and students, I’d like to thank Yoram for a great  day and wish him the best in his careers.