Put a Cap and Trade in that Ass

Climate Progress and Krugman team up (well, CP just backs up what the Krug-sangwich blogs) again to drop major logical bombs on the dunderheads who don't get the cap and trade law. They basically say what I would say if I took appealing econonmics classes instead of attending Econ 103 only to guarantee I had a nap before my afternoon workout.

Readers Digest:

Any time you have a market, there’s some opportunity for speculation. Even if the good being traded isn’t storable, there may be a futures market, so you
can bet on the future price. If the good is storable, the spot price may be moved by the futures market, since high futures prices may provide an incentive for stockpiling.

For example, the fact that wheat is traded means that there’s also a wheat futures market; and because wheat can be stored, futures prices affect spot prices.

So, should fear of speculation lead us to ban trading in wheat? Nobody would say that. Yes, sometimes speculators will get it wrong — but the advantages of having a wheat market vastly overshadow the possible harm that may sometimes come from speculation.

Now substitute “emission permits” for wheat. It’s exactly the same story. Why should you address it any differently? Yet as Joe Romm tells us, Sen. Byron Dorgan — who I
suspect kind of favors allowing the market in wheat to operate — warns against cap and trade because it would offer too many opportunities to the “Wall Street crowd.” And that same line is, unfortunately, being echoed by a number of progressives.