Cap and trade

John is a hunter, a great hunter. There are many types of hunters. Beginners hunt rabbits. The seasoned ones hunt bears. The elites hunt humans. John is an elite hunter.

In John’s house, there are many skulls. These are his hunting trophies. John is a modest person. He never talks about his own hunting expeditions. Instead he would tell you great hunting stories about the owners of those skulls. All those people were legendary hunters before being hunted down by John.

John is getting old, really old. On several recent encounters, he felt less like a hunter, he felt more like a hunted. But he can’t simply retire. He has a large estate to maintain. He has a large staff to maintain. He hires many secretaries. There is a secretary of estate, who handles his whole estate. There is a secretary of finance, who handles his money. He also hires many private servants, who take care of his private matters, and public servants, who take care of his public matters. He has to find a way to sustain his large and increasing staff.

Academics are tasked to find a way to make the hunting and life sustainable. Academics, of course, enjoy complete academic freedom. They have no obligations to study sustainability. However, only promising Ph.D.s are hired as academics. Only the ones having delivered are granted tenure. Only the faithful and able are promoted. Soon many schemes are developed. The most prominent one is cap and trade.

John used to hunt one thousand skulls a year. Academics, through painstaking studies, find the sustainable level of hunting is one thousand. So the total hunting quota must be limited to one thousand per year. There are many young and aspiring hunters. John graciously agrees to reduce his hunting activities and allocate the saved quotas to the young and aspiring. As there is a strong demand for the hunting quota, the best way for John to distribute them is through market auction. Whoever bid the highest price will get the quota. In this way, the total hunting quota is capped at the sustainable level. The distribution of quota is achieved through a market trade system.

In this way, the free market system, the best of all possible systems, is preserved. The hunting activities are maintained at a sustainable level. John, by auctioning off hunting quota regularly, makes his great lifestyle sustainable.