Krugman: Government Imposed Rationing Is Market Mechanism
"The truth is that conservatives who predict economic doom if we try to fight climate change are betraying their own principles. They claim to believe that capitalism is infinitely adaptable, that the magic of the marketplace can deal with any problem. But for some reason they insist that cap and trade — a system specifically designed to bring the power of market incentives to bear on environmental problems — can’t work."
In this short paragraph, no less than three falsehoods and contradictions can be found:
1) Conservatives (or libertarians or objectivists) do not really believe that capitalism is "infinitely adaptable" or that markets will create a perfect world. The case for the free market doesn't depend on the delusion that markets are perfect, but is instead based on the insight that it is better than the alternative of government control.
And free market advocates certainly doesn't believe that markets can undo any and all damage caused by government interventions, such as "cap and trade".
2) "Cap and trade" does not rest on market incentives since it is based on government creating an artificial shortage, something which by necessity will reduce output.
3) Incidentally, since Krugman is known to doubt "the magic of the market", shouldn't he be skeptical of the ability of the alleged market incentives here?