When my grandparents passed away, we had a pretty messy time deciding who gets what. These kinds of things never go well.

We had several ideas of how to do this fairly. One was to have an "auction" using each family member's liquid inheritance, with the proceeds being redistributed evenly. Another was to assign an arbiter of unlimited power to dole things out and call it a day. Of course, our democratic family doesn't work that way – we like to argue, and vote, then argue about the vote.

We went with a mix, with my mother and her sisters serving as auditors, we came to each item, someone was nominated to receive it, and if more than one person was nominated, the receivers got to make brief comments like "he already got the rifle," or "I'm a musician," and then we took a hand vote. Afterward, people could trade things with each other, so grabbing things of greater monetary value (or alcohol content if a certain uncle had what you wanted) could barter you toward the object you truly desired.

In the end, every grandkid got something meant to be special to that person: the musical cousin got an antique violin, the Harley-owning brother got the WWII memorabilia, the hunter cousin got Grandpa's old M1, the geek got the chess set, etc.

I got lots of books. Publishes a magazine = books.

A book of quotes

Some were instant treasures (Shakespeare's Collected Works – oh yeah!). But most ended up on a shelf at my parents to be saved the rigors of a 20-something's vagabond lifestyle.

Last week I rediscovered this dusty shelf, and stumbled on a surprising little book. A little red book. Yes, that little red book. According to my mother it wasn't just there as a collector's item; before the war, Grandpa "dabbled" in Communism.

Communism when it's explained by its leaders (and when they can stay away from repeating "the common weal" for more than a page) seems to make some sense. It's very clean: the idea is to apply basic organizational principles to everything. Need 10 guys over here – put them there. Need $10 million over here? Put it there. From on high, everything makes sense. It's on the ground that this system becomes a cartload of 'common weal' – without built-in motivating factors, progression comes to a standstill.

Capitalism, by contrast, is messy. For some people to be rich, others have to be destitute. And the things we value as a society may not coincide with those that the market values at any given time. Anecdotally, you could fill shelf after shelf with the uglier side of our system. The thing to remember, then, is that anecdotes don't tell the whole story.

Who gets the credit?

History can take this wide-angle view, but current events seldom give us such a comprehensive vision. Rather, we focus on individual tales: the man on the street versus the man in the tower. In the microcosm, our trust in free markets can seem counterintuitive.

This week the Government Accountability Office (GAO) released a report speculating on how the government might put together a new cap-and-trade system for greenhouse gas (GHG) control. The report highlights different methods for doling out emission allowances, noting that the success or catastrophic failure of the whole program will come down to how well this key aspect is executed.

No ifs, ands or buts: when launching a new commodity, there's one shot to get it right. Essentially, you're centrally planning a free market, a collision of communism and capitalism. Dicey? I should think so.

The options discussed for allocation are reminiscent of those discussed for Inheritance Sunday. One is to auction off every credit, using the revenues to compensate households (presumably this means a tax break for the total amount raised). Companies would be responsible for knowing how much they need, would be incentivized to walk into the auction with the most accurate information.

Another is to hand 'em out, which the regulated community prefers for obvious reasons. This is a more Communist (actually: Socialist) answer, though, requiring a lot of initial oversight by the federal government to determine who gets what. Imagine the opportunities for corruption, if, say, one company with some political influence got a bunch of credits they didn't deserve, or if one that was politically unpopular for unrelated reasons got the shaft. Imagine the bureaucracy needed to get accurate, honest, one-time estimates of each plant's CO₂ output!

The third option discussed by the GAO report is to mix it up, giving away some allowances, and then auctioning off the rest.

Assessing the options

In the microcosm, Options B and C seem to make sense, right? This makes government the ultimate arbiter, and the one ultimately responsible for knowing what each plant's credits should be.

By contrast, on the surface, intuitively, Option A looks scary. For one, putting the auction money in the government's hands and expecting it to be "redistributed" sets off our 'red' flags – I mean, c'mon, when's the last time we handed over a $100 dollar bill to the government and had it come back with Ben Franklin still on the face (in other words, how's that Social Security thing going)?

The auction idea also puts industry in the position of paying a massive up-front cost, which it obviously has to pass on to consumers. A one-time hit like this, even if offset by a tax break later, is a nasty, clutch-less shift for the economic engine to absorb.

And it puts a lot of pressure on the energy industry in particular to get accurate estimates going in. Considering we're in undiscovered territory here, I'm gonna go out on a limb here and suggest that - erk – not a few companies will get it very wrong, and go out of business.

This is messy.

So is Capitalism.

A capital idea

One thing about the big red idea: it's clean and neat. When it's time for everybody to, say, control something they've never thought about controlling before, everyone moves at once, fairly, with the referee directing the way. Of course, in application, this fails – regularly and spectacularly fails. The corollary: Capitalist responses are sloppy – only in the macro, i.e. with the hindsight of history, is its superiority ultimately made clear.

By now, I think you know where I'm going with this. Option A – the auction – is the answer. Oh, it's going to hurt, but there's some things we can do about that.

1. I'm not up enough on finance to go into specifics here, but my feeling is a portion of the credit should be made directly into the startup capital for EPA's enforcement mechanism of its GHG program, and the rest put into an egalitarian (i.e. every taxpayer gets $100) Income Tax refund.

2. We're going to put a few companies out of business. This is what I mean by our system being a bit messy: this is a necessary part of the transition. In particular trouble are coal-fired power plants, and companies that haven't upgraded in a while. To this, there really isn't a cure-all answer – the best we can do as a nation is let these businesses have enough lead-time that they have a fighting chance to develop the technology and get it online before the program goes into effect.

Nobody promised things would be perfect. Okay, some people are promising things will be perfect, but they're fooling themselves. Transitioning the United States to a cap-and-trade system for GHG control is going to get ugly one way or another. The question is what we look like when we've come out the other side: do we take the bitter pill up front, or have it dosed by the government?

If it's one or the other, I say we just do the auction, get it over with, see who we lose, and trust in our own ingenuity to bring us through in the end. It's worked before.

And besides, you know what you get when your ultimate fate is put in another's hands? You get a little red book full of quotes in support of what is ultimately a stupid idea.