RoR: Forum

Ed, what is your take on the idea of "externalities"?

Anarcho-capitalist David Friedman discussed them in his book The Machinery of Freedom as a valid economic concern so I wanted your take on them.

As an aside, the authors' characterizations of themselves as "libertarian paternalists" reminds me of a similar phenomenon I call "totalitarian libertarians" or people who believe in freedom for themselves and the concurrent control of others by government force or social coercion. One local libertarian I know falls into this mold. On the government side, she openly favors sterilizing everyone from birth and then requiring them to get state licenses to become fertile and reproduce. On the social side, her first husband failed to meet her expectations of what he might and ought to become, so she divorced him. "I could see that he could be more!" she squawked repeatedly, which in reality meant, "I could see that he could be more my way!" When I asked what his current wife does for him, she answered, "She is simply 'there for him' when he needs her," as if such a peaceful coexistence were something bad.

Houseguests from Hell, meet the totalitarian libertarian.

(Edited by Luke Setzer on 9/01, 6:29am)

Post 1

Sunday, September 1, 2013 - 10:30am

Ed,

Excellent analysis of this nasty book.

Don't you guys even think in principles?

Yes, they do and the principles are those of the Progressives. The end justifies the means. The end is total centralized control of all aspects of human interaction. The only means we are not pursuing is violent revolution because we believe that we can tell lies, use propaganda, fiddle the electoral system, bit by bit increase the disregard of the constitution, tweak the rules and regulations till we have nudged then to where we want, legislate from the bench, co-opt the educational system for our ends, ridicule our opposition, factionalize the electorate with identity politics, never tell anyone what our actual end is, create non-objective laws, and get to our end.

Usually they find a moral stalking horse, like protect the planet, or protect children from gun violence, or help the poor get medical care.... then with that quasi-moral emotional talking-points base they create a Trojan horse complex of laws. The moral dressing and justification is proudly painted on the outside, while hidden on the inside, in the actual statutes live the real intent which is to diminish the influence of the constitution, concentrate power in the administration, turn representative legislators into potted plants, pave the way for still more non-objective law by regulatory agencies answering to the executive branch, and, of course, centralize ever more power and control in Washington.

The old Fabian Socialist strategy was to continue to educate new generations with each one more to the left than the one before and then to be able to pass ever more draconian laws (what Sunstein refers to as "Command and Control"), but this new tactic is to make little nudges here and there and thereby be able to sneak up on that same end - command and control of everything.

Post 2

Sunday, September 1, 2013 - 10:44am

Luke,

One thing I've noticed is that those who are opposed to a system that they don't dare attack openly will try to co-opt its moral authority or rationality by stealing its name. That is what I think we see with those people who call themselves "Anarcho-Capitalists." It isn't possible to have Capitalism without some degree of minarchy - some degree of protection under the law for voluntary association and contracts. But they attempt to steal the meaning of Capitalism and bind it to anarchy as if a hyphen will somehow erase a contradiction.

Same thing for "libertarian paternalists" where they attempt to steal the mantle of liberty represented by sound libertarian thought to hide the true nature of paternalism when it is not a parent to their child, but the government to their citizens. They seem to hope that one aspect of their system that is most important to them - control of others - will be hidden from sight by their attempt to hide behind the word "libertarian."

They attempt to 'progress' via deceitful corruption.

Political corruption (crony capitalism, election fraud, use of government power to pursue partisan ends),
epistemological corruption (see above),
legislative corruption (non-objective law, unconstitutional law),
constitutional corruption (liberal interpretations and ignoring),
judicial corruption (legislate from the bench)

Post 3

Sunday, September 1, 2013 - 11:06am

Luke,

Ed, what is your take on the idea of "externalities"?

Anarcho-capitalist David Friedman discussed them in his book The Machinery of Freedom as a valid economic concern so I wanted your take on them.

Interesting question. I want to warn you that I may not have a good enough answer to it, but I hope to entertain it while being somewhat entertaining.

I want to address your question starting with a list of possible externalities -- because the concepts can mean anything to anyone, it is actually pretty important for everyone to first agree as to what it is that they are talking about. Before I do, I challenge the wording of your question, which presumes that at least some things will be things that, in themselves, are not a valid economic concern. Who decides something like that?

According to Austrian economic theory-method (a better name than Austrian Economics, which makes you think it is something "special" or "abstract"), consumers are pretty much sovereign and can pretty much demand that anything been seen -- in some roundabout way, at least -- as a valid economic concern. It is the opposite of "If you build it, they will come." It is rather: "If they want it (and are willing to pay for it), it will be built." The question is over coercion, not over the choice of an ultimate objective -- such as whether to increase or decrease any given "externality" that someone, at some time, is championing. Some of the following are controversial.

A list of some possible externalities for regulation vs. free market solution discussion
-your neighbor plays music so loud that you cannot sleep and therefore do not wake up in time for work the next day
-you decide to "get him back" by cultivating the bacterium, clostridium difficile -- which releases sulphur-containing compounds not immediately hazardous to anyone's health, but with a terrible, and I do mean terrible, odor (which, using an industrial fan, you send over into his back yard
-he decides that this is going to be a case of the Hatfields vs. the McCoys, so he plants a huge tree on the edge of his property, and that tree prevents you from sun-bathing, and causes prickly needles to be dropped into your yard which get stuck in your bare feet as you walk around, leading to agonizing pain
-you decide to fire up that decades-retired wood fireplace, without cleaning out the soot in the chimney, resulting in thick black smoke that tarnishes his view of the otherwise-pristine countryside
-he decides to open up his house as a sort of half-way house for drug addicts and prostitutes either on the lamb or in recovery
-you buy a dog that is especially adept at near-constant barking (even at night)
-he lets his grass grow 3-feet tall
-you overcut your grass or apply growth-destructive chemicals, so that there is nothing but an ugly, black mound of dirt on the edge of his property line
-he knows you own stock in carbon-trading, so he willfully reduces his use of energy -- leading to less profit for you in the long run, or at least postponed profit by reducing the tabulated cost-benefit ratio of energy source mandates
-you know he owns stock in Exxon-Mobile, so you buy an electric car and post glowingly about it on the internet
-he discovers that you are an atheist, so he starts selling bibles and proselytizing from a stand in his front yard
-you discover he is allergic to hay, so you buy a horse and keep all of the hay along his property line

This list, written on the fly, turned out to be more like a Spy-vs.-Spy cartoon than anything else. But I hope I captured some peoples' vision of what an externality is, or might turn out to be, in some kind of a court of law. After we agree on that -- after we agree on what it is that can be called an externality, and on what it is that cannot, under any circumstances whatsoever, ever be called an externality -- then the discussion can proceed rationally.

Otherwise, it can't.

:-)

Ed

Post 4

Sunday, September 1, 2013 - 12:48pm

Thanks, Steve.

And you made good points, yourself.

Ed

Post 5

Sunday, September 1, 2013 - 7:03pm

Steve,

Thaler and Sunstein have an idea with which you might agree. I'm not trying to start trouble based on guilt-by-association (e.g., "Oh, you agree with Karl Marx on issue X? -- then you must be evil!"), but it's an issue that you and I were recently discussing.

A "freedom" that Thaler and Sunstein want people to have (a freedom which they currently do not have under current law) is to be able to waive their rights to sue their doctors for malpractice. Thaler and Sunstein make the libertarian-sounding argument that not only should people be free to waive their rights, but that it would help to bring medical costs down (because lawsuits are costly, and costs always end up in the lap of consumers).

What do you think about that?

Ed

Post 6

Sunday, September 1, 2013 - 7:26pm

Ed,

I completely agree with having the option to forego a given right in exchange for some value.

If we didn't deal with our doctors through third parties, like government or insurance, it would help to have a laundry list of options we could use to customize our on-going relationship. I'd like to be able to email my doctor with a questions (and get charged a reasonable fee for the answer) - I'd pay extra for that option (and it would save me now and then from a visit).

I'd be happy to sign away rights to sue, with the right doctor, and I'm not much interested in seeing the kind of doctor I wouldn't trust. And what about cutting out lawyers in yet another way by signing an agreement that any legal conflicts we can't work out will go to mediation by a mutually agreed upon mediator.

What about reduced monthly or per visit charges but with an agreed upon bonus at the end of each year where your health meets some agreed upon standard?

Post 7

Sunday, September 1, 2013 - 10:07pm

Good ideas, Steve.

It's hard to trust these 2 guys after they have shown that they are actually cunning collectivists merely masquerading as individualists. They may start and end a point in the book by "patriotically" reciting a key part of the Declaration of Independence* (using the tactic called the "sandwich approach"), but that is only to fool people. It's purpose is purely deceptive. The important part of the sandwich is the meat in the middle -- and, with a few exceptions, the meat these guys are selling is old and rotting.

It's like a 3-course meal, but the main course is stale socialism mixed with some deep-fried fascism -- and a sprinkle of American exceptionalism/individualism -- in order to spice it up a little, so that it is at least palatable.

Ed

*"... with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed." Of note is that you cannot be both for the 2 sentences quoted above, and, at the same time, for the organized coercion required for, say, universal health insurance (e.g., penalties for not purchasing) -- as that would involve a contradiction. If health coverage and/or provision were a "right" then someone would have to be "forced" to pay.

(Edited by Ed Thompson on 9/02, 8:36am)

Post 8

Tuesday, September 3, 2013 - 8:55pm

I regard externalities as a bogus concept, because it is mired in subjectivism. What a negative externality is to one person can be a positive externality to another. Let's say that my next-door neighbor plays rap music, which the guy on the other side enjoys. To him, it's a positive externality. But I hate listening to it, so to me it's a negative externality. The music is desirable to him, but undesirable to me. Therefore, it is simultaneously both a positive and a negative externality.

According to the standard theory, an externality is an uncompensated benefit or harm, and accordingly deserves to be compensated for. So the guy on the other side owes the neighbor compensation for the benefit he receives from hearing the music and therefore ought to pay him for his listening enjoyment. But for me, the music is an annoyance, which means that I ought to be paid for having to listen to it.

The examples Ed mentions are not simply externalities; they are violations of individual rights, and should therefore be prohibited. The neighbor who plays music I don't like is not violating my rights unless it's so loud it violates a noise ordinance by interfering with the peaceful enjoyment of my property. Excessively loud music, especially if it occurs at night and interferes with other people's sleep, is a violation of their rights. It is not simply a negative externality.

Post 9

Wednesday, September 4, 2013 - 5:12am

A NASA intern I mentored back in 2008 had a heavy interest in economics and asked me about Objectivism's take on externalities. I declined to mire myself in a discussion that might drive a wedge between us in our professional relationship. I suggested he pose his question to this forum but he declined.

If I understand the comments, basically, externalities (or whatever you want to call them) would be tolerated within strictly defined limits beyond which they would be treated as property rights violations to be handled in civil or criminal court.

His specific interest was in air pollution. How much should be tolerated as an externality before the government takes action? There are many other examples but that seems the most immediately threatening one. Think of the infamous London Great Smog event of 1952 that led to the Clean Air Act of 1956.

The externality argument hinges on the idea that costs ideally internalized into the business model to leave common properties like air unharmed get externalized and so enhance profits of some to the expense of others. I cannot argue against that. The only question is about how much pollution actually counts as a harmful externality. Science can answer that but we all know how often scientists like to pose and posture, especially environmental scientists.

Post 10

Wednesday, September 4, 2013 - 1:10pm

Luke:

I don't know how Objectivism would deal with it, but I think there is a cause for state action regarding air pollution on the basis of forced association, when the resource being polluted is not fully owned by a private entity. That is the nature of common air and water.

Pollution as a consequence of commerce, exposed to others, is an example of forced association(with the commerce of others.) Because I tend to apply that filter to such issues, I recognize a state interest in prohibiting acts of forced association in such instances.

Common air and water is unavoidable part of the public commons, and fouling of the public commons without consequence or recourse is, I think, an act of forced association.

It is argued sometimes that a better solution is to have no public commons, but I see no way of doing that with shared air and water, as distinguished with private water.

An instance of private water would be, a totally enclosed watershed on private land. No downstream, no runoff into common watershed.

An instance of private air would be, air inside of an enclosed dome, as in, on the Moon or Mars.

But on earth, anything in open air is certainly shared/public commons, and forcing the results of our industry and commerce on third parties without their participation or consent is just, well, forced association. An obligation to clean up the shared resource exists in that case, IMO, and the state has an ethical interest in enforcing against instances of forced association(as well as defending free association.)

I wish.

regards,
Fred

PS: And I agree with you that the real question is not if there is an obligation to cleanup discharge into common air and water, but to what extent. Certainly, below measurable harm, and that is up to objective science to determine, as best as possible. And, I also agree with you that process is subject to politicization, where charaltains show up with their princess on a pea arguments as an excuse to thwart industry using every means possible, anti-capitalism via environmentalism.

(Edited by Fred Bartlett on 9/04, 1:19pm)

Post 11

Wednesday, September 4, 2013 - 1:25pm

Fred,

I agree with your post above, but I think it can be better understood as property rights.

We know that we want as little as possible in the way of public property - commons - and as much as possible held privately, but that little that is left as public property, under minarchy, can still be treated similar to the way we treat private property.

We, the people, are the owners and the state is the manager who watches over that property that we hold in common. This doesn't eliminate the problems, but it reduces the confusion somewhat, and it makes clearer for us that government power should be less arbitrary, less about some pie-in-the sky floating abstractions concocted by eco-nuts, and it should make it more obvious when the there is gross overreaching by government. They can only take those actions towards protecting the common air, and common water, and common land and common buildings, that a private person could take in protecting their property (slightly less, actually, since they are managers they also have areas where they would need permission from the owners - via representative legislation).

Post 12

Wednesday, September 4, 2013 - 8:11pm

I don't think there is any such thing as common property. Land that is unowned is not common property; it is not the property of everyone. It is not anyone's property. It is simply unowned. That does not mean, however, that it can be used to violate other people's rights.

The same is true of air. Air is not common property; it is not the property of society; it is not owned collectively. It is simply unowned. That does not mean, however, that it can be used as a vehicle to violate other people's rights by, for example, transmitting harmful pollution onto an unwilling individual or his property.

Water is covered by the same principles. Where it is owned, the owner has the right to use it as he sees fit, so long as in doing so he does not violate people's rights.

Post 13

Wednesday, September 4, 2013 - 9:45pm

Bill,

Leaving aside the issue of air and water (I need to think about that), lets discuss real property.

The county court house is the property of the county - a government organization. If the government is a proper government, as opposed to abusing citizen's rights, then it is only managing the property for the citizens.

I maintain that the county court house is common property.

Post 14

Thursday, September 5, 2013 - 1:55pm

William:

Excessively loud music, especially if it occurs at night and interferes with other people's sleep, is a violation of their rights. It is not simply a negative externality.

I think that's a great example. It's also an illustraion of the concept, 'to what extent?' As in, to what decible level is 'excessive?'

Can be heard at all?
Can be heard?
Can be loudly heard?

It's also one thing to move into a community with established noise standards. It's another thing to move into a community with no such noise standards, and then have standards declared after the fact.

Without established noise standards, there is no reasonable way to judge conflicts over levels(well, below the threshold of pain, for sure.) Say a buyer investigates buying a property. It is quiet on Mon, Tue, Wed. He buys it on Friday, signs the deal. His neighbor throws a loud music party on Saturday--just like he has for every Saturday for the last 20+ years. Inadequate research on the part of the buyer, but now he is stuck. What possible course of action could he have? How does he unilaterally establish community noise standards where none previously existed...without compensating those who now cannot enjoy their property as they freely have in the past?

I don't see any reasonable way to enact retroactive standards that would impinge on property use, only going forward. But the law, I don't think, always sees it that way.

regards,
Fred

Post 15

Thursday, September 5, 2013 - 2:14pm

Steve:

The court house or public school is, and yet, not in the sense that you or I, as ownners, could dispose of it or treat it as our own. Like, paint it red. We could elect representatives with the power to act as owners, and paint it red, and set its hours of operation, and lock its doors, even from us. We partially benefit from it when we might needit; we even partially benefit from it when others are using it for its intended purpose. For most of us, mainly in that fashion(we hope.)

We don't solely benefit from it, as we would if it was private property and we the owners.

It is for sure unique, as common/public property.

All schools -could- be private.

I'm not as sure about all court houses. We can and do partially privatize legal functions. Maybe we could privatize more. We shop for the best lawyer we can afford. Could we also shop for the best judges and juries and clerks? For civil cases, maybe. Yet, who would prosecute criminal cases?

Is there something about the nature of recording of deeds that it couldn't be privatized? Street maint? Clearing snow from streets? Operating water and sewage systems?

Hard to see how we ever -completely- kick the court house off of the public commons. Whatever remains is as you say, a kind of public common, not private, property.

regards,
Fred

Post 16

Thursday, September 5, 2013 - 4:44pm

Fred,

The court house or public school is, and yet, not in the sense that you or I, as ownners, could dispose of it or treat it as our own. Like, paint it red.

Yes, it is and it is not. If I am the sole owner of a building, then I can paint it red... Whoops, not if my building is part of an Home Owner's Association that has architectural rules that prohibit painting it red (very common). There are also partnerships, where they may need to have a vote of the partners to paint the building red. And, in New Hampshire, where they vote directly on so many local issues, they might gather and vote (just like a partnership) to paint their court house red.

This is where the concept of a bundle of rights (whether we are talking legal or moral rights) is the best way to understand ownership. "Public ownership" is often an oxymoron, but that is because the government is such a poor structure to use in nearly every function one can think of, and should be severely restricted to ONLY what can not be done in any other way (laws, law enforcement, military, and little else).

But for those few things that are left in a minarchy as publicly owned, it is best to understand the nature of the ownership as a bundle of rights held equally by all who are citizens. And it is kind of like an on-going trust that is managed by elected officials - and apart from changing officials, or suing for misfeasance or malfeasance, there aren't too many rights that can exercised and the exercise is that very clunky process of electing someone who sees things your way.

The alternative to seeing this as ownership by the citizens is to attempt to deal with the concept of moral rights (individual rights) that belong to a government instead of an individual and there are nothing but contradictions down that road.

Post 17

Thursday, September 5, 2013 - 5:30pm

Bill,

You indicated that you don't believe that there is any such thing as common property. I'm hoping that you are rethinking that regarding something like a county court house.
------------

As to Air...

Air is not common property; it is not the property of society; it is not owned collectively. It is simply unowned. That does not mean, however, that it can be used as a vehicle to violate other people's rights by, for example, transmitting harmful pollution onto an unwilling individual or his property.

Air wouldn't be the property anyway, since property, properly understood, are those rights (all of which are actions) that one has the moral sanction to pursue relative to the object in question.

If I created some 'air' in my laboratory by mixing gases, then clearly I'd have the moral right to dispose of it, use it, etc. (And, as you say, none of these rights could ever include the right to violate someone else's rights.) But is this different from having any rights in the air that circulates around and past my house?

I think that there are some differences, but not as many as one might first think. I can bottle the air around me and even though I didn't create it, I have acquired a right to sell it (done everyday in those gas stations that have coin-operated air pumps, and at SCUBA shops). I have the right to breath air no matter where I am standing (I might not have the right to stand in some places, but I don't see how I could not have the right to breath air, even if I'm trespassing).

With what you are calling "unowned air" I have a moral and legal right to modify the physical and chemical make up of the air, but only to the degree that it isn't infringing on the rights of others to use the air in various ways. (With every breath I take, as the song goes, I keep some oxygen and increase the Carbon Dioxide, whether others like that or not). If I put a tiny bit of pollutants in the air, it won't violate the rights of others. If I put a lot of pollutants in the air, it will. My point here is that to have some moral rights in air, is to have some degree of ownership. If it isn't air I created in a laboratory or factory, then it is air that, to the extent that there can be any ownership - i.e., rights, then it must be a common ownership.

For water, I'd refer you to Riparian Rights. These are legal rights that in the U.S. mostly come to us from English Common law. They attach certain rights (actions: e.g., boating, fishing, swimming, drinking, etc.) to the control and use of the water as is passes through a piece of land to the owner of that land. They define rights, but the main purpose is to limit the rights of one landowner such that he can not deprive the landowners downstream of their riparian rights. It is a common property (common set of rights) but limited to those that own land adjoining the water in question.

There are other rights that are common, not to all citizens, but to the owner (or perhaps controller) of a piece of land. Like the mineral rights, or the right of passage in the sky over the property - air space rights.

I believe that we need clear legal descriptions - that is legal rights - to let us have a civil society and settle disputes according to rational, objective law, and to be able to plan in ways that minimize conflicts and predict outcomes. These laws must include all those things that can have the effects on us that land, water and air have.

Law should just be made up willy-nilly as to what sounds good. It must be logically derived from moral rights. And the moral rights that pertain to a class of objects must be derived from the more abstract and general rights. Man's right to his life is the source of all the rights that follow - right down to who has the right to jump in a creek and go for a swim.

From that perspective, I'd say that if there are two people and they are in potential conflict over the same object, that object is subject to moral rights as property (a bundle of rights defining moral sanction to various actions regarding that object or class of objects). If there are two people and an object, it can never be totally unowned (e.g., without sanctioned actions that apply to it).

Post 18

Saturday, September 7, 2013 - 10:29am

One problem with "externalities" versus "property rights" in handling pollution is that just about anything can be argued as an "externality." I saw a debate at my undergraduate university between Phyllis Schlafly and Sarah Weddington in 1988 on the future of women in America. During the subsequent Q&A session, a female student asked Schlafly if the increase in employment of women resulting from Reagan policies meant that the federal government would now undertake the obligation to supply these women with day care for their children. Her implication was that the employment of mothers "externalized" the cost of child care. As you can guess, Schlafly gave this young lady an earful about the matter.

Post 19

Sunday, September 15, 2013 - 8:02am