Question for Libertarians

[Benman]

What's the latest libertarian thinking on pollution laws? I've read somewhere that some libertarians think that marketplace pressures will be enough to control excess pollution. Seems to me this only works if the press is effective in publicizing who's responsible for pollution. What if you have a tire manufacturer who buys rubber from a company who buys a chemical compound from a company who buys the chemical precurser for that compound from a chemical company that's a horrible polluter. How can the market fix that problem. First, it's unlikely that people are even going to figure out that the tire company is indirectly responsible for the pollution. Second, it's quite possible that the public wouldn't hold the tire company responsible anyway because they are so far removed from the polluting company.

I've also read, and am much more persuaded by, libertarian support for the buying and selling of pollution rights. Ie, there's laws against excess polluting, and let the market distribute the legal pollution as efficiently as possible.

So, my question is this--are very many modern libertarians still of the first school of thought? If so, I can't ever see myself buying into the belief that the market can solve pollution.

As to the pollution rights libertarians, I would ask this: haven't you essentially conceded that the underlying pollution legislation, which sets the threshold amounts, is necessary, and doesn't this concession sort of undermine the supremecy of markets which is the point of libertarianism?

I hope I don't sound too snotty. I'm not a libertarian, but I have a lot of respect for their ideas and free market theories in general. I just think that when it comes to pollution most of what I've read from libertarian thinkers is pretty weak and disengenuous.

[lehighguy]

My understanding is that the market has intrinsic costs (those factored into price) and externalities (like pollution).

When externalities arise it is a market failure and government must step in.

The prefered way of making a company deal with externalities is to make it pay a fee. In other words, calculate the cost to the community and charge that to the polluter.

Basically, you are trying to determine the correct price of something by adding in the external costs.

[squeek12]

[ QUOTE ]
My understanding is that the market has intrinsic costs (those factored into price) and externalities (like pollution).

When externalities arise it is a market failure and government must step in.

The prefered way of making a company deal with externalities is to make it pay a fee. In other words, calculate the cost to the community and charge that to the polluter.

Basically, you are trying to determine the correct price of something by adding in the external costs.

[/ QUOTE ]

I haved gained much respect for you in your libertarian posts, but I have to disagree with you on this one. I believe that mainstream libertarians disagree with the idea of "market failure" or "externalities." Externalities only exist because the government fails to enforce private property rights correctly.

My understanding is that pollution is a violation of property rights. If the courts correctly handled pollution cases, the offending companies would be made to pay huge sums of money to victims. Companies that polluted too much would then be "weeded out" and replaced by companies that are able to make similar products with less pollution.

Instead, we have government regulations that actually allow companies to pollute at certain levels. This takes away the economic incentive to pollute even less than the government assigned levels. Also, private property owners are weaked against companies that are complying with these regulations.

Your response seems more Coasian than Libertarian. I would love to continue this argument as it was the subject of my favorite course with my favorite professor in college: Environmental Economics with Walter Block.

[lehighguy]

A market failure is when the market doesn't account for a cost without government intervention. In other words, when a third party is involved that isn't the buyer and seller.

Let's say I buy tires from you. It costs you $1 to produce the tire so you sell it to me for $2 and keep a dollar profit.

However, there is an externality. The pollution you caused killed someones dog. For the sake of arguement we will assume the dog costs $1/tire.

Unless the government steps in and protects the property rights of the dog owner you can continue to sell tires for $2 and make $1 profit. What the government does is it tells you that your pollution (the externality) is causing $1 worth of damage to the community so you must pay a fee to the government which they will distribute to the parties harmed by your action.

So the government charges you $1. Now you have to raise your price to $3 in order to make the dollar profit. The cost of the pollution (externality) has been factored into the price you charge your customers.

I think we are actually in agreement here. "Externalities" are a term you learn in freshmen economics. They can be accounted for within classical economic theory and in no way threaten its basic premises. Perhaps your just unfamilair with the term externality.

[QuadsOverQuads]

Pardon me for jumping in, but this is an interesting position and I can see a couple of questions relating to it.

First, why is the only option one of government-enforced reimbursement? Does the victim of the externality (the dog-owner, in this case) have any rights that are also worthy of protection? Is there an option for the dog-owner to go to the state and say "I haven't given Tire Company, Inc, my consent to poison my dog. Not for $1, not for $3, not for $500. They asked, and I said no. Compensation is not at issue. I simply want the government to prevent them from infringing on my rights at all."

Second: assuming that you don't see this as an issue, how would the company's action -- even with compensation -- be fundamentally different from a "taking" (with compensation given, of course). It strikes me that supporting such a takings-scheme is not terribly popular among Libertarian Party members at the moment, so I'm curious how you'd respond to that.

Anyway, sorry again for the intrusion, but I did want to drop these two questions onto the table for your consideration.


q/q

[squeek12]

I understand the concept of externality. I just meant that in the case of the neighbor's dog, the death of his dog should be considered part of the market process, and not external to it. The cost of potential lawsuits should be considered by companies and used in the pricing of their products. If a company was killing too many dogs, their prices would cease to be competitive, and they'd be replaced by more dog-friendly companies. This, IMO, is part of the market process, and therefore, not an externality.

Externality suggests an occurance that cannot be handled by the market. I think pollution can be internalized by the market as long as the courts enforce private property rights. Your first post (IIRC) suggested that the government take action to compensate for the costs of negative externalities. All I wanted to argue is that I believe that the market can, in fact, account for the negative effects on society made by the production of goods or services.

Of course the government would play a role in settling lawsuits, but I don't consider this a direct participation in the market.

FWIW, I'm no economics expert by any stretch of the imagination, but I tend to subscribe to the Austrian school more so that the Classicists.

[lehighguy]

They are very good questions. I actually have some thoughts on them, but I will have to do some editing to flush them out. It's nearly 3am over here, so I'll try to come back to this post tommorrow night.

I can't gurantee that my response will be a libertarian response. I identify with the party because thier policies and views closest resemble my own, but it is possible we are drawing from different underlying assumptions. I'm not well versed in libertarian ideology.

[squeek12]

[ QUOTE ]

Pardon me for jumping in, but this is an interesting position and I can see a couple of questions relating to it.

First, why is the only option one of government-enforced reimbursement? Does the victim of the externality (the dog-owner, in this case) have any rights that are also worthy of protection? Is there an option for the dog-owner to go to the state and say "I haven't given Tire Company, Inc, my consent to poison my dog. Not for $1, not for $3, not for $500. They asked, and I said no. Compensation is not at issue. I simply want the government to prevent them from infringing on my rights at all."

Second: assuming that you don't see this as an issue, how would the company's action -- even with compensation -- be fundamentally different from a "taking" (with compensation given, of course). It strikes me that supporting such a takings-scheme is not terribly popular among Libertarian Party members at the moment, so I'm curious how you'd respond to that.

Anyway, sorry again for the intrusion, but I did want to drop these two questions onto the table for your consideration.


q/q

[/ QUOTE ]

If the courts decided to place an injuntion on the tire co., this would in no way be contrary to libertarian ideals.

I suppose the severity of the violation would determine the severity of the punishment in any case.

[lehighguy]

[ QUOTE ]

Of course the government would play a role in settling lawsuits, but I don't consider this a direct participation in the market.

[/ QUOTE ]
That's basically where our misunderstanding is comming from. I consider the government facilitating such lawsuits to be direct participation.

Moreover, there are instances in which private individuals sueing firms is an ineffcient way of doing things. For instance, lets say a firm pollutes the air and all of the people in the city are slightly more likely to develope Asthma. When someone comes down with Asthma there is no way to prove that the companies pollution specifically caused it. Individual lawsuits are impossible.

In comes the government. They have an enviormental scientist calculate the odds that an individual will contract Asthma because of the polution (A), figures out the population of the city effected (B), and then is given a "cost" of having Asthma (C).

A * B * C = D

D is the fee the government will charge the company for polluting. Since individual victims can't be identified, the government must use the money to benefit the citizens potentially effected (send everyone a check, provide healthcare for Asthma patients, etc.)

I would also consider this direct participations. I think our confusion that I consider any government involvement (even protecting property rights) a direct involvement.

[ QUOTE ]

FWIW, I'm no economics expert by any stretch of the imagination, but I tend to subscribe to the Austrian school more so that the Classicists.

[/ QUOTE ]
I'm not sure what the definitions of the various economics schools are. I kinduv learned them all at once. I could be refering to Keyensian, neo-classical, or classical in any of my posts. I never much cared for the distinctions, only the ideas behind them.

[lehighguy]

It is more complicated then that, it gets to the heart of property rights and things like Kelo. It will require a lengthy response, but one I can't provide tonight because I must sleep.