intention, you keep talking about these externalized benefits, but I’m not sure what you mean. You mentioned smooth traffic above, but I’m not sure that’s a quantifiable benefit, so much as it’s a lack of a cost. Perhaps you mean that ‘personal mobility’ is a benefit, and I agree, but it’s certainly not an externalized one - in fact, it’s one enjoyed specifically by the consumer of the fossil fuel, so there’s no need to account for it separately as an externality. Perhaps you could clarify.
Do Not Taunt, welcome to the discussion. I think our posts might have crossed. Immediately above I say:
Here’s another example. Disregarding CO2 entirely, what is the net cost of say a 1°C of global warming? All things being equal, globally a warmer world is a wetter world. More heat = more evaporation = more rain. So the question is:
Do the cost of the floods from more rains outweigh the gain to the crops from more rains?
The extra-tropical zones are the world’s breadbasket. They are where we get the wheat and corn and rye and millet and all. The greatest overall warming of the 20th century occurred in the extra-tropical zones, at night, in the winter.Warmer means more heat, more rain, and significantly, a longer growing season. Which in turn means more crops to feed everyone.
Do those net benefits outweigh the externalized cost of future increase in floods in those areas?
So in response to your question, those are some examples of externalized benefits.
Regarding renewable energy standards, its another reason not to like them. Too often they depend on these kind of supposed “cost/benefit analyses” that only do half their job, and you know which half.
My best regards to all.
Hi, intention, and thank you for your welcoming. I had read that post; I guess I missed that you were using jobs as an externalized benefit from a polluting industry. I can see your point in that while the direct proceeds from industry go to the business that does the polluting and thus internalized by definition, the jobs and particular the multiplier effect from the existence of those jobs accrues benefit to society as a whole. But this has got to be the most discussed externality of all time. Seriously, doesn’t every single cost/benefit analysis of pollution take this into account? Usually, it’s the primary or even only benefit discussed.
Well, I’m no expert on the effects of global warming, but I agree it’s possible that mild warming could, in fact, be an externalized benefit. Some reports I’ve seen suggest that up to 1-2°C of warming could, on net, benefit the world. To the degree that it does, and I’m happy to let that argument take place in the scientific literature, I agree it should be accounted for.
Or maybe more warmth means more pests, more rain waterlogging the plants’ roots, and on net, fewer crops to feed everyone. Can we agree that this should be counted as an externality of global warming, regardless of which sign it has?
Wait, sorry, you just lost me. I know you’re not saying that renewable energy projects have external benefits that aren’t being accounted for. So are you saying that they have unaccounted costs? Or are you saying that their big benefit, ameliorating warming, is lower than claimed because warming has unaccounted benefits?
Thank you for your reply, and best to you too.
He’s saying that people supporting renewable energy tout the benefits and ignore the costs. ‘Green’ job creation is a perfect example. If alternative energy sources are not cost-competitive with other energy sources (neglecting externalities for a moment), then any jobs you ‘create’ must be done with subsidy. That subsidy money must come from somewhere. Note that we’re not talking about a stimulus here - this is a longer-term investment for which the money cannot simply be borrowed without taking it from somewhere else. Jobs are lost not just in the traditional energy sectors, but the higher cost of energy or the higher taxes or inflation that result from the subsidy cost jobs across the spectrum of society.
This is true of most government plans to ‘create jobs’. Governments get away with this because the benefits are visible and are touted, while the costs are diffuse and not at all transparent. No one sees the job lost because a factory had its energy costs go up and therefore couldn’t expand. No one sees the jobs lost because consumers spend more on energy or taxes and therefore can’t afford the goods or services that would have created jobs.
The specifics may not even be knowable - opportunity costs are not easy to see, especially multiplied over time. You don’t know which jobs were lost, but you can be sure that many were. But because the effect is diffuse and opaque, there is no constituency for them as there is for the new solar cell factory the government wants to build in your town.
Well, I suspect intention might have been saying something slightly different. That’s why I asked.
Excluding times of stimulus, I don’t think I actually disagree with you much here: job creation is a silly reason for a government program. In fact, I’d generally consider it a negative: during an expanding economy, ‘creating jobs’ puts upward pressure on wages and is inflationary, so it’s a cost that needs to be overcome by the value of the program. Only during recessions should this calculus change.
But I’m not sure any of this is actually germane to the original context of calculating the externalities relating to gasoline use.
Do Not Taunt and Sam Stone, I appreciate your responses. My meaning was that whoever is putting together an estimate is very likely to, as the old song says, “accentuate the positive, and eliminate the negative” …
The tendency is by no means limited to those on one side of a discussion.
And even if we can decide on general areas that should be included or excluded, this doesn’t end the difficulties. For example, DNT said above:
This is the problem in a nutshell. There are literally hundreds of effects that will come from say a 1° warming in the extratropics. Depending on exactly which ones of these a person chooses to count and how they price each one, the net of everything counted can be either positive or negative … but there are no rules or guidelines on either what to count, or how to price it. So while it is easy to agree that the effects of a 1° warming should be counted as an externality, what are those effects, and how do we price them?
Finally, we have not included the problems caused by the “Law of Unintended Consequences.” Here’s an example. When snowmobiles were invented and started to be used in the Arctic, there were analyses that said that it was going to be very damaging to the wildlife. In contrast to dog-sleds, for example, it would allow people hunting say caribou to chase them for hours and days without stopping. So in trying to see what effect the introduction of snowmobiles might have, the probable loss of size of the caribou herds was included as an “externalized cost” of the change to snowmobiles. Made perfect sense
However, after the introduction of snowmobiles what happened was that the caribou herds increased in size.
Why? Well, what had been left out of the very careful calculations was the question of motive power. You see, while snowmobiles run on petrol, dog-sleds run on … caribou meat … and while you can park a snowmobile and stop feeding it petrol, dogs eat meat year-round.
That’s why I am very cautious and very suspicious of any study that proposes to put dollar values on externalities, either external costs or external benefits. Even with the most balanced and even-handed of intentions it is a very difficult task … and most people’s intentions are far, far from even-handed.