On the Governing of Externalities

So your guiding principle is that you get to decide what’s right and wrong? I can see how that seems like a good system to you but the rest of us might see it as a long bonecentric.

Your decision that the government should not be allowed to regulate Toyotas is just as unilateral as Bloomberg’s decision that the government should be allowed to regulate sugary drinks. You both have opinions you want to impose upon everyone else.

Bonecentric would be awesome, but no. I’d much rather persuade my fellow voters they should not allow power to accrue too greatly in the hands of too few. Sometimes that works, and other times it doesn’t. When the courts struck down stop and frisk and the soda ban, that was a result I agreed with.

And that both Bloomberg and I both offer opinions doesn’t mean they are the same. My take attempts to increase individual liberty while Bloomberg would restrict it. Both are opinions, but that is simply equivocating.

Okay, let me give you a serious example: speed limits.

Suppose ninety percent of the people in the town want a town-wide speed limit of 25 mph. But some people don’t agree; they think the speed limit should be 35 mph.

Can the majority impose their views upon everyone and make everyone drive 25 mph? Or can people exercise their individual liberty and drive either 25 or 35 mph depending on what speed limit they individually choose to follow?

Why not just call it the liberalism/Nazi spectrum?

Authoritarian is a loaded word, though admittedly not as loaded as Nazi. Also admittedly, now I’m quibbling about language. (Not quite a quibble though, as I think I misunderstood you earlier.) Calling a ban on jumbo-sized sodas (when you could buy as many regular sized sodas as you want) “authoritarian” stretches credulity beyond the laugh point.

That said, though I misunderstood you earlier, your usage isn’t unusual: the political compass applies such a framework. I can roll with this. Using this definition, say a policy is a little more authoritarian than it is libertarian: so what? Lots of policies are: examples include spending more 2.3% of the economy on the military during peacetime (routine in the US, not so much for the OECD) or Kissinger style realpolitik in the foreign policy sphere. Bans on convenience store cup sizes don’t really register.

Speed limits are another example (thanks Nemo). 25 mile an hour speed limits in school zones are authoritarian, while 35 MPH speed limits are libertarian. Extremists favor 10 MPH speed limits or none at all.

If you are going to make this argument, I want to see the t’s crossed and the i’s dotted. ISTM that your sugar tax is hitting a lot of people who are not increasing healthcare costs. And the fat drinkers of big gulps are surely taking on some of damage themselves. You need to make the calculation. Has there been a study of the externalities of drinking fizzy drinks? I’ve seen (problematic) qualitative ones, but not a quantitative one.

Then again, if you apply Mill’s argument referenced above, you only need to show that fizzy drinks are less desirable relative to hard work and industry. That’s easier.

I think folks are still too distracted by abstract principles, to the detriment of actual results. France was, in this quote, mocking the obsessive focus on equality; but I can paraphrase the quote to make it about liberty.

A liberty is only a meaningful liberty when it permits a person to do something they want to do; and if social structures are set up such that one liberty (e.g., private property ownership) is so overwhelming that many people are prevented from doing what they want (e.g., obtain adequate health care, education, nourishment, etc.), things is unbalanced.

Our focus should not be on a negative-duty liberty (that is, a sense of liberty in which individuals are forbidden to encroach on one another), but on the larger picture: have we set up our society in a way that allows everyone to pursue their happiness? In some spheres, that’s gonna require regulation; in others, it requires government to back off; in others still, it’s unclear which is the best approach.

Calling the two choices “Liberalism” and “authoritarianism” has a pernicious effect: it makes the idea of regulation seem like the worse choice, when it very often isn’t. What if, instead, we call it “individualism” and “collectivism”? Certainly a lot of libertarian sorts shudder at the word “collectivism,” but the rest of us, I think, find it less loaded than “authoritarianism.”

Or you could go for something like “regulated” and “unregulated.”

A public road is entirely different than a private transaction to purchase soda. On a public road I certainly think that the way speed limits are generally established is acceptable. But if the example were to change to a privately owned road, say by me, then I should be able to drive whatever speed I choose.

I’m not so hung up on terms, though I would draw the line at Nazi spectrum. Yes I pulled from the political compass, but if you or others want to call it collective/individual or regulated/unregulated it doesn’t make the argument very different. I think it’s a bit Orwellian but it’s not the interesting part of this discussion. I may slip back and forth because I do consider things on the authoritarian scale as a matter of course.

I’m only quoting this part, but this is a response to your whole post.

Essentially you are making an outcome based argument, or a means/ends type argument. It’s legit, but I reject it mostly. In my view, liberty is a goal unto itself. Liberty isn’t a means to an end where we celebrate it only if other ends are satisfied - it is both the means and one of those ends.


It’s also important to distinguish between the types of externalities we are talking about. Some examples like pollution where those impacted had no choice in the matter are much better candidates for intervention/regulation/authoritarian actions to prevent or mitigate them. Other examples like increased health costs for sugary drinks are only externalities because we have chosen to accept those costs. We don’t have to accept the costs imposed by high consumption of sugary drinks. A person down river of a factory polluting toxic waste did not make such a choice to accept the sludge.

The reason why negative health outcomes as a catalyst for intervention is such a terrible thing is because virtually all behavior can be linked to negative health outcomes. That basis as justification for intrusion on individual liberty has no principled limit to what it could encompass.

What’s your opinion on the sale of drugs? Should people be able to buy, sell, and consume drugs like marijuana, cocaine, heroin, and meth without any government restrictions?

I’d like to affirm that I’m not trying to be argumentative here (that’s done the hall). I just want to find out what your core principles are and how you see them being applied in specific situations.

Whoa, not sure I’d accept that, Bone. I lived for years in the Mid-Ohio Valley. It is, unaffectionately, also known as the ‘Chemical Valley’ (also the name of a lawyer friend’s band). For more than 100 years various firms have been manufacturing various substances and chemicals there and essentially poisoning the environment. But by your reasoning no one HAS to live there. They could move.

Except people don’t. And you have to take into account the behavior of people under such conditions. They have as much choice to accept living in a polluted environment - with affiliated risks such as increases in cancers, heart attacks and strokes - as a person has of not drinking 64 ounces of soda pop.

Indeed. I don’t agree with that. But is some form of intervention - bans, taxes, incentives - justified to deal with such externalities on some level? I’d say yes and I get that you disagree. But your approach seems to me to be hopelessly idealized.

If your neighbor doesn’t like your Toyota, sure. But what if you don’t like your neighbor’s 45 year old Pinto that is up on blocks in the front yard. He goes out everyday, starts it up, and revs the engine for hours filling your yard and house with not only noise, but noxious fumes? Is it appropriate exercise of government action to get him to stop?

All drugs should be legal. I’m opposed to sin taxes.

The point I was making was that simply saying that judging between two neighbors’ interests must be done by the government is vague enough to be meaningless. I acknowledged there are examples where intervention is appropriate, and asserted that there are examples where it isn’t. The vague fortune cookie like pronouncements either aren’t useful, or are a trap. They aren’t useful because they don’t have content, or if content is assumed one way or the other the trap is sprung and it’s easy enough to adjust the parameters to rebut the assumption.

It’s not a perfect example. The idea is that some people did not choose to be subject to the sludge. Those people are experiencing the negative externality that justifies intervention. Sure some people could also make the informed choice that the reduced cost of living is worth the tradeoff in reduced quality of life - but the negative aspects of the pollution are sure to impact more than just those that may have made an informed choice.

Hope springs eternal :slight_smile: I think striving towards the ideal is always worthwhile, while at the same time acknowledging practical realities. I do agree that some form of intervention may be appropriate so I don’t think we disagree on that concept - just on where on the scale each intervention should fall.

Which means that we need to have a government that can decide when your neighbor’s activities are disruptive to your pursuit of happiness to step in. In order to do that, we need people to vote on that government, and weigh in on the things that they want the govt to regulate. Sometimes, there will be underregulation, and you will be more disturbed by the externalities of other’s actions than you would like, and sometimes, there may be over regulation, where your activities are restricted even though you do not feel the external harm imposed on society warrants it.

So, if there are over regulations, talk about those specific over regulations, and how they impose a greater restriction on freedom than they do eliminate externalized harms. Don’t question whether the govt has the right to impose those regulations in the first place. I have seen examples of regulations (at local levels, not federal), that certainly were not in the best interests of free enterprise, but I have seen far more examples of people allowing others to suffer, while benefiting themselves due to their actions that really need some regulation.

You were apparently advocating the elimination of dispute resolution by governments. I said I thought that was a bad idea. Anyway…

Let’s say he has complained to me about the Toyota, but I’m sure there’s nothing wrong with it, so I told him to stop complaining and I did nothing more about it.

Right solution: He goes to whichever government (probably local, this sounds like just him and me), and complains about my Toyota. They say “What’s the problem with it?”. He answers, showing them either that my Toyota is legitimately causing a serious problem, or that he’s making a frivolous complaint. They tell him my Toyota is fine and they send him away, or they take whatever other action is appropriate, for example to force me to fix the problem, or to force Toyota Corp to fix the problem, or whatever.

Wrong solution #1: No government will handle his complaint, so the neighbor retaliates.

Wrong solution #2: there are lots, I’m sure.

Inappropriate action by some government on some occasion is not a reason to eliminate government from its role in deciding cases where the rights of Person A clash with the rights of person B. Because no one else will do it. Or if someone does do it, they’ve become a government, so back to square 1.

Bone: I’m not so hung up on terms, as long as all parties understand them. When you initially said authoritarianism, I mistakenly thought about this guy FWIW.

How do you reply to John Stuart Mill’s point? Specifically, the government needs some sort of revenue to pay for its bombs and missiles. Why is it preferable to tax labor and savings as opposed to alcohol, tobacco, [del]firearms[/del], [del]sugar[/del], [del]Brussels sprouts[/del], and pr0n? Provided that the tax is set at the tax revenue maximizing point or below.

There’s a tax complexity argument against Mill’s point, but that seems easily alleviated in practice or at least addressed.

The Economist’s take is that illegal drugs should be decriminalized, taxed and discouraged. I’m mentioning this as they are somewhat supportive of abstract and esoteric appeals to liberty. (Informed skeptical take here).
Reference: JS Mill citation, public domain: [INDENT][INDENT][INDENT][INDENT][INDENT] A further question is, whether the State, while it permits, should nevertheless indirectly discourage conduct which it deems contrary to the best interests of the agent; whether, for example, it should take measures to render the means of drunkenness more costly, or add to the difficulty of procuring them by limiting the number of the places of sale. On this as on most other practical questions, many distinctions require to be made. To tax stimulants for the sole purpose of making them more difficult to be obtained, is a measure differing only in degree from their entire prohibition; and would be justifiable only if that were justifiable. Every increase of cost is a prohibition, to those whose means do not come up to the augmented price; and to those who do, it is a penalty laid on them for gratifying a particular taste. Their choice of pleasures, and their mode of expending their income, after satisfying their legal and moral obligations to the State and to individuals, are their own concern, and must rest with their own judgment.

These considerations may seem at first sight to condemn the selection of stimulants as special subjects of taxation for purposes of revenue. But it must be remembered that taxation for fiscal purposes is absolutely inevitable; that in most countries it is necessary that a considerable part of that taxation should be indirect; that the State, therefore, cannot help imposing penalties, which to some persons may be prohibitory, on the use of some articles of consumption. It is hence the duty of the State to consider, in the imposition of taxes, what commodities the consumers can best spare; and à fortiori, to select in preference those of which it deems the use, beyond a very moderate quantity, to be positively injurious. Taxation, therefore, of stimulants, up to the point which produces the largest amount of revenue (supposing that the State needs all the revenue which it yields) is not only admissible, but to be approved of. [/INDENT][/INDENT][/INDENT][/INDENT][/INDENT]

If you want a cite that’s the Tiebout model.

More generally, this is an application of the Coase theorem (which is more of a conjecture actually). If transactions costs are nil, it doesn’t matter if you give the individual a right to clean water or the industry the right to dump swill in the well. Either way, an agreement can be reached to obtain the optimal solution (X amount of sludge, but not more). That doesn’t imply that markets are perfect. Rather it implies (according to one view) that rules should set to minimize transactions costs: in this case regulating the pollution is superior to having the courts sort through pollution damages of each valley resident or worse deciding which resident pays how much to bribe the capitalist to install better equipment. In other contexts, one might assign property rights elsewhere. I’ve heard that in some jurisdictions you can legally to sell soda pop in buckets, regardless of the resulting health costs.

And this may be the root of the disagreement. Liberty is a vital tool toward achieving the ends, but it ain’t an end itself. The single appropriate end, I believe, is setting things up such that folks are able to live their one life the way they want to.

Liberty is hugely helpful toward that end. The expert in how you want to live your life is you, so the fewer rules that impede your exercising your best judgment, the better.

However, sometimes my liberty impedes your living your life the way you want to. If I want to have a party at four in the morning, with music blasting at full volume, you, my neighbor, can’t live your life the way you want to.

In this case, society can restrict my liberty, or society can restrict your ability to live your life the way you want to. Restricting my liberty isn’t an evil directly. The evil in that case is that I’m no longer able to live my life the way I want to–which is the mirror of the evil of letting me throw the party (i.e., in that case, you can’t live your life the way YOU want to).

Removing liberty as an end, seeing it appropriately as a means to achieving the end of folks being able to live their lives the way they want to, makes it a lot easier to see how the rights of opposing parties may be balanced. Libertarian approaches skew far too heavily, IMO, toward the happiness of the actor, rather than the acted-upon.

The argument essentially being that if there must be a tax, it should be on those items we as a society ought to discourage consumption or use of? I reject it. I’m of the mind that it is not the proper role of government to encourage or discourage behavior through tax policy. It’s a bit abstract, but agreeing there are essential funding levels, revenue should be generated in a way to intrude the least upon behavior. So that means the broadest base in a way least likely to influence choice. If we as a society choose to pay for something, then we all pay to an extent. We don’t make that choice and foist the cost onto those we deem to engage in behavior we disfavor.

There are real world practicalities of course and I’m persuaded that some form of negative taxation or other type of safety net is worthwhile. But the general argument I would make is that behavioral modification type taxes are not the proper role of government.

But that gets away from the crux of the biscuit here: externalities.

It is easy - oh, so easy - to view the discouragement of externalities as a behavioral modification tax because the two are very similar and indeed, can be identical.

However, making someone pay for the cost they are imposing on others will discourage them from inflicting that cost as will imposing a tax for less-than-optimum behavior. In both cases, people are discouraged - by some sort of cost - from some sort of behavior. Is the intent of the law that important?

Or, in short, is someone’s ability to indirectly cost me something - time, dollars, health, what-have-you - NOT actionable by government working on my behalf?

Yes, it would be possible to personally go after each and every case individually through the courts, but I have very little faith in the ability for the average man to get a fair trial against a major corporation. The power disparity there is too high to assume that can happen in the United States.

But that’s why we band together into governments: to do things collectively that are either impossible or inefficient to do individually.

The intent is important, yes. But in the case of externalities, the cause of the externality is also important. I view this like malum in se vs malum prohibitum. Are these externalities because by their very nature they impose cost on others, or do they only impose cost because we have decided they should impose cost?

Me drilling for oil in my yard wreaking havok on my neighbor’s property creates an externality by virtue of the activity itself. A person consuming a poor diet leading to poor and expensive health outcome creates an externality only because we have chosen this to be so in our shared health costs. I’m much more inclined towards intervention on the former, and not the latter.

I feel like you may be looking at the the wrong side of the picture. Government policy involves a rats-nest of subsidies and tax breaks for producers. I am pretty sure there are major ag subsidies – direct and indirect – that favor production of the kinds of foodstuffs that are contributing to our pervasive health problems. Focusing on consumer behaviors while ignoring producer behaviors is short-sighted (and probably easier because it is less complicated and fraught).

My opinion is that a big part of the problem is the blind trade ethos. I sell you something, I take your money, and my concern in the matter is finished.

For example, if I make disposable alkaline batteries and sell them to you, what you do with them when they wear out is irrelevant to me. I only take the cashflow and use it to make more of them. If you throw them in the river, where they leak toxic substances that kill aquatic life or find their way into the food chain, causing human health problems, that is not my fault. Nor is it my fault that you take them to the can at the hardware store where they get recycled.

Blaming the consumer for the problem is an incomplete approach. Unhealthy and damaging products exist because producing them is profitable. It would make as much sense (or more) to shift an appropriate share of the social cost of stuff onto the producers, marketers and vendors of that stuff.