Externalities! Where do they go?

[Steinhauser]

Hi! So, I was arguing with some statists, and the topic of externalities comes up.

Insurance can solve problems with externalities.
If people in a region insure against, say, pollution, it's in the
agency's best interest to curb pollution in that region as much as
possible. They may pay the polluting companies incentives to reduce
pollution, invest in cleaner technologies, etc.

His reply:

But that is not
a solution. The externality remains. If I run a polluting company, I
either make a profit from not cleaning up my act, or from being paid to
clean up my act by those who otherwise have to bear the cost of my
pollution. If I want to make more profit, I can do that by thinking of
more ways to impose externalities on others. What you propose is merely
to institutionalise blackmail.

 

On a slightly different topic, he asked what I considered moral grounds for ownership of property. Among the other ways of acquisition (and not really having researched this point philosophically), I said:

discovering an unclaimed/unowned resource in nature.

His reply:

Libertarians (your question suggests you are one)
often quote the principle "your right to swing your fist ends at my
nose". I agree with that. How about you?




The problem with claiming ownership on "discovering an unclaimed/unowned
resource in nature" is that as consumption increases, fists swing in
wider arcs and with more power, and as population increases, noses are
closer together. The atmosphere has long been treated as an unclaimed
resource. The result is smog, acid rain, the ozone hole, a CO2
concentration causing ocean acidification and global warming (cue
protest by ruveyn). There are so many people consuming so much that any
additional load on ecosystem services will impose an externality on
someone. That means you make a profit from their loss, without them
having entered into a contract with you. Is that not theft?

 

I had to admit to him, both his points had me stumped! (Don't worry, I got him back on other stuff)

Perhaps I'm not thinking far enough outside the box. How does an insurance company make sure local polluting businesses don't just ring them through the cleaners by threatening increasingly more pollution?

How do we avoid the problem of the commons with "shared" resources like the atmosphere and oceans? Am I even correct in assuming nature can be owned by claiming it?

[Andrew79]

Perhaps I'm not thinking far enough outside the box. How does an insurance company make sure local polluting businesses don't just ring them through the cleaners by threatening increasingly more pollution?

I'm not sure I understand this. If I pay for pollution insurance then if there is pollution the insurers pay me and get it back from the polluter. The more pollution, the greater the payout. So the only cost-effective thing they can do is to not pollute.

You also might want to comment on his blackmail remark. Remind him he's the one cheerleading for violence against his fellow humans if they don't do what they're told.

How do we avoid the problem of the commons with "shared" resources like the atmosphere and oceans? Am I even correct in assuming nature can be owned by claiming it?

So the state's overseen massive pollution but it's a libertarian problem?

The problem of the commons is purely a state problem, the answer to it is private property.

For more detail, Walter Block has a chapter on free market, property rights driven environmentalism in his book Building Blocks For Liberty, it's a good, rigorously thought out read (and it's free):

http://mises.org/document/5862/Building-Blocks-for-Liberty

[MrCapitalism]

What you propose is merely
to institutionalise blackmail.

Defending the Blackmailer - Walter Block - Mises Daily

 

 

[LovePrevails]

 

Hi! So, I was arguing with some statists, and the topic of externalities comes up.

Insurance can solve problems with externalities.
If people in a region insure against, say, pollution, it's in the
agency's best interest to curb pollution in that region as much as
possible. They may pay the polluting companies incentives to reduce
pollution, invest in cleaner technologies, etc.

His reply:

But that is not
a solution. The externality remains. If I run a polluting company, I
either make a profit from not cleaning up my act, or from being paid to
clean up my act by those who otherwise have to bear the cost of my
pollution. If I want to make more profit, I can do that by thinking of
more ways to impose externalities on others. What you propose is merely
to institutionalise blackmail.

 

On a slightly different topic, he asked what I considered moral grounds for ownership of property. Among the other ways of acquisition (and not really having researched this point philosophically), I said:

discovering an unclaimed/unowned resource in nature.

His reply:

Libertarians (your question suggests you are one)
often quote the principle "your right to swing your fist ends at my
nose". I agree with that. How about you?




The problem with claiming ownership on "discovering an unclaimed/unowned
resource in nature" is that as consumption increases, fists swing in
wider arcs and with more power, and as population increases, noses are
closer together. The atmosphere has long been treated as an unclaimed
resource. The result is smog, acid rain, the ozone hole, a CO2
concentration causing ocean acidification and global warming (cue
protest by ruveyn). There are so many people consuming so much that any
additional load on ecosystem services will impose an externality on
someone. That means you make a profit from their loss, without them
having entered into a contract with you. Is that not theft?

 

I had to admit to him, both his points had me stumped! (Don't worry, I got him back on other stuff)

Perhaps I'm not thinking far enough outside the box. How does an insurance company make sure local polluting businesses don't just ring them through the cleaners by threatening increasingly more pollution?

How do we avoid the problem of the commons with "shared" resources like the atmosphere and oceans? Am I even correct in assuming nature can be owned by claiming it?

 

Surely there are a lot of ways around this?

Peoples DROs or Insurance Companies get in touch with the companies DRO and ask them to sue their client for damaging their environment?

Or they go to the company and say "Look, you are polluting here, we are willing to pay half way towards providing you with filters to clean your stuff before you release it into the environment, if you cooperate."

Where there is a will there is a way

[Magnus]

I have never understood why people flock to statism to solve the problem of pollution. 

Pollution is a property-rights problem. It arises from a lack of clear definition of property.

Starting in the mid-19th century, government courts began changing the age-old common law rules that prohibited any "nuisance" -- any form of trespass, by person, animal or object.  They simply decided to stop enforcing those property rights, in order to give large, locally-powerful polluters a free pass.  It was a raw exercise of corruption and corporatism, as far as I can tell.

[Steinhauser]

 

I'm not sure I understand this. If I pay for pollution insurance then if there is pollution the insurers pay me and get it back from the polluter. The more pollution, the greater the payout. So the only cost-effective thing they can do is to not pollute.

I was under the impression that the insurance companies are paying out incentives to the polluting companies to curb pollution, not demanding compensation if they don't. How would the polluting companies be beholden to the insurance companies?

You also might want to comment on his blackmail remark. Remind him he's the one cheerleading for violence against his fellow humans if they don't do what they're told.

Rest assured, the irony of his statement (and "is that not theft?" as well) were roundly noted.

The problem of the commons is purely a state problem, the answer to it is private property.

For more detail, Walter Block has a chapter on free market, property
rights driven environmentalism in his book Building Blocks For Liberty,
it's a good, rigorously thought out read (and it's free):

http://mises.org/document/5862/Building-Blocks-for-Liberty

 

Thanks, I'll give it a look-over.

Defending the Blackmailer - Walter Block - Mises Daily

I've never thought about it this way before. Thank you.

I still see a problem existing with extortion, however - the blackmailer demands further and further payment to temporarily refrain from spilling beans. In effect the blackmailer is breaking his contract not to talk, and the blackmailee has no recourse because inviting a third party means spreading the information he wants to keep secret in the first place. Or is that just a case of caveat emptor?

Peoples DROs or Insurance Companies get in touch with the companies
DRO and ask them to sue their client for damaging their environment?

Yes, this can work provided enough of the polluted territory is privately owned. I guess the problem hinges on property rights.

Or they go to the company and say "Look, you are polluting here, we
are willing to pay half way towards providing you with filters to clean
your stuff before you release it into the environment, if you
cooperate."

On the other hand this simply invites the same extortion from before: If the company makes more money not using filters, it has no incentive to accept the offer. If the offset costs of the filters allow it to make more money, it will reinvest its earnings into increasing its production, and then demand more filter-money to curb the new higher levels of pollution.

I suppose that using this option as an incentive, alongside the abovementioned damages claims as a deterrant, could work to good effect.

Pollution is a property-rights problem. It arises from a lack of clear definition of property.

Without having skimmed Walter Block's book yet. Is there a quick and easy-to-explain process for the transfer of things like atmosphere and oceans to private ownership?

[Andrew79]

I was under the impression that the insurance companies are paying out incentives to the polluting companies to curb pollution, not demanding compensation if they don't. How would the polluting companies be beholden to the insurance companies?

The polluter pays because they're committing a crime - they're breaking property rights, the same as if someone stole or damaged your property.

As Magnus said, this is the way things used to be until governments, looking for an economic advantage, abandoned it.

[Magnus]

 

Pollution is a property-rights problem. It arises from a lack of clear definition of property.

Without having skimmed Walter Block's book yet. Is there a quick and easy-to-explain process for the transfer of things like atmosphere and oceans to private ownership?

 

Every tangible thing that we humans have the ability to use starts out as unowned.  The first user of it becomes the owner -- he has the superior property claim to it, compared to all other subsequent would-be users of it. 

Most of the earth is unowned.  It's not economically viable to use most of it.

One person's use of his property cannot legitimately infringe on anyone else's use of his property.

If you are polluting air or water, which have a tendency to drift around onto other people's property, then you are trespassing. Polluters trespass when they fail to contain their pollutants, and they end up in my lungs, for example.

[Steinhauser]

So any polluter is considered to violate property rights the moment the pollutant enters someone's property, regardless of where that pollutant was originally disposed. And companies are liable for containing their own pollution, or else for paying restitutions to any property owner consequently affected.

Okay, that actually makes far more sense. I get it! Thanks, Andrew and Magnus.

[Magnus]

You're welcome. 

The law of nuisance can go a step further than requiring payment in restitution for trespassing. If a property owner's use his property repeatedly interfered with the property rights of others, then the offender could be shut down. It was an act of self defense -- force could be used if the interference could not be remedied by money damages and the polluter kept doing it.

That happened with some of the early industrial polluters, like coal burning factories or tanneries. They'd initially be located out of town, so as to avoid harming others, but the town would grow. The law of nuisance doesn't care who got there first. If you bought a house next door to a pre-existing tannery that stank so much it interfered with the homeowner's use of his property, then the tannery still had to either shut down or move. 

It is very short-sighted to allow a tannery to keep polluting, even though it is economically important to a community, and had been there first. If it can't operate without harming property that it does not own, then it should not operate.

But eventually, the courts caved, and let them do it anyway. Anglo-American property law hasn't been the same since. 

[Steinhauser]

Interesting - so, say, an environmental group who really cared about a particular region's ecology need only purchase some land in that region. Then any aggression toward the ecology is also an aggression toward their property.

That sounds remarkably similar to the current practice of sponsoring trees in the rainforest, etc.