Sunday, January 19, 2014

Why pollution requires government intervention

Despite having views in both far right and far left camps, I always find myself more in line with the political right line of thinking.

I always wondered why that is, and my current theory is that my perspective is aligned with the libertarian and conservative political axes as suggested by Arnold Kling.

As a result of that, I find myself writing more spirited pieces about my more conservative views, and far less often about my left wing views. Unless they are social issues, they tend to only make appearances in personal conversations outside of the view.

I'm going to make an effort to change that while still being true to myself with my new "Quick admissions" tag. I try to avoid writing detailed posts about views that can be found elsewhere, but I also want to make sure this blog represents my views accurately. I had a similar motivation in 2012 when I wrote about the need for a government or my various posts against crony capitalism.

With that in mind, let's talking about pollution.

Pollution is a well-known negative externality, where the parties making a trade impose effects on others, and the free market fails to make up for the cost of that pollution on its own.

In English, John sells coal to Sarah and Sarah burns it, but the smoke pollutes the air that everyone breathes. Maybe she dumps the ashes in the river too.

The market does not have an automatic mechanism to account for that cost and externalities are known as market failures. Elinor Ostrom's work on the commons found ways that informal social forces can discourage people from certain actions, but that's not an absolute. We really need a system of laws to intervene here, and environmental regulation is part of the proper role of government.

There's a second question that should not be ignored: What form should that regulation take? I've written before about how pollution should be regulated by taxing polluters by volume, not by requiring specific pollution-reducing methods. Simply saying that we need pollution laws so we should support all proposed pollution laws is a mistake, as Milton Friedman reminds us, but the fact remains that we need environmental protection laws to intervene in the market.

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