The logic here takes a little thought... but it is correct and often overlooked (courtesy Don Boudreaux at Cafe Hayek)


Why assume that greenhouse-gas emissions are an externality that ought to be internalized?

PERC’s Terry Anderson and I were talking recently and Terry pointed out that the concept of ‘externality’ implies a prior property right. For example, if I have a right to sleep soundly at night in my home, then noise created by my neighbor that penetrates into my nighttime bedroom is indeed a negative externality on me.

But if I choose to try to sleep on a bench inside of a jazz club, the jazz-club’s music will keep me awake but it is no externality imposed on me. The reason, of course, is that the jazz club has a right to stage musical performances within its premises – a right that supercedes my right to sleep in that club.

So who’s to say that each Chinese person’s right to the fruits of economic growth are superceded by each non-Chinese person’s (or even each Chinese person’s) right to be free of whatever increased health risks might result from continued economic growth in China?

This from the great Steve Landsburg... note especially the reason Pigou and others missed the critical point Coase makes.... it was because they were obsessed with fault, blame and revenge!!! The N.Z. screams of "polluter should pay" in recent times make precisely this mistake - a far too naive view of just who is imposing costs on whom.

December 29, 2009

Ronald Coase In the theory of externalities—that is, costs imposed involuntarily on others—there have been exactly two great ideas. The first, forever associated with the name of Arthur Cecil Pigou (writing about 1920) is that things tend to go badly when people can escape the costs of their own behavior. Factories pollute too much because someone other than the factory owner has to breathe the polluted air. Nineteenth century trains threw off sparks that tended to ignite the crops on neighboring farms, and the railroads ran too many of those trains because the crops belonged to someone else. Farmers keep too many unfenced rabbits when they don’t care about the lettuce farmer next door.

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A common theme in recent economic writing has been that the institutions which characterise any given society are important in improving total economic well being. This article provides valuable evidence.....



The Secrets of Intangible Wealth
By RONALD BAILEY
September 29, 2007; Page A9 WSJ

A Mexican migrant to the U.S. is five times more productive than one who stays home. Why is that?
The answer is not the obvious one:

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