12/04: Externalities and Prior Property Rights
Category: Law and Economics
Posted by: Admin
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So who’s to say that each Chinese person’s right to the fruits of economic growth are superceded by each non-Chinese person’s (or even each Chinese person’s) right to be free of whatever increased health risks might result from continued economic growth in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?
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So who’s to say that each Chinese person’s right to the fruits of economic growth are superceded by each non-Chinese person’s (or even each Chinese person’s) right to be free of whatever increased health risks might result from continued economic growth in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?
