Externalities, intrinsic to capitalism

Here's a good post on how externalities are inhernent to capitalism, and so reasonable capitalists should face them like grown ups---not argue them away (however semantically successful) while letting their negative costs run rampant on society. There was never an anthropologic theory without holes in its application, and economists admit (but sparingly) yes, indeed capitalism is but a theory at last.

The economy, however is not even a theory. It is a work in progress (though that may rankle both those that would control it and those that image it perfectly free). Human hands shape it, and do so imperfectly.

All that was a rambling introduction to a fine post by Tom Evsilin (Fractals of Change) on the importance of recognizing (facing) externalities and government's (place +/- adjective here) role in addressing them.

Regulation is essential to capitalism. I’m damned near a libertarian and certainly a capitalist but I do believe SOME forms of targeted regulation are necessary – even though all regulation poses a danger...A very good form of regulation is to force the externalities to become costs of production. Tradable pollution credits really work to reduce pollution. Why? Because they are technology neutral and result specific. Instead of leaving the good guys at a cost-disadvantage, they create an economic incentive to fix or avoid pollution. Of course, the cost must be applied to ALL producers and that usually means some form of international cooperation. That’s hard! And that’s why the Kyoto treaty with its lofty goals and exclusion of huge developing economies can’t work.
It scares me a bit that a post I agree with so closely in this matter with a person who one post back says he voted for Bush, but hey I feel lucky to find any sense out there. I feel deeply sympathetic to the way this carefully thought and well-balanced opinion is routinely sidelined in the chasm of political thought between both "right" and "left".

1 Comment:

Tom Evslin said...

Thanks, Melanie.

I'm glad you're willing to listen despite my voting record. We'll never be in 100% agreement but all a lot smarter if we can have a reasonable dialog.