Saturday, November 19, 2005

Sue/My political philosophies:

The above link is incorrect. But I think this comment to Sue from Thom Hartman's blog showed some of my political philosophies...
Hi Sue:

Nice to hear from you.
As for me, I am in a distance learning degree programme from University of London in MSc Financial Economics. My economic interests are International Economics, Externalities and Utility Curves.

Some of the sites that have similar philosophies to me are:
Perc/Improving Environmental Quality Through Markets
TheCommons/Markets Protecting the Environment Markets
Greenspirit/For a Sustainable Future (Trees)
A World Connected

And non-economic:
Democratic Peace

It's only natural that there will be some NIMBYism wherever a plant is proposed, whether by environmentalists or not, but it is often balanced by people wanting the jobs and/or boost to the local economy that a new or expanded plant can provide. Which side wins varies from project to project.


But fortunately or unfortunately, the legal system is not democratic and is not balanced between the needs of the many or the one. Our legal system allows a small group or one to take an action to court and either win or lose. A perfect example is the case of saying the pledge of Allegiance in school. One person in the nation has brought the case to the Supreme Court that will affect every public school in the US. Growing up in Oregon, I also saw that with high unemployment (especially in timber), the small group was shutting down the large group.
If there could have been an economic solution that benefited most citizens while not harming anyone, then this would have been an ideal condition.
Environmental regulations are a different matter. Many of them have the purpose of reducing the amount of pollution that plants output - pollution which harms people's health, often reducing or wiping out their productivity as well as causing personal and financial distress. I believe that if such financial costs had to be factored in to decisions about what plants to build, etc., we would have a very different view about which projects were economically efficient.


As noted above, I am always concerned about externalities even if they are positive. We may have a different view if we count all costs, but if we are to protect the property rights of those affected by externalities we need to use the market to come at an economic efficient outcome.

Let me give you one case that explains how negative externalities can be taxed at the source and distributed to those affected.
California has a vehicle registration tax based on the value of the car and require a smog check to make sure that your car does not pollute with either a pass or fail. Does this create incentives to reduce air pollution. No. But since we know from the smog check how much exhaust approximately it produces in a year (miles driven times pollution level), we can tax to the level of damage this causes. This pool of monies can now compensate anyone that is suffering from that pollution.
This creates the incentives to buy Hybrids or reduce miles or even tune up your car more often.

The present incentives in California are almost as bad an idea as Oregon going to a mileage tax.

And Sue stop by here sometime.

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