I found this post on raising pigs to be thought-provoking. This post (not written by Levitt or Dubner, I should note) does not contain a policy prescription - it simply looks at the commonly held wisdom that "pig crates are the least humane way to raise pigs" and offers a critique.
Noticeably lacking are any policy prescriptions or name-calling (neither side is called a "religion," for example). Hopefully this is a sign of things to come from this group; I'd like to see these guys get back to their roots.
Thursday, November 12, 2009
Thursday, November 5, 2009
Free Market Environmentalism
This train of thought stems from a recent presentation I gave in my environmental ethics class. I didn't do a very good job outlining free market environmentalism, mostly because I forgot I was presenting to non-economists. Oh well. I'd like to explore free market environmentalism a little further, though, and contrast it with government regulation as the solution to our environmental problems.
One essential factor of the market is its propensity to spur dynamic innovation. Thus, we replaced horses with cars to clean up the pollution in New York City. We solved overfishing by offering every fisherman quotas, which changes their incentive structure and prevents them from depleting fisheries beyond sustainable levels. My conclusion from the recent presentation: "You cannot know in advance what solutions might be brought about by the market. (If you could, you'd be a venture capitalist or entrepreneur, or at the very least you'd sell your ideas to those people). Supporting free market environmentalism, then, isn't supporting any specific solution - including geoengineering (Levitt and Dubner, are you listening?). Rather, it is supporting market principles, based on strong historical evidence that the market has provided the best solutions to problems and will continue to provide the best solutions in the future."
The counterpart of the market is the government, at least in the current post-Cold War era. Government, in general, is not designed to spur innovation, although it does fund much of the research and development into new technologies. The whole point of government is to choose the winning technological development in advance, then alter the regulatory structure to ensure that solution is the one pursued by a majority of citizens. Government is also less dynamic in its response to problems - regulation essentially exists to slow or stop change. In the case of the environment, this is not necessarily always bad, as we may need to slow or stop emissions of CO2. If you support government regulation of the environment, then you probably disagree with the last line of my conclusion, that the market will continue to provide the best solutions. Either that, or you're intelligent enough to recognize that our "market" isn't close enough to the ideal to spur the necessary innovations.
One other thought I had while preparing for my presentation: in a liberal critique of FME, Ernest Partridge tried to claim that libertarians in general would have to outlaw cars and electric power plants, because these CO2 emissions were imposing on everyone's rights to "life, liberty, and property." The truth is, if we outlawed these, or announced that in five years they would be outlawed, I can offer a prediction of the results. Wind and solar power plants would spring up across the country. The electric car that GM has supposedly been developing would hit the road in fewer than five years. Tons of resources would be directed into making these technologies better and cheaper, and many more resources would be spent deploying them as quickly as possible. The engine of progress wouldn't shut down entirely - though it's an interesting question whether this would jolt us out of the recession or create a bubble that would pop once the regulations took effect. I think Partridge, in trying to extend an argument ad absurdum, misunderstands the dynamic nature of the market. I'm also not sure this would be the worst solution to our environmental and economic problems, though I am sure it's not politically feasible.
This post is already too long and wonky for its own good, but it has me feeling better about free market environmentalism than I have in a long time.
One essential factor of the market is its propensity to spur dynamic innovation. Thus, we replaced horses with cars to clean up the pollution in New York City. We solved overfishing by offering every fisherman quotas, which changes their incentive structure and prevents them from depleting fisheries beyond sustainable levels. My conclusion from the recent presentation: "You cannot know in advance what solutions might be brought about by the market. (If you could, you'd be a venture capitalist or entrepreneur, or at the very least you'd sell your ideas to those people). Supporting free market environmentalism, then, isn't supporting any specific solution - including geoengineering (Levitt and Dubner, are you listening?). Rather, it is supporting market principles, based on strong historical evidence that the market has provided the best solutions to problems and will continue to provide the best solutions in the future."
The counterpart of the market is the government, at least in the current post-Cold War era. Government, in general, is not designed to spur innovation, although it does fund much of the research and development into new technologies. The whole point of government is to choose the winning technological development in advance, then alter the regulatory structure to ensure that solution is the one pursued by a majority of citizens. Government is also less dynamic in its response to problems - regulation essentially exists to slow or stop change. In the case of the environment, this is not necessarily always bad, as we may need to slow or stop emissions of CO2. If you support government regulation of the environment, then you probably disagree with the last line of my conclusion, that the market will continue to provide the best solutions. Either that, or you're intelligent enough to recognize that our "market" isn't close enough to the ideal to spur the necessary innovations.
One other thought I had while preparing for my presentation: in a liberal critique of FME, Ernest Partridge tried to claim that libertarians in general would have to outlaw cars and electric power plants, because these CO2 emissions were imposing on everyone's rights to "life, liberty, and property." The truth is, if we outlawed these, or announced that in five years they would be outlawed, I can offer a prediction of the results. Wind and solar power plants would spring up across the country. The electric car that GM has supposedly been developing would hit the road in fewer than five years. Tons of resources would be directed into making these technologies better and cheaper, and many more resources would be spent deploying them as quickly as possible. The engine of progress wouldn't shut down entirely - though it's an interesting question whether this would jolt us out of the recession or create a bubble that would pop once the regulations took effect. I think Partridge, in trying to extend an argument ad absurdum, misunderstands the dynamic nature of the market. I'm also not sure this would be the worst solution to our environmental and economic problems, though I am sure it's not politically feasible.
This post is already too long and wonky for its own good, but it has me feeling better about free market environmentalism than I have in a long time.
Wednesday, November 4, 2009
10 pillars of Economic Wisdom
By David Henderson:
1. TANSTAAFL: There ain't no such thing as a free lunch.I think I will post these in big letters on the wall of a classroom someday. I also think I will buy Henderson's book.
2. Incentives matter.
3. Economic thinking is thinking on the margin.
4. The only way to create wealth is to move it from a lower valued to a higher valued use. Corollary: Both sides gain from exchange.
5. Information is valuable and costly.
6. Every action has unintended consequences.
7. The value of a good or service is subjective.
8. Costs are a bad, not a good.
9. The only way to increase a nation's real income is to increase its real output.
10. Competition is a hardy weed, not a delicate flower.
Tuesday, November 3, 2009
IgNobel Prize winners
The 2009 IgNobel Prize winners were announced last month, and I'm not sure how I missed all of their important discoveries in human endeavors. I hope to one day attend the award presentation ceremony, it seems quite fun.
What's Wrong with America's Health Care?
I was recently forwarded this article by the AFL-CIO. Setting aside all of the other problems I had with the piece, I found these two paragraphs interesting:
The first paragraph implies that less access to prescription drugs is bad, while the second suggests that more access to prescription drugs is bad. How much access to prescription drugs is good? And how can spending be kept down if it is bad to expose patients to the costs of their medications?
Other cost increases hitting workers include larger hikes in the cost of family coverage, less access to needed prescription drugs through stricter HMO formularies and higher prices for more comprehensive coverage. See the Consumers Unions’ Health Care Plans and Managed Care (PDF).
Consumers are using more prescriptions, at younger ages and for more conditions, and substituting newer, more expensive medications for established products. As a result, pharmaceutical spending increased by 17.4 percent annually between 1999 and 2000 and another 16 percent from 2000 to 2001 (PDF).
The first paragraph implies that less access to prescription drugs is bad, while the second suggests that more access to prescription drugs is bad. How much access to prescription drugs is good? And how can spending be kept down if it is bad to expose patients to the costs of their medications?
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