Ornery.org
  Front Page   |   About Ornery.org   |   World Watch   |   Guest Essays   |   Contact Us

The Ornery American Forum Post New Topic  Post A Reply
my profile login | register | search | faq | forum home

  next oldest topic   next newest topic
» The Ornery American Forum » General Comments » WP- How do we know which regulations help and which hurt?

 - UBBFriend: Email this page to someone!    
Author Topic: WP- How do we know which regulations help and which hurt?
Ivan
Member
Member # 1467

 - posted      Profile for Ivan   Email Ivan   Send New Private Message       Edit/Delete Post   Reply With Quote 
In the How Libertarian Are you? thread, WP said:
quote:
Most well-intentioned government regulation that goes beyond protection of rights, globally speaking, hurts more people than it helps.
My question is twofold: first off, does this mean that you (WP) believe we should pass any law that "globally speaking", helps more people than it hurts? And secondly, how do we know which regulations help more people than they hurt? I'll posit an answer for the second question and hope for a response.

I believe that the best regulations are those which tax, in some way, behaviors with negative externalities. In other words, polution regulations which tax the amount of pollutant released by an amount equal to the cost of its cleanup ensure that those who benefit from the production of whatever good requires the release of the pollutants (the producers, as well as the consumers) pay an accurate cost for its consumption. Similarly, in the case of seatbelt regulations, those who do not wear seatbelts are taxed in order to pay for the additional costs their choice may bring (extra EMTs, people to scrape bodies off of the road and clean up, etc.), which is done by taking the expected cost of the decision. IE, if there is a .05% chance that you will get in an auto accident on each average trip, and the average extra cost in scrape-up charges, etc. is $10,000, then you should be charged $5 for each "average" trip you take. Therefore, if you are caught when you do not wear your seatbelt at a rate of 1 time in 20 average trips, your fine should be $100.

In short, the best system of regulations would ensure that everyone pays the correct price for the goods they consume and the decisions they make.

-Ivan

Posts: 1710 | Registered: Jan 2004  |  IP: Logged | Report this post to a Moderator
WarrsawPact
Member
Member # 1275

 - posted      Profile for WarrsawPact   Email WarrsawPact   Send New Private Message       Edit/Delete Post   Reply With Quote 
Tez called my attention to this. It's 3:16 in the morning here, I'll answer you after I wake up later.
Posts: 7500 | Registered: Sep 2003  |  IP: Logged | Report this post to a Moderator
WarrsawPact
Member
Member # 1275

 - posted      Profile for WarrsawPact   Email WarrsawPact   Send New Private Message       Edit/Delete Post   Reply With Quote 
Sorry for the delay. I forgot.
quote:
first off, does this mean that you (WP) believe we should pass any law that "globally speaking", helps more people than it hurts?
"Should"? Don't like that word. Replace it with a "must...if" statement and it will magically turn from an assertion to a disprovable argument.
And no, I don't think it's necessarily government's role to eagerly pass "any law" that helps more people than it hurts. After all it might hurt a very important group a lot and only help a slightly larger group a little bit. There are pragmatic considerations here.

quote:
And secondly, how do we know which regulations help more people than they hurt?
That question has an extremely complex answer. Truthfully, I can't answer it fully and I don't think anyone can.

quote:
I believe that the best regulations are those which tax, in some way, behaviors with negative externalities. In other words, polution regulations which tax the amount of pollutant released by an amount equal to the cost of its cleanup ensure that those who benefit from the production of whatever good requires the release of the pollutants (the producers, as well as the consumers) pay an accurate cost for its consumption.
What you need to be careful of, though, is overstepping your bounds here and making compulsory what isn't prohibited.
Why *tax* all negative behaviors? That assumes that the state is the party that suffers and needs compensation. If you don't wear a seatbelt, your assets should be siezed to pay for your cleanup.
If you victimize someone, that someone is the only party to whom you can justify payment. And you are the only party that can be justifiably forced to pay, unless others have decided to share in your risk (insurance).

quote:
In short, the best system of regulations would ensure that everyone pays the correct price for the goods they consume and the decisions they make.
The "correct price" being what? The costs required to set things back to normal?
Does the money the polluter pays all go toward cleaning up pollution? What about the suffering the consumer endures when prices on things like gasoline dig into medicine money for the kids?
The correct price (in my mind) is the price negotiated between two well-informed parties.

Then again, I don't have all the answers. There are certainly a lot of things I'm not taking into account.

Posts: 7500 | Registered: Sep 2003  |  IP: Logged | Report this post to a Moderator
FiredrakeRAGE
Member
Member # 1224

 - posted      Profile for FiredrakeRAGE   Email FiredrakeRAGE   Send New Private Message       Edit/Delete Post   Reply With Quote 
WarrsawPact's thoughts also trigger 'victimless crime' questions. With regard to things like drugs, prostitution, et al., the question becomes 'is there a victim'. In most cases the answer is no - but crimes perpetrated that relate to the action are used to legislate against it.

While I do not wish to derail this thread on regulation I will use prostitution as an example. Good or bad, prostitution (for this example) is a consensual transaction between two adults. Many times when prostitution is addressed with regard to regulation underlying crimes become more of an issue than prostitution itself. People speak of those victimized by prostitution. If being victimized (in whatever manner - I'm trying to avoid generalities) is a violation of someone's rights, it needs to be addressed. However, it should be addressed in the context of the underlying crime.

If a prostitute is murdered, we should call not for an end to prostitution, but an end to murder.

--Firedrake

Posts: 3538 | Registered: Sep 2003  |  IP: Logged | Report this post to a Moderator
Mike_W
Member
Member # 202

 - posted      Profile for Mike_W   Email Mike_W   Send New Private Message       Edit/Delete Post   Reply With Quote 
"Does the money the polluter pays all go toward cleaning up pollution?"

Even if it doesn't, at least the price of the good or service reflects these costs and demand is adjusted accordingly. Otherwise, given negative externalities, those two arties will negotiate a price that is too low, and a quantity that is too high from an efficiency perspective.

"The correct price (in my mind) is the price negotiated between two well-informed parties."

Classical economics assumes perfect information, rational behaviour, competition, and no externalities. When these conditions are met (well enough), then, in fact your assumtion holds.

Posts: 1352 | Registered: Dec 2000  |  IP: Logged | Report this post to a Moderator
WarrsawPact
Member
Member # 1275

 - posted      Profile for WarrsawPact   Email WarrsawPact   Send New Private Message       Edit/Delete Post   Reply With Quote 
Mike - Read Hayek. Information doesn't have to be perfect, people don't have to be terribly rational, and good competition just helps the consumer. Think about it: without central planning of any kind, Paris gets fed. Somehow, every day, millions of people get up and decide what they want for breakfast. They all have little pieces of information.

quote:
"Does the money the polluter pays all go toward cleaning up pollution?"

Even if it doesn't, at least the price of the good or service reflects these costs and demand is adjusted accordingly. Otherwise, given negative externalities, those two arties will negotiate a price that is too low, and a quantity that is too high from an efficiency perspective.

Why does it need to reflect extra costs? If a farmer's cows release a few tons of methane into the atmosphere, who is he costing exactly? How are you going to calculate the benefits and costs associated with that? Almost certainly, you'll be slapping the farmer with a dollar figure that was just guesswork, and that money will almost certainly not go toward curing any harm caused by the methane.

In the meantime, the resulting drain of money from producers and damage to the consumers' bottom line naturally slows the march of innovation: the farmer (and all competing cattle ranchers) has less money to improve his process, or worse, to clean up other messes. The consumer has less money to invest elsewhere.

Posts: 7500 | Registered: Sep 2003  |  IP: Logged | Report this post to a Moderator
Mike_W
Member
Member # 202

 - posted      Profile for Mike_W   Email Mike_W   Send New Private Message       Edit/Delete Post   Reply With Quote 
WP,
Please note that I said "well enough" with respect to the classical conditions. I'll skip the intro course and move on to level two if you don't mind ;-). And, yes, Paris does get fed. Markets work very well. But, they are not perfect. The closer to perfect they are though, the better the result (assuming efficiency = better).

The point with negative externalities is that the economy is unfairly subsidizing those activities. In your methane example, the assumtion is that the methane does cause ecological harm (that can be debated but for this example let's assume it does). Even if the tax isn't perfect, it is still better than an implied subsidy for the good in question (just like competition doesn't have to be perfect, reactions to market failure don't have to be perfect to deliver better solutions).

The farmer shouldn't be rewarded with excess demand, nor should the consumer be rewarded with low prices.

The market should be rewarding alternate technologies that do not have such negative externalities.

A better example - you like to talk about TDP. If TDP is not price competitive with traditional oil and gas because the negative externalities of those goods are not priced in, then TDP doesn't get off the ground. The market is delivering a sub optimal solution.

Note, in that case it is not only a case of unpriced negative externalities, but also of direct and indirect subsidies to oil and gas.

Posts: 1352 | Registered: Dec 2000  |  IP: Logged | Report this post to a Moderator
WarrsawPact
Member
Member # 1275

 - posted      Profile for WarrsawPact   Email WarrsawPact   Send New Private Message       Edit/Delete Post   Reply With Quote 
Excellent, Mike. Thanks. I understand a lot better now.
Posts: 7500 | Registered: Sep 2003  |  IP: Logged | Report this post to a Moderator
Mike_W
Member
Member # 202

 - posted      Profile for Mike_W   Email Mike_W   Send New Private Message       Edit/Delete Post   Reply With Quote 
My pleasure. We can always disagree on the desireability of trying to correct imperfections (the cure could be worse than the disease in some cases).

By the way, is it me, or has the quality and civility of discussion been particularily good the last few days?

Posts: 1352 | Registered: Dec 2000  |  IP: Logged | Report this post to a Moderator
   

Quick Reply
Message:

HTML is not enabled.
UBB Code™ is enabled.
UBB Code™ Images not permitted.
Instant Graemlins
   


Post New Topic  Post A Reply Close Topic   Feature Topic   Move Topic   Delete Topic next oldest topic   next newest topic
 - Printer-friendly view of this topic
Hop To:


Contact Us | Ornery.org Front Page

Powered by Infopop Corporation
UBB.classic™ 6.7.1