I found this comment by Patch puzzling and fascinating: "Nor am I trying to say you don't praise the market, or aren't "pro market." I just think there is an important difference between a free market economist and a "pro market" economist. Pro market economists are not against using government to correct what they believe are flaws that would develop in a laissez faire setting. Free market economists would not advocate any government intervention since they believe markets, unburdened by government (or "free"), would achieve the best outcome."
So let's run through this with an energy example because I just talked about Solyndra and because it's the easiest way to talk about externalities with people:
Situation 1:
- Rights to carbon recognized
- Rights to the air you breath not recognized
- Market allocation of carbon
- No market allocation of the air you breath because we haven't figured out how that could possibly be done
Situation 2:
- Rights to carbon recognized
- Rights to the air you breath recognized
- Market allocation of carbon
- No market allocation of the air you breath because we still haven't figured that out yet, but a political nudge in its allocation by a liberal democracy
People like me would just like to take a step from situation 1 to situation 2. But for some reason our desire to make rights better established without eliminating the market for carbon at all (because we recognize and have always recognized what free markets can accomplish) makes us suspect on this count. I don't get it. The politicial intervention into the air we breath doesn't eliminate the market allocation of carbon at all. When property rights are violated, even minarchists think the government should intervene to remedy the situation. Why do they change their tune on something like carbon taxes?
So I'm baffled here. I think property rights should be stronger, not weaker, I don't propose eleminating any market allocation, and I propose a traditional minarchist function of government in this sphere. And yet somehow for Patch that means that maybe I can claim to be pro-market (I still obviously have a soft spot for them), but I'm not "free market". Baffling.
I've had a realization lately about this stuff, thanks to a post by Mattheus on defining libertarianism. That's always really tricky, as regular readers know. What I suspected in the comment section is that maybe defining libertarianism with respect to "markets" or with respect to "liberty" isn't right at all. Bob Murphy is not more "pro-market" than I am. Ron Paul is not more "pro-liberty" than I am. Perhaps the real distinction doesn't have to do with liberty or markets, but government. I'm "pro-government" (properly used). I see it as one of many emergent institutions that free people develop to solve their problems. "Government", therefore, is not the opposite of "markets". Indeed, they usually go hand in hand.
Libertarians often (I'm not comfortable with saying "always" yet) see them as alternatives or opposites - so that if you have more government htat means you have less markets. That's the only thing that can explain this baffling comment by Patch. I want more robust property rights and the same markets in my two situations above, but I'm somehow not "free market". That only makes a lick of sense if you have this view that "markets" and "government" are opposites and so that one somehow cancels the other out simply by being there.
Wednesday, February 8, 2012
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Now this is the second post where I was center stage (first the one with Delong and Austrians, I think?). Flattered haha.
ReplyDelete"People like me would just like to take a step from situation 1 to situation 2. But for some reason our desire to make rights better established without eliminating the market for carbon at all (because we recognize and have always recognized what free markets can accomplish) makes us suspect on this count. I don't get it. The politicial intervention into the air we breath doesn't eliminate the market allocation of carbon at all. When property rights are violated, even minarchists think the government should intervene to remedy the situation. Why do they change their tune on something like carbon taxes?
So I'm baffled here. I think property rights should be stronger, not weaker, I don't propose eleminating any market allocation, and I propose a traditional minarchist function of government in this sphere. And yet somehow for Patch that means that maybe I can claim to be pro-market (I still obviously have a soft spot for them), but I'm not "free market". Baffling."
Alright, I'm not a property rights/legal contracts expert, but there are some differences between greenhouse gas "externalities" and others. Libertarians aren't opposed to the government (or whoever is running the courts) to correct environmental external costs if they are a failure of property rights. So, to use the typical example, if in the 1800s I owned a farm and someone built a railroad right next to me, and its pollutants covered my crops and demonstrably physically hurt my private property, then since I was here first and had already "homesteaded" this area, I could rightfully press charges againist the owner of the railroad and make him compensate me for damages.
Unfortunately, the problem is not as easy with respect to greenhouse gases. To borrow a passage from Murray Rothbard in "Law, Property Rights, and Air Pollution":
"We have established that everyone may do as he wishes provided he does not initiate an overt act of aggression against the person or property of anyone else. Anyone who initiates such aggression must be strictly liable for damages against the victim, even if the action is "reasonable" or accidental. Finally, such aggression may take the form of pollution of someone else's air, including his owned effective airspace, injury against his person, or a nuisance interfering with his possession of use of his land.
This is the case, provided that: (a) the polluter has no previously established a homestead easement; (b) while visible pollutants or noxious odors are per se aggression, in the case of invisible and insensible pollutants the plaintiff must prove actual harm; (c) the burden of proof of such aggression rests upon the plaintiff; (d) the plaintiff must prove strict causality from the actions of the defendant to the victimization of the plaintiff; {e) the plaintiff must prove such causality and aggression beyond a reasonable doubt; and (f) there is no vicarious liability, but only liability for those who actually commit the deed." (EC, p.405)
In this case the crucial one is d. Unless there is a way to prove that Person X's car or Corporation Y's plant caused demonstrable/isolable damage to Z, then the situation could not hold up in a court and property rights can't be invoked here.
So for environmental cases, it depends. Instead of having the EPA put regulations on businesses not to emit X amount of pollutant or dump only Y amount into a river etc etc, private property libertarians would allow them to buy the property they wanted to pollute on, and as long as no one else who had already homesteaded area was hurt, then hunky dory. But for something like greenhouse gases, where it is impossible to show that specifically firm contributed to this much of a temperature increase and how that specific plant hurt the individuals in the world isolably (harking back to letter d), then "protecting property rights" can't apply.
ReplyDeleteNow this doesn't mean libertarians don't have solutions to greenhouse gases. A prominent one would be to privatize the roads. To alleviate chronic shortages, the roadowners who raise the price, which would cause more people to economize on cars and carpool/travel in bus/transit systems. Less automotives=less pollution.
Patch and Daniel, this post today is relevant: Greenhouse Externalities.
ReplyDeleteI am virulently anti-government because I see the state as an alternative to freedom, not as its corollary or complement.
ReplyDeleteAs surprised as you are to hear this, you are on the Misesian side of this argument.
"If I am of the opinion that it is inexpedient to assign to the government the task of operating railroads, hotels, or mines, I am not an "enemy of the state" any more than I can be called an enemy of sulfuric acid because I am of the opinion that, useful though it may be for many purposes, it is not suitable either for drinking, or for washing one's hands." - Liberalism
First, I don't think it makes sense to have "Keynesians" as one side of this debate. One can believe in and adhere to every single Keynesian model out there and oppose stimulus. You might believe that the way the stimulus spending is done will create micro-level distortions which in the long run will be even more painful than the business cycle. You might believe that the government will simply keep growing larger as opposed to actually being counter-cyclical, etc... In other words, you might be on the side of those who believe that while there is a theoretical world in which the government can do good things, once granted the power to do "things", they will most likely do bad things.
ReplyDeleteSimilarly, I strongly believe that Piguvian taxes and such arrangements are a wonderful idea and that you are perfectly right that a market is just as free whether the commons are enclosed or not and that a good enclosure can really make things better. But having seen the people in charge of implementing the enclosing, I have every confidence that they will royally screw it up and so I am reluctant to let them do anything, even when they have a good starting point.