Ask HN: Why are we as a society unable to account for negative externalities?
11 comments
> Ask HN: Why are we as a society unable to account for negative externalities?
Because (1) externalities, especially diffuse ones, are often difficult to objectively assess in magnitude (this is true of some internalities, too, which is a source of market failure), and (2) the people who benefit most from not accounting for externalities are also the people with disproportionate power in society.
Because (1) externalities, especially diffuse ones, are often difficult to objectively assess in magnitude (this is true of some internalities, too, which is a source of market failure), and (2) the people who benefit most from not accounting for externalities are also the people with disproportionate power in society.
Externalities usually become obvious after the fact. The problems we aim to solve through our inventions are multi-dimensional topologies. Like tree, at any given point we can only see portions of it, leaving other perspectives unaccounted. Trimming leaves or branches would reveal deeper previously unseen parts.
The human brain and our tools thus far are more adapted to solving linear problems, so the higher the dimensionality and non-linear the relationships, the less we're able to produce determinist results.
I personally believe problems of this kind we cannot arrive at perfect solutions, only optimal ones. By optimal, I mean making trade-offs on certain variables so as to minimize total cost. The weights are also variables depending on trends of the epoch (environmental factors not such a big deal a decade ago, big deal now --> need to update our equation)
The other factor comes as a form of bureaucracy. It takes time to push the change through the chain of politics, re-aligning incentives, carving new markets and distribution channels, changing market sentiments, etc.
The human brain and our tools thus far are more adapted to solving linear problems, so the higher the dimensionality and non-linear the relationships, the less we're able to produce determinist results.
I personally believe problems of this kind we cannot arrive at perfect solutions, only optimal ones. By optimal, I mean making trade-offs on certain variables so as to minimize total cost. The weights are also variables depending on trends of the epoch (environmental factors not such a big deal a decade ago, big deal now --> need to update our equation)
The other factor comes as a form of bureaucracy. It takes time to push the change through the chain of politics, re-aligning incentives, carving new markets and distribution channels, changing market sentiments, etc.
There are many problems
See https://en.wikipedia.org/wiki/Pigovian_tax
For instance estimates of the "social cost of carbon" vary widely
https://19january2017snapshot.epa.gov/climatechange/social-c...
one of the most important factors is the "Discount factor" which is highly subjective. (How much do we care about 10 years from now as opposed to 1000 years from now?)
Some people don't like the idea that "rich people" get the right to pollute.
In some cases "paying money" might just legitimize bad behavior. A day care center in Tel Aviv tried charging people money if they picked their kids up late, it was not successful at letting the staff leave home early because some parents decided it was worth paying the fee.
See https://en.wikipedia.org/wiki/Pigovian_tax
For instance estimates of the "social cost of carbon" vary widely
https://19january2017snapshot.epa.gov/climatechange/social-c...
one of the most important factors is the "Discount factor" which is highly subjective. (How much do we care about 10 years from now as opposed to 1000 years from now?)
Some people don't like the idea that "rich people" get the right to pollute.
In some cases "paying money" might just legitimize bad behavior. A day care center in Tel Aviv tried charging people money if they picked their kids up late, it was not successful at letting the staff leave home early because some parents decided it was worth paying the fee.
If there is a fine involved with a certain behavior, this can commoditize the behavior in a way - it's an extra option that you can buy.
An interesting historical example for this may be the trading of indulgences (pardons for sins) in the late Middle Ages.
When (parts of) the church started to sell indulgences, so that people could pay for spending less time in purgatory for minor sins lead to a veritable explosion of trade with absolution of sin, financing wars, construction projects etc. Minor sinning was suddenly not that serious anymore for the wealthy and the church gained even more economic power.
Indulgences were even sold for dead relatives. Think about your family worrying for the soul of your dead aunt (who had a bad habit of blashpheming) and trying to scrape together what is effectively ransom for an imaginary hostage...
While the rich were relatively fine with the system, the poor were now even discriminated against in the afterlife, since they couldn't just buy their dead realtives or themselves a shorter time in purgatory. In some theologicians' eyes this clashed with dogma and to the public would end up as one factor driving the reformation.
An interesting historical example for this may be the trading of indulgences (pardons for sins) in the late Middle Ages.
When (parts of) the church started to sell indulgences, so that people could pay for spending less time in purgatory for minor sins lead to a veritable explosion of trade with absolution of sin, financing wars, construction projects etc. Minor sinning was suddenly not that serious anymore for the wealthy and the church gained even more economic power.
Indulgences were even sold for dead relatives. Think about your family worrying for the soul of your dead aunt (who had a bad habit of blashpheming) and trying to scrape together what is effectively ransom for an imaginary hostage...
While the rich were relatively fine with the system, the poor were now even discriminated against in the afterlife, since they couldn't just buy their dead realtives or themselves a shorter time in purgatory. In some theologicians' eyes this clashed with dogma and to the public would end up as one factor driving the reformation.
I remember that story about the Tell Aviv daycare. It makes for a fun story, but in the end the issue was that they charged too little. They purposely made it a tiny charge so as not to be perceived as adversarial or overly punitive to their customers. Had they properly accounted for the costs of late pickups, it should work out such that everyone is indifferent when it happens.
When negative externalities are properly accounted for, it's less "rich can but right to pollute" and more "if you want to pollute, you have to pay to clean it up too".
When negative externalities are properly accounted for, it's less "rich can but right to pollute" and more "if you want to pollute, you have to pay to clean it up too".
IIRC what you're talking about is called "True Cost Economics". I first read about it years ago, & when I look for the article now it's a 404.
However I was able to find an excerpt here:
http://www.utne.com/community/truecosteconomics
However I was able to find an excerpt here:
http://www.utne.com/community/truecosteconomics
Let me rephrase this to annoy you. Why are we as a society unable to account for positive externalities?
They're externalities. You're probably wrong in the grand century scale scheme of things, heck you're probably wrong in the 5 -10 year scale of things.
They're externalities. You're probably wrong in the grand century scale scheme of things, heck you're probably wrong in the 5 -10 year scale of things.
That's a really good question flip.
Because the negative externalities don't affect the balance sheets of companies. However the companies with the biggest profits can lobby politicians more effectively. They can also pick their favorite jurisdictions to operate from.
This comment gets closest to the heart of things. Such costs can only be imposed by the state, but the state has limited power/desire to do so.
Isn’t it fundamentally an inherent game theory problem? Why don’t prisoners cooperate in the prisoners’ dilemma?
We have accurate data on what the costs are, we have the rule of law, foreign actors who do not abide by the same regulation can be taxed or banned. Why do we not simply charge corporations for external harm they do so that costs can can be passed on to customers thereby adjusting demand of harmful products appropriately? What is the blocker?