It has been interesting (in a very bad way) to observe in the last three years how one particular externality that we can all cause, the possibility of passing on a virus, has gone from something we felt did not justify the cost to reduce very significantly, to something we seem willing to incur incredibly high costs to reduce.
How much of our understanding of the cost and benefits of externalities is shaped by cultural and social factors, availability bias etc? Quite a lot it seems.
Also: now I know Cameron Diaz was in Minority Report!
I think the framing of the cost of contracting the disease is largely to blame, and that those who framed it as such knew exactly what they were doing. "A nasty flu anyone under 65 without serious comorbidities is roughly 99% likely to have no problem with" would get a yawn, which is why there was so much early censoring of discussion of age related death rates, listing everyone dying with COVID as dying from COVID, etc. It has to be a big cost to justify a big change in behavior.
As an employer I tell my people to give and get their attention somewhere else than the workplace. It works fine. If two employees have coupled off that's also fine, but they're here to work not to feel each other up all day. It's vital, with employees, children, or colleagues, to set boundaries. Morality, being the predecessor of a written code of law that avoids internal conflict in a community, includes boundaries in its word cloud. Thus I consider that small-scale interactions such as you have described are more part of the give-and-take normal in a peaceful society. To get my notice as an externality it would have to be quite a bit bigger and involve someone a lot closer than my cousin in Australia's neighbor's chiropodist.
I don't think most of our inhibitions are truly the result of rational self-interest. Rather they are more the result of strong emotional reactions that evolved at a time when we lived in much smaller groups.
I think the best evidence of this is how difficult many men find it to ask women out. They often believe it's a perfectly reasonable thing to do, that if they do it in a friendly appropriate way the target of their attention will be flattered and their friends will think more of them. Yet the fear of rejection stops them.
I think it's that same fear which does most of the work to keep us from smelling up the mall or engaging in asshole behavior while on vacation far from home.
Yet more proof comes from the suggestion (tho hard to be sure) that many well-adjusted sociopaths seem to outperform non-sociopaths in certain careers.
- this is how social media cancel culture works, a viral cancellation keeps getting shared until shared connections affect the cancelled persons life, job etc
- for a lot folks, the government, judicial system is the shared connection who knows both individuals so more people rely on it
So what you suggest seems plausible but I'm not sure I like the outcomes
In "Externalities," (in _Markets Don't Fail_), Brian Simpson says there are no economic externalities because they don't include property rights. And they are, basically, a rationalization of the irrationality of altruism (otherism), ie, sacrifice for something or somebody beyond the self. Taken consistently, they would require totalitarianism and end all economic and, perhaps, all other activity in society. Eg, must I pay for the benefit of seeing a beautiful woman? Must she pay me for her pleasure in the masculine gaze?
I think I would argue in agreement with the second point, but from the opposite direction. Externalities are a bit like spiders: they are everywhere, some are good and some are bad, but to a varying degree. Some are so bad they are worth getting rid of, but many are so minor it is more trouble than it is worth. Likewise some are good, but going out of your way to increase the good ones is often more trouble than it is worth. Min/maxing the amount of bad/good externalities isn't the goal, rather efficient choices of what to address and what to ignore.
Statistics are valid relative to valid ideas, not to intellectual yardsales. Both Marx and Hitler explicitly based their politics on intuition. There are no externalities in economics because they are an evasion of individual rights, inc/property rights, and, basically, an evasion of individuals for groups. They rationalize collectivism and altruism. Markets provide the right amount of goods relative to individual choice. There are externalities but not in economics. Economic externalities rationalizes Left and Right statism. Philosophy is the base of economics.
I am afraid I don't quite understand what you mean. Are you arguing that bad things don't exist ever, or that bad things get corrected immediately upon beginning to exist such that they instantly cease to exist, in the manner of the 20$ bill lying on the sidewalk in the old joke about the two economists walking down the street?
What I am arguing (with Coase) is that a "bad" externality to you has to be a "good" externality to somebody else. Since I find it very unlikely that the one(s) causing the externality were doing it just for the pleasure of doing "evil things" to you.
This being the case, it all come down to "adding" the "bad" done to you by the externality, to the "good" this very same externality is doing to somebody else.
But "central planners" are reportedly bad at adding "(des)utility". Here, De Jasay is the reference:
"objective and procedurally defined interpersonal comparisons of utility… are merely a roundabout route all the way back to the irreducible arbitrariness to be exercised by authority… [T]he two statements “the state found that increasing group P’s utility and decreasing that of group R would result in a net increase of utility,” and “the state chose to favor group P over group R” are descriptions of the same reality."
Taking this into account it is very difficult (but somehow happens all the time) not to reach Coase's conclusion on what is the best solution: voluntary free trade among people suffering the "bad" of a externality and the people benefiting from the "good" of this very same externality. To help this process the best "we" (as in "we The People") can do is stablish clear property rights on the externality and liquid non-frictional markets to trade on it.
Thanks to Coase we know that under these conditions, no matter to whom these rights are initially assigned, the optimal situation would be the same and would be achieved.
Ok, I think I see what you mean. However, I think you are misreading Coase, as I don't recall him anywhere stating that every negative externality is perfectly balanced by the positive externality to someone else. I wonder if you are using the standard definition of externality, that of costs/benefits that accrue to others outside the decision making group.
Further, Coase specifically says that the original assignment of rights is only irrelevant given sufficiently low transaction costs. That is true, but often transaction costs are not sufficiently low; I could fly with card board wings given sufficiently low gravity, but that doesn't mean I can fly now.
So while I generally agree that central planners, governmental or other outsiders are typically very bad at correctly balancing the costs and benefits of externalities, that doesn't imply that externalities do not exist. While encouraging (hell, even just allowing for in many cases) more liquid markets to lower transaction costs in general is absolutely a good thing, it does not seem possible to entirely reduce transaction costs to the point that externalities functionally do not exist. At some point we have to acknowledge they exist, but at the same time acknowledge that they are not worth doing anything about in many cases, and at others come up with the least bad assignation* of rights to avoid problems, or have other evolved social solutions to deal with them.
In other words, externalities exist, but about as often as not the correct response to someone pointing one out is just to say "So what?"
(* For lack of a better phrase. I dislike the notion of anyone 'assigning rights' , but that seems to be the language used generally.)
Everything that everyone does or does not do has some effect on others. So?! I didnt buy a car today. Ive "harmed" car makers. How much should I be taxed? I play excellent music that can be heard thru window screens in the summer. How much should pedestrians outside be taxed for this? A rational philosophy is needed for valid ideas that guide thinking. The alternative is intellectual sludge that corrodes the use of the mind. Or is it OK to put an orange in a bag of apples and call it a bag of apples? Ambiguity is a logical fallacy.
"the least bad assignation* of rights to avoid problems, or have other evolved social solutions to deal with them."
There are no "bad assignations" of rights. No matter how "bad" you assign the rights the final amount of the externality will be the same and will be optimal. So you don't need to worry about this.
An "evolved social solution" (designed, I imagine, by privileged minds) on the other hand does really scare the sh... out of me!!
"that every negative externality is perfectly balanced by the positive externality to someone else. "
This statement does not make any sense, since interpersonal utility comparisons can not be made, which means that balanced (or perfectly balanced or a little bit balanced) is just an empty sentence with no real meaning whatsoever.
So your total misread of my alleged misread of Coase, does not even make sense.
To be clear, even in a case on which:
a) the externality is bad to 1,000,000 people and
b) the externality is good to 1 person
(I couldn't come up with a more perfectly "umbalanced" case), "we" are not in a position of saying that the externality is "net bad" or "net good". "we" simply don't know.
But they would still exist in that case, and would still be "bad", they just wouldn't be worth the cost of eliminating. Just because something is more expensive to eliminate than it is to endure doesn't make it "good", right? It just makes it the lesser of two evils, as it were.
Incentives are psychological, not economic. Economics has facts of reality that may or may not be part of production for a market. There are no incentives literally in reality. Your implicit context is the mystical absurdity of consciousness as part of (or cause of) reality. There are no spirits in trees or grottoes. A few blocks from my home is a former church thats now a private residence with a really big front room that must be very expensive to heat, cool and clean. There was no incentive literally in it that caused its repurposing. We can rationally assume that the Pope would be horrified to view the Vatican as a uniquely upscale condominium investment opportunity. And why has the Vatican held on for a long time to art works that are apparently never viewed by the general public? We can rationally assume the "incentives" for art auction houses.
It has been interesting (in a very bad way) to observe in the last three years how one particular externality that we can all cause, the possibility of passing on a virus, has gone from something we felt did not justify the cost to reduce very significantly, to something we seem willing to incur incredibly high costs to reduce.
How much of our understanding of the cost and benefits of externalities is shaped by cultural and social factors, availability bias etc? Quite a lot it seems.
Also: now I know Cameron Diaz was in Minority Report!
I think the framing of the cost of contracting the disease is largely to blame, and that those who framed it as such knew exactly what they were doing. "A nasty flu anyone under 65 without serious comorbidities is roughly 99% likely to have no problem with" would get a yawn, which is why there was so much early censoring of discussion of age related death rates, listing everyone dying with COVID as dying from COVID, etc. It has to be a big cost to justify a big change in behavior.
As an employer I tell my people to give and get their attention somewhere else than the workplace. It works fine. If two employees have coupled off that's also fine, but they're here to work not to feel each other up all day. It's vital, with employees, children, or colleagues, to set boundaries. Morality, being the predecessor of a written code of law that avoids internal conflict in a community, includes boundaries in its word cloud. Thus I consider that small-scale interactions such as you have described are more part of the give-and-take normal in a peaceful society. To get my notice as an externality it would have to be quite a bit bigger and involve someone a lot closer than my cousin in Australia's neighbor's chiropodist.
I don't think most of our inhibitions are truly the result of rational self-interest. Rather they are more the result of strong emotional reactions that evolved at a time when we lived in much smaller groups.
I think the best evidence of this is how difficult many men find it to ask women out. They often believe it's a perfectly reasonable thing to do, that if they do it in a friendly appropriate way the target of their attention will be flattered and their friends will think more of them. Yet the fear of rejection stops them.
I think it's that same fear which does most of the work to keep us from smelling up the mall or engaging in asshole behavior while on vacation far from home.
Yet more proof comes from the suggestion (tho hard to be sure) that many well-adjusted sociopaths seem to outperform non-sociopaths in certain careers.
Two comments immediately come to mind:
- this is how social media cancel culture works, a viral cancellation keeps getting shared until shared connections affect the cancelled persons life, job etc
- for a lot folks, the government, judicial system is the shared connection who knows both individuals so more people rely on it
So what you suggest seems plausible but I'm not sure I like the outcomes
But what if our social network is composed of self appointed “Karens”?
> Externalities are a bit like spiders: they are everywhere, some are good and some are bad,
Your post offends me. Its a negative externality. You owe me $100.
Most externalities are created by a small group of people. Crime for instance.
The ratio of troublemakers to good enough seems pretty consistent in many domains.
"Because many negative externalities cost too much to eliminate, and many positive externalities cost too much to deliver."
There is a great deal of disagreement over what it costs to keep this small group of people under control.
In "Externalities," (in _Markets Don't Fail_), Brian Simpson says there are no economic externalities because they don't include property rights. And they are, basically, a rationalization of the irrationality of altruism (otherism), ie, sacrifice for something or somebody beyond the self. Taken consistently, they would require totalitarianism and end all economic and, perhaps, all other activity in society. Eg, must I pay for the benefit of seeing a beautiful woman? Must she pay me for her pleasure in the masculine gaze?
I think I would argue in agreement with the second point, but from the opposite direction. Externalities are a bit like spiders: they are everywhere, some are good and some are bad, but to a varying degree. Some are so bad they are worth getting rid of, but many are so minor it is more trouble than it is worth. Likewise some are good, but going out of your way to increase the good ones is often more trouble than it is worth. Min/maxing the amount of bad/good externalities isn't the goal, rather efficient choices of what to address and what to ignore.
Statistics are valid relative to valid ideas, not to intellectual yardsales. Both Marx and Hitler explicitly based their politics on intuition. There are no externalities in economics because they are an evasion of individual rights, inc/property rights, and, basically, an evasion of individuals for groups. They rationalize collectivism and altruism. Markets provide the right amount of goods relative to individual choice. There are externalities but not in economics. Economic externalities rationalizes Left and Right statism. Philosophy is the base of economics.
"Some are so bad they are worth getting rid of,"
I very much doubt it. Afterall, if they are so "bad" why would they exist?
I am afraid I don't quite understand what you mean. Are you arguing that bad things don't exist ever, or that bad things get corrected immediately upon beginning to exist such that they instantly cease to exist, in the manner of the 20$ bill lying on the sidewalk in the old joke about the two economists walking down the street?
What I am arguing (with Coase) is that a "bad" externality to you has to be a "good" externality to somebody else. Since I find it very unlikely that the one(s) causing the externality were doing it just for the pleasure of doing "evil things" to you.
This being the case, it all come down to "adding" the "bad" done to you by the externality, to the "good" this very same externality is doing to somebody else.
But "central planners" are reportedly bad at adding "(des)utility". Here, De Jasay is the reference:
"objective and procedurally defined interpersonal comparisons of utility… are merely a roundabout route all the way back to the irreducible arbitrariness to be exercised by authority… [T]he two statements “the state found that increasing group P’s utility and decreasing that of group R would result in a net increase of utility,” and “the state chose to favor group P over group R” are descriptions of the same reality."
Taking this into account it is very difficult (but somehow happens all the time) not to reach Coase's conclusion on what is the best solution: voluntary free trade among people suffering the "bad" of a externality and the people benefiting from the "good" of this very same externality. To help this process the best "we" (as in "we The People") can do is stablish clear property rights on the externality and liquid non-frictional markets to trade on it.
Thanks to Coase we know that under these conditions, no matter to whom these rights are initially assigned, the optimal situation would be the same and would be achieved.
Ok, I think I see what you mean. However, I think you are misreading Coase, as I don't recall him anywhere stating that every negative externality is perfectly balanced by the positive externality to someone else. I wonder if you are using the standard definition of externality, that of costs/benefits that accrue to others outside the decision making group.
Further, Coase specifically says that the original assignment of rights is only irrelevant given sufficiently low transaction costs. That is true, but often transaction costs are not sufficiently low; I could fly with card board wings given sufficiently low gravity, but that doesn't mean I can fly now.
So while I generally agree that central planners, governmental or other outsiders are typically very bad at correctly balancing the costs and benefits of externalities, that doesn't imply that externalities do not exist. While encouraging (hell, even just allowing for in many cases) more liquid markets to lower transaction costs in general is absolutely a good thing, it does not seem possible to entirely reduce transaction costs to the point that externalities functionally do not exist. At some point we have to acknowledge they exist, but at the same time acknowledge that they are not worth doing anything about in many cases, and at others come up with the least bad assignation* of rights to avoid problems, or have other evolved social solutions to deal with them.
In other words, externalities exist, but about as often as not the correct response to someone pointing one out is just to say "So what?"
(* For lack of a better phrase. I dislike the notion of anyone 'assigning rights' , but that seems to be the language used generally.)
Everything that everyone does or does not do has some effect on others. So?! I didnt buy a car today. Ive "harmed" car makers. How much should I be taxed? I play excellent music that can be heard thru window screens in the summer. How much should pedestrians outside be taxed for this? A rational philosophy is needed for valid ideas that guide thinking. The alternative is intellectual sludge that corrodes the use of the mind. Or is it OK to put an orange in a bag of apples and call it a bag of apples? Ambiguity is a logical fallacy.
"the least bad assignation* of rights to avoid problems, or have other evolved social solutions to deal with them."
There are no "bad assignations" of rights. No matter how "bad" you assign the rights the final amount of the externality will be the same and will be optimal. So you don't need to worry about this.
An "evolved social solution" (designed, I imagine, by privileged minds) on the other hand does really scare the sh... out of me!!
"that every negative externality is perfectly balanced by the positive externality to someone else. "
This statement does not make any sense, since interpersonal utility comparisons can not be made, which means that balanced (or perfectly balanced or a little bit balanced) is just an empty sentence with no real meaning whatsoever.
So your total misread of my alleged misread of Coase, does not even make sense.
To be clear, even in a case on which:
a) the externality is bad to 1,000,000 people and
b) the externality is good to 1 person
(I couldn't come up with a more perfectly "umbalanced" case), "we" are not in a position of saying that the externality is "net bad" or "net good". "we" simply don't know.
I suspect what is meant is as per the post, few bad things will be worth totally eliminating, the cost of doing this is likely to exceed the benefit.
But they would still exist in that case, and would still be "bad", they just wouldn't be worth the cost of eliminating. Just because something is more expensive to eliminate than it is to endure doesn't make it "good", right? It just makes it the lesser of two evils, as it were.
Incentives are psychological, not economic. Economics has facts of reality that may or may not be part of production for a market. There are no incentives literally in reality. Your implicit context is the mystical absurdity of consciousness as part of (or cause of) reality. There are no spirits in trees or grottoes. A few blocks from my home is a former church thats now a private residence with a really big front room that must be very expensive to heat, cool and clean. There was no incentive literally in it that caused its repurposing. We can rationally assume that the Pope would be horrified to view the Vatican as a uniquely upscale condominium investment opportunity. And why has the Vatican held on for a long time to art works that are apparently never viewed by the general public? We can rationally assume the "incentives" for art auction houses.
.