Friday, July 29, 2011

Negative Externalities and Government

Statist thinking is lazy thinking. The solution to everything: have the government do it. Libertarian thinking is much more difficult (which is probably why few people do it). First, assume anarchy. Then, figure out what institutional arrangements will emerge to replace the state apparatus.

For example, when faced with the issue of pollution as a negative externality, too many immediately assume the government should solve the problem. Ignoring all the problems of governments as the main polluters in the history of the world and of corruption, let us look at what may be a better solution even if we assume the government is able to do what is good for the sake of doing good.

FIrst, you have to face the fact that there is a problem with externalities because of the fact of the subjectivity of values. The same amount of pollution will have a high negative externality for one, a low negative externality for another, and a positive externality for yet another. If a certain amount of pollution bother you more than it bothers me, by all means, feel free to sue -- but don't sue on my behalf, or pretend that you are doing me a favor when I could care less. When you do that, you are attempting to impose your values on me.

There is a perfectly reasonable solution that has nothing to do with government imposing its values on everyone. I do not think the government is the only answer, or the best answer, to solve the problem. It is possible to solve the problem of negative externalities through the use of lawsuits. If you have a person who is convinced that your pollution is imposing on his property rights, then he can certainly sue for damages -- and he should get those damages. I am against government restrictions on lawsuits precisely because they (purposefully?) undermine this process. The role of lawsuits is to reduce negative externamities and to create a real cost on errors. The only laws you have to have in place for this system to work are those protecting property rights and making the initiation of force and fraud illegal. With those in place, and a legal system that respects equality under the law, and you have the solution to negative externalities without having a bunch of do-gooders more interested in power than actually doing good foisting their values on everyone else. You may not be able to completely do away with the incursion of others' values on yourself and others, but you can certainly minimize it by getting government out of the business of imposing values and replacing it with the above system.
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