Wednesday, April 30, 2008

Just Another Case Where I’m Right, and Everyone Else is Wrong

We often talk about externality abuse in the various classes Professor Eubanks teaches. But not once have I heard mention of Public Good abuse, something we perhaps need a primer on, because, in my opinion, we’ve stumbled into just such a mistake with endangered species.

In terms of externalities we attempt to frame the debate in two ways. First we provide a very explicit and very stringent definition in order to expel many things right off the bat. If it doesn’t fit the definition it can be dismissed out of hand, and a great many popular “externalities” are not non-market, unintentional interdependences that affect an unthought of third party.

Second, we’ve deemed it necessary to confine externalities to something that has recognizable and actionable physical consequences. In other words car exhaust can be an externality because it causes actual harm to those breathing it by polluting the air and damaging their lungs. By the same token attractive people display no externalities, because while it may give joy to some to see them, and disappoint others (under the logic “I’ll never be that good looking,” or what have you), there is no physical harm or benefits being bestowed. If we didn’t confine externalities in this manner, and allowed things such as feelings to play a part, we would end up handing out subsides and levying corrective taxes every which way you turned, and often times the same thing would be getting subsidized and taxed simultaneously.

Now returning to public goods, the definition requiring them to be both non-rival and non-excludible is appropriately limiting, it’s in the follow up where we’ve failed. Unlike with externalities we seem perfectly okay with undefinable values based on feelings. Endangered species are the perfect example of this. We’ve allowed them as a public good because many have expressed some sort of existence value for them. In other words, the mere knowledge that various species exist has a particular value to some people, and in some cases they’re even willing to pay in order to maintain that value. However, there’s no true market driven method to provide these species because the knowledge of their existence is both non-rival and non-excludible, inviting a free rider problem, and suggesting that, perhaps, government has a role to play. However, in making this assessment we’ve forgotten to attach our feelings filter, because that’s all this value is based on, a particular feeling that various people experience. I ask then, what if there are people experiencing exactly the opposite feeling? Is it so hard to imagine there are those with anti-existence values? I, for one, would actually be happier knowing there are no more snakes on the entire planet. And knowledge such as that is non-rival and non-excludible. Should we tax everyone to provide this “public good” and make myself and others like me happy? Of course not.

The entire idea of taxing in order to provide a public good or limit or expand an externality (depending on whether it’s positive or negative) is based on an efficiency ethic. Taxing everyone to provide endangered species fails to meet the standards of efficiency. Aside from the obvious debate between those with existence values and those with anti-existence values there are clearly those who are existence neutral. If we take from everyone to provide for the feelings of a few, we’ve caused discernible harm in order to make others better off. This is the antithesis of the entire basis for our model.


Alan C. Earing said...

when do I get my attractiveness subsidy?

Just kidding! But, on that point, why would we subsidize attractive people, when they get things like preferential treatment in the work place, or paid to model and many other perks to being good looking?

In a sense, there is a sort of value on attractiveness, right? Well, in same manner, there might very well be a sort of value on endangered species and their habitats. If so, then couldn't there exist, without the force of government, a market for endangered species and their habitats?

Man, I'd be quite upset to learn that attractive people would be put on an endangered species list and protected by government with tax money, that I PAY!!!

Jaeson Madison said...

Well Alan, you're not getting your subsidy, in fact we're going to charge you for making the rest of us look bad by comparison and thus lowering our datability quotient.

And you’re absolutely right about there being a value to some in regards to endangered species. I’m not denying that. My issue here largely stems from the fact that I just don’t think we should refer to it as a public good, which I think you‘d agree with based on your comment about a market for endangered species.

Based on the concepts we’ve been going over all semester, I think the response you and I would be likely to hear from an endangered species advocate, with a degree in economics, is a protest about a free rider problem cropping up in a market based system and causing a less then efficient allocation of resources. But if ever confronted with this imaginary person and their gloomy little logic I would say, “So what?” Essentially by implying that government force is needed to correct this problem people are saying that the free rider harm to those with existence values outweighs the harm to me and you that is created by taking our money to provide for them. But how exactly does one make that determination? On what basis?

As far as I’m concerned if there’s a free rider problem amongst those with existence values, then the only people it’s harming are those same individuals. Thus if both the harm and the cause of harm are generated from the same place, perhaps they should sort it out amongst themselves and leave me, and everyone else for that matter, out of it.