Sunday, October 14, 2012


The market exists in equilibrium, maximizing utility.
There's some hubbub about a negative externality.
Classical economic theory calls for a tax equal to the social cost of the externality,
but we do not yet know what the externality is,
So far it has been shown to probably include peanut allergies, and asthma
Chemical runoff from the production of watches
combines with runoff from the production of cell phones
so would be difficult to determine the social cost of the negative externality,
even if we knew what the negative externality was.

Because we do know that without the runoff from the phones,
It would be significantly smaller.
But the social cost of the production of phones
would likewise be significantly smaller,
without the runoff from the watches.

One cannot divide the tax, the value of the combined social costs
of the production of watches, and of the production of phones.
Because to do so, would be to punish one industry for the existence of the other,
And that is certainly not their fault.
So how can we choose?
(although don't people just look at their phones for the time?)

And then do watches have a lesser non-external social benefit?
And should therefore receive the brunt of the tax?
But if it is non-external, then it is not a social issue,
and the market should be left in equilibrium,
and watches should be less expensive than phones,
although they are not.

But even if this impossibility,
the question of how to distribute the tax,
this question, which is more ethical than economic,
or environmental
were to be sorted out
Where would that leave us?

Because how does one measure all subsequent cases of asthma and peanut allergies
which might arise
in perpetuity,
in terms of watches,
or phones,
or jobs?

The going rate for watches, in a completely free-market, i mean for these particular watches, which produce the runoff in question,
is $90.
And most of the people who live in proximity to the runoff don't make that much over the course of their lives.
This then suggests that the tax need not be very large, and perhaps the onus could be discretely placed on one industry, the one with a less active lobby, without much hubbabaloo.
But then there is the question, of how much these people might make if they didn't have to worry about asthma and peanut allergies, because if they made more, than the social cost of the externality would be greater, or maybe it would be the same but there would be more of a hubbubaloo about it, it is becoming difficult to tell.  But either way, if this were the case, then how much would it be worth to them to not have to deal with asthma and peanut allergies, and the anxieties that go with these things, and the quiet rage as they watch their child asphyxiate against a background of murky rivers and dead earth.  But of course, for that to be greater than the value of the watch, we already have to have gotten rid of the watches.  It becomes a bit of a catch-22.  But if the value of not having to deal with these things increases as they don't have to deal with these things then what does that do for a quantified conception of value?  But of course they are accepting the risks of the two factories, but then of course would they still if there hadn't been sequences of other factories in the area? But the structure is breaking down, the situation is becoming too complex, and this was only a vastly simplified hypothetical, as it must be, because inreality the combined runoff was a product of more industries than i had space to list.

No comments: