Friday, 5 October 2012

Flora Faun On Externalities

"Cowen, who is tellingly a professor of economics, thus commits the cardinal sin of so many economists in that he disregards any external effects, the so-called “externalities,” one system has on another."
The pseudonymous "Flora Faun" in the Taipei Times once again. Without even getting into the ins-and-outs of what Tyler Cowen wrote, it should be immediately understood that it is in fact, Flora herself who disregards exernalities and this is so because the authority of action to which she stipulates really leaves her with no other possibility.

In any insane, sisyphean attempt to calculate the unintended consequences of government, the "negative externalities" of the State as it were, we could surely do no better than to begin by noting the immense radius of social upheaval and misery described in North Africa last year by the effect which U.S. government subsidies for ethanol production had upon the price of grains. And of course the irony top-up there is that that particular siren emerged from a cacophony of rhetoric about externalities.

It must also be pointed out that, in stark contrast to the inevitable and often enormous negative externalities engendered by action through institutional coercion, the chief ethical principle on which a free-market must be predicated - private property rights - is also the chief prerequisite for any attempt, whether effective or ineffective, to redress the loss of value that negative externalities cause. Without the principle of private property rights (or its substitute: permissions), identification of who is responsible for what damage of what extent to whom can never be achieved through anything more objective than an arbitrary decision.

Whilst it is of course possible that negative externalities will occur without redress in a free society, there is no reason to suppose that their occurence will even remotely resemble those engendered by the militarized States of the last century.

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