Katherine
Evatt, President of the Foothill Conservancy, recently posted an article
entitled “Time to internalize those externalities and get prices right”. This
article opens by stating that externalities, that is the external effects an activity
may cause such as air pollution, are “still buried in obsolete economic
textbooks”. Having taught college
economics up to the senior level for almost eight years, the topic of
externalities is standard in the texts and curriculum. This statement is a
distortion at best or at worst a lie.
They
attack the pollution of “the 300 years of the Industrial Era” without even
noting that the pendulum has swung so far the other way that today we don’t
just prevent pollution, we prevent entire projects. Part of their backup for this is “loss of
forests”. But there is more standing timber in the USA today than in 1900. Much
of this was family farms bankrupted in the depression and reforested during the
New Deal. They assert that “massive debt overhangs” are due to the unaccounted
for externality of pollution. I suppose then that a welfare state that pays
people not to work or endless other examples are not factors in government
debt. They speak of unsafe offshore
production while ignoring the real choices those people sadly have. The Western
do-gooders that ended child labor of those under 16 in Bangladesh forced
thousands of 14 and 15 year old girls into prostitution. While we all would
like to live in a perfect world, we don’t. I prefer to make decisions in the
real world rather than somewhere else.
This
article completely ignores that the greatest material improvement in all of
human history was the industrial revolution. My students found this hard to fully
comprehend and I often told this story of Louis 14th, builder of the
Palace of Versailles, who’s very name stands for opulence and extravagance. He
considered one of his most prized possessions to be a whole vanilla bean. Today anyone of us could buy a whole vanilla bean
for a few dollars. Without the Industrial Revolution people with the article
writer’s attitude would not have the leisure time to complain.
They
attack fossil fuels. But the oil industry was started to produce kerosene to
replace whale oil. We all want to save the whales, don’t we? Or have they just
forgotten? Gasoline was an underused by product of kerosene production. The
automobile cleared our cities of horse manure and deduced infectious diseases.
Victorians didn’t wear gloves and tall shoes because they were quaint. When my
parents were growing up people washed their clothes in gasoline because it was
cheaper than laundry soap. This history are externalities also.
Their
attack includes “speculation in commodities” causing obesity and diabetes. But
these are primarily the result of poor diet choices. In any market the raw
fruits and vegetables, grains and beans are far cheaper than the packaged foods
with undesirable additives. They also
include “hunger.” Most food “speculation” provides the necessary shortage of
crops between harvests and also provides liquidity to the markets. Certainly
there are dishonest speculators, but greed is nothing new and human nature is
unlikely to change. In our common law tradition regulation of food speculators,
in this case during a famine, goes back at least to Edward the 1st
in the 1200’s. It is not an externality within the economic understanding they claim
to be using.
These
are but a few highlights of what purports to be an article. However, it is not
a reasoned discussion, it is propaganda based on falsehoods. But judge for
yourself and do share your thoughts as comments. http://www.greenbiz.com/blog/2012/12/21/time-internalize-those-externalities-and-get-prices-right
Copyright
2015, Mark L. Bennett
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