+1 to this--I meant to say something like that in the previous post but don't think I did. It was in the background when I said "first/second best solutions" and stuff about assuming the gov't interventions needed to be perfect and that I was saying wasn't the case. Janabis explained well what I meant--if we knew that (for instance) the externalities of gasoline were *about* $4/gal, the exact damage by an individual would depend on a number of factors. So we wouldn't necessarily be able to get the exact amount, but we would know that 'too much gasoline was being consumed' compared to the optimal. Putting a $1/gal tax would reduce the consumption and get us closer to the optimal amount--and wouldn't overshoot the damage caused by anyone (barring any incredibly extreme cases).

Most of my neighbors do own their apartments. They had to sign the contract upon buying the individual apartment. Decisions as to the common areas of the building are made by all department owners coming together and voting, much like a publicly traded company would, with votes being based on the stock owned by each shareholder.

This could easily apply to neighborhood associations, where you sign a contract upon buying property in that particular neighborhood, then become a shareholder there.

No, I didn't do either, and you're proving it with your own words here.

I don't care one bit about gasoline being burned half way around the world. The toxic elements in the smoke are diluted in a gigantic mass of air, and they're absorbed by plants far before reaching me. I'm not even sure they stay in gaseous form for very long. Either way, people burning gasoline in the other side of the world bothers me as much as someone playing loud music 100 miles away from me.

What I care about is people polluting the air in my close surroundings. It's true that the range is normally larger than for sound, but it's nowhere close to where you put it.

Well, when "externality" is defined as "an impact derived from an activity, that the market isn't taking in account", then you've already excluded market solutions, and as soon as I propose one, in your mind that won't be an "externality" anymore. You do see what you're doing here, right?

No, I can't. Which is what I said.

How is this clear? Making people pay for their own treatment is far more efficient.

Examples are not hard to come by. Think about pollution, education, vaccinations, etc.

What if people get cancer from second hand smoke? How would you force smokers to pay for other people's cancer treatment? What if the smoker died before he could pay? What if the smoker can't even afford his own treatment? There's a market failure here and taxation would mitigate it.

LOL @ bringing smoking as the example.

How about global warming soon2bepro? Ozone layer depletion? Acid rains?

Though none of this are the kind of government intervention that was getting criticised in this thread and in this forum in general, I think.

Just because nobody has taken up the honor in every thread of engaging you in a never-ending debate after you've demonstrated the propensity to post incessantly until you "win" through sheer endurance doesn't mean you're one of the most knowledgeable people.

This forum has always had good debate on various subjects, but when you come in claiming someone is wrong to say that a small group of individuals can't intervene and improve the NET efficiency of a very complex economy while lacking profit/loss signals, operating with public money, and being influenced by political agendas, it's going to incite about as much serious discussion as someone going to the HSNL forums asking for a lengthy debate on why playing the button in poker is actually -EV.

The person could even have all sorts of silly examples they've concocted for their argument, twisted logic, and selective statistics to argue their point. Nobody is going to feel like spending days debating the notion when it can never be proven wrong 100% and there's endless talking points the person could make if they wanted to waste peoples time. Especially in the manner that you've shown you love to isolate every single word of a post to try to grind out an argument that's not there. Not just talking about this thread.

The example you tried to give to argue for intervention into the markets is ironically a good example of why trying to intervene and "guide" the markets is to involved a process to be left to a small collection of individuals. You tried to type up a simple example and it has all sorts of holes, false logic, assumptions, unmentioned variables, and doesn't even scratch the surface of all the other factors and implications involved to really assess how it's ultimately affecting the economy. The idea of people actually trying to do that on a large economic scale is frightening and we've seen how the story ends many times over.

Well then you're creating straw mans for the sake of arguing. soon2bepro said that no individual or entity can guide the overall market (=NET) to better efficiency. You disagreed with this because of some example you drummed up and thought was clever. Trying to claim isolated, twisted examples where MAYBE (if we try to keep it as simple and unrealistic as possible) the government can do something effective still overlooks the reality that the application of such will never be limited to JUST those wacked out examples, which is still a stretch to assume they can accurately identify the ones where they are NET helping the economy, but even further, preposterous to believe it will ever be confined to just those. It's simply not the nature of government to be efficient given the circumstances of their existence. You're basically saying "but nah nah I can think of examples where it's conceivable the government could theoretically net improve the efficiency of the economy if only we had the right people in there smart enough to do it and to limit/control/confine themselves to just those examples". Cool man. I can't outpost you with the multi-quotes and lengthy responses though, so knock yourself out.

lol'ing at the follow up explanations of that example. And that was supposed to be the simple, obvious example of when government intervention can guide efficiency.

Again, please don't focus on the noise aspect--gasoline would be much better to discuss for the purposes of this conversation. I know I talked about noise in the brief example, but you're also not really talking about what I was talking about when even mentioning noise as there are a lot more assumptions added in (a government-like entity, albeit smaller).


I don't thin that's a valid statement--I explained why I thought those implications are there. And I never said that the market/private solutions wouldn't work for *some* things. In fact, I mentioned to Coase theorem which applies to such things in certain situations. So just because I said market might work with the noise stuff (for the reasons that the noise happens to affect a small number of people) doesn't prove your words in general.

I believe that's an incredibly shortsighted statement
Maybe, but if a lot of people are emitting toxic elements, that dilution doesn't really happen..., No offense (I can't think of an easier way to say this, so it might come across as rude, but I don't mean it) but how do you know that? Are you a climatologist or meteorologist or atmospheric scientist in come capacity?

I wouldn't be too sure. And even if that's the case, what about the people polluting 100 miles away?

Again, how do you know? Atmospheric CO2 levels, other greenhouse gasses, etc. are proof in my favor. What do you have?

Actually that definition isn't right. An externality is defined as a benefit or cost generated by a transaction incurred by someone who isn't involved in the transaction.

There are ways to internalize the externality, but there's still the externality. Whether the market takes it into account or not, it is what it is.

That's not the basis for my claims. Nice spin though.

The reason I make the claim is because it is true. Most of the people that debate on here (not all, but most) show their lack of knowledge about what they're arguing.

LMAO. Poker analogies? Wow, just wow. Nice spin too. Let me translate what you said: "I can't dismiss your arguments, so I'll just assert that what you're saying is wrong and in an effort to make it seem like I'm making a valid point, I'll try to tie what you're saying to a statement that's incredibly obviously wrong". Sorry, it doesn't work that way.

LOL. Sure. I back up my posts with logical arguments (and try to figure out what people -- read AEists -- are saying because they have a propensity to use words in very non-traditional ways) and attack me for that. Wow.

AAAAAAAAAAAAAaaaaaaaand it's quite obvious you missed the point of the example. It was to give the idea of an externality. Your brain must have shut off after reading the first part of what I read in that post. You seem to have missed the part where I said that particular example could be fixed with private solutions, but if you have damage that can travel a lot further you have a lot more people involved and the private negotiations/transfer payments/etc. no longer work.

AAAaaaaaaaaaaaaaaaaand another example of not reading what I wrote. I've said twice ITT so far that I'm not defending EVERY intervention. Especially when politicians get involved.

Now you're just throwing stuff at the ceiling and arguing with strawmen. I love the spin here too (drummed up, thought was clever, stretched, twisted, wacked, preposterous, etc...). First, I and others have shown that those examples can be accurately identified. Second, you're throwing a ton of stuff in that wasn't part of the initial claim or conversation. I know you "hate the gubmint" but that's seriously clouding your judgement and arguments. I really shouldn't reply to your rant above, so I'll stop here.

[/quote]It's simply not the nature of government to be efficient given the circumstances of their existence.[/quote]

And that's also not the point of the discussion. Unless s2bp and you want to stipulate that government interventions can help the efficiency of markets to increase and start a new discussion on whether one form of government or another would have a net positive or negative effect on the overall economy. But we were talking about individual markets, not the government as a whole. Again, you're going 153 steps down the road, seeing a conclusion you don't like and dragging your feet.

And there's plenty of those examples (we haven't talked about public goods and common resources).

By the way, I would like to point out that you (and s2bp in some sense) are comparing apples to oranges. You're essentially comparing "perfect world" market outcomes with "real world" government outcomes. That is, for the market outcomes we seem to be able to assume that all these contracts will be written, everyone goes along with them, and so on. While for the government interventions we have to use the real-world issues and can't confine ourselves just to a market (which was the original discussion point) but have to consider everything else a government could possibly do.

Another small point--you do seem to agree with what I was saying though, while at the same time arguing against me. You did say "they can accurately identify the ones where they are NET helping the economy" which implies that there ARE ones that intervention can net help. Sure, you can talk about (and you did) whether it's easy to identify those or whether a government can limit themselves to acting just in those. But, the discussion was about whether those opportunities could exist, and it seems you have actually done what I was asking above, and that was to stipulate that it was possible (which was my position). If you want to go on a further anti-government rant further, be my guest. Just don't call my arguments wrong while actually agreeing with them.

Again, when you don't actually read everything...

I think I'm going to hold myself to a rule to only reply to those being civil. I can and (usually--can't say I'm perfect) civil to those in return. But when people act like b4m, it brings out my sarcastic side. It really doesn't get the conversation anywhere.

So s2bp, Vanatek (and others?) I'd love to continue. Please don't take any of my replies to b4m personally. b4m, unless you can be more civil (not spin so much, not express the wish I could be shouted down or drummed out, etc) I won't reply. And I will promise you I'll be more civil to you (or try to--realizing that nobody's perfect, I'll be willing to overlook a thing here or there on your part too)

coffee

why do you bother? he clearly isnt interested in changing his opinion, there is no point.

with b4m? Yeah, I see your point, and that's why I decided to stop. I should have figured that out earlier with his first post essentially wishing I had been censored.

With s2bp? maybe he isn't interested in changing his opinion, but at least it's an interesting (and mostly) civil conversation. And any incivility (I hope there was none, though) was probably stuff from b4m coloring my replies to s2bp. I enjoy thinking about these things, and s2bp, who backs up his statements with actual arguments (and there are others) helps with thinking about these things on a deeper level.

I reacted to your long ass answer to b4m (Didnt read it tho)

I don't blame you. And I thought you were talking about b4m.

coffee_monster, I agree with you that government intervention can be good. I myself think of it in terms of the tragedy of the commons, a very simple mathematical process that is easy to understand for me (whereas you think of it in terms of externalities? adds up the the same thing I think.). Government intervention is to my knowledge necessary to combat the tragedy of the commons. In fact, I believe most governments don't go anywhere far enough for this purpose. If soon2bepro doesn't care one bit about people burning gasoline across the globe and from the looks of it seems like a global warming denier, I would certainly like to distance myself from anything he says.

But like I said I just feel the type of government intervention that is being criticised both in this thread and in this forum in general (most notably money printing, central banking and bailouts, but also various regulations of the labour market, possibly public healthcare and social security but that's more arguable) have little if anything to do with that. I fail to see how they achieve anything desirable. I am open to the possibility that they do but so far I'm unconvinced. The only meaningful argument for money printing that makes sense to me is "stickiness" of wages but funding giant government deficits and creating huge moral hazard in the financial sector seems to go way beyond what's helpful.

Externalities are a bit more general, but yeah, it winds up being the same thing. The issue with the tragedy of the commons is that the cost of an action isn't borne solely by the person making the action. For instance, if you have the canonical 'commons' where people graze their sheep, then if I bring my sheep to graze, that imposes a cost on you (there's not as much grass, you can bring fewer sheep--or maybe you have to graze there for longer). So you have the tragedy of the commons--overgrazing, in this case--or overuse of the resource. In terms of externalities, my grazing imposes a cost on you, a third party. Since there's a negative externality the market equilibrium quantity is higher than the socially efficient quantity.

Clean air can be thought of as a common resource fairly easily. I think more in terms of externalities because while it may be possible to put things in terms of common resources (or the similar 'public goods' category) sometimes it might be convoluted.

TBH, I think the Coase theorem can be applied to small systems if the costs of negotiation, monitoring and anything else are small. But in modern society I think you're generally right, at least for some (very important) things


I'll definitely keep that in mind. I know I wasn't lumping you in with s2bp or b4m, but I know people in general tend to like to simplify into us v. them or at least generalize into 'teams' or the like.

True. But I think one ought to be careful--I'd (generally) agree with you on those things. It's a dangerous precedent to have bailouts. I'd differ with the criticisms of central banking in general (but not in particular--I'm referring to the 2008- actions of the Fed).

I think I was probably (over?) generalizing s2bp. I've seen some people on these forums who do take the stance that s2bp wrote earlier, that government intervention (in anything!) can only be counter-productive. Maybe s2bp mistyped/miswrote what he meant to say, that's definitely possible--this forum isn't something that sees well-polished writing that's been proofread multiple times by several people. Their hatred, for lack of a better word, of the government or their love of AE doesn't allow them to see anything positive in the government. I had one debate with someone and eventually it got to the point where there were two solutions offered--the only difference was the government was the 'actor' in one solution and (somehow) a private entity (almost just government with a different label) was the actor in the other. The government solution was dismissed completely but the other solution was embraced fully.

Vanatek (and others): I wrote this in the Gary Johnson thread (in support of him!) but it seems almost more applicable for this thread, especially given that we're talking about Bernanke ITT and your edit about the Fed's role. I hope this works, I've never tried quoting from a different thread before.


Question from someone was what I thought of eliminating the 'dual mandate' of the Fed--to maintain a steady price level AND to maintain 'full employment'--and replace it with what Gary Johnson was suggesting, a single mandate to keep a steady price level. My reply was:

Seems like Taylor doubts there's a Phillips like relation between unemployment and inflation

Probably. Two things came to mind when you said that. First, Taylor (in the testimony I linked to) was focusing more on the long-term than short, and the tradeoff (if it exists) is short term. In the long run, (according to the theory...) expectations will adjust, the price level and the change in the price level won't have an impact on the level of GDP. It's the idea of monetary neutrality in the long run.

For the short run, I cracked open Mankiw's text. In the '60s, there's a beautiful monotonic relationship in the graph of Inflation Rate vs. Unemployment Rate. In the '70s through 2005 the graphs look like a ball of tangled yarn.

Maybe the theory still holds, but people are much better at predicting the Feds actions/rate of inflation so that any changes will be random rather than systematic? As I mentioned earlier ITT (I think...) simple Taylor rules could predict pretty accurately the actions of the Fed. I can't find the chart I am thinking of, but Wikipedia says the Taylor rule follows Volker's and Greenspan's Fed actions fairly well. Interesting that Bernanke is left out...

You don't. Your house, your rules. If you go to someone else's house and they smoke, you have no claim against them for "forcing" you to breathe their smoke.

Well that's too bad for them. Maybe charities will help them. Personally, I'd rather donate money to charity treatment centers where smokers who have lung cancer or other respiratory illnesses attributable to smoking get a low priority for treatment.

Government scares ldo.

If these were serious problems the market would still find ways to regulate them. However the fact that it doesn't already tells you that the likelyhood of them actually being a problem is low.

I'm going off topic here, but mostly all the research done into these subjects is funded by tax money, and, unsurprisingly, these agencies also propose creating new taxes to mitigate the problems. The fact that most independent studies show these "mainstream" findings to be exaggerated at best and crooked at worst doesn't seem to be an issue for people like you.

Oh, by the way, it's not "global warming" anymore, it's "climate change". See, that way, even if the planet is cooling, they can still say it's because of some human activity that they must now tax. Most people already forgot about the 70's "global freezing" scare; but this new term, "climate change", is great because no matter what happens, they can always say: "I told you so!" (since the climate always changes)

You said I was requiring the State intervention to be perfect and assuming that market solutions already are perfect because I said that the intervention will cause the market to misallocate resources. This is faulty logic. The market doesn't have to be perfectly efficient for the State intervention to always drive it further away from perfect efficiency.

You're the one claiming that gasoline burned in the other side of the world has a significant effect on the quality of the air I breathe; and that to consider otherwise is "extremely shortsighted".

It depends. If they're burning tons of vegetation or thrash and the smoke cloud is so big that it reaches me, then I may have a claim against them. If they're just burning some gasoline for their tractor, there's no way I could even tell the difference.

What if people smoke in, or otherwise pollute, public property?

Then you'd have to choose between adopting their orphaned children or watching them die in the streets. Alternatively you could simply tax cigarettes and have the smoker cover the expense himself, which would be far more cost effective.

Well that's a problem of public property, isn't it? In the market there is no such thing.

Everybody is somebody's child. I don't owe them something just because their parents decided to reproduce. Maybe I'd want to help them, but it's not an absolute requirement. And if they die, they're probably not gonna do it in my street. (since they'll be kicked out, because the street wouldn't be public property)

Not really. First, people tend to get lung cancer when they're old and their children, if any, are already grown up. Second, if they don't have money to pay for the treatment, they probably don't have money to feed and clothe their children and raise them properly either, especially not if they've also been paying the cigarette/tobacco tax for 40 years.

And of course you're not taking into account the fact that people would take better care of their health and make better plans for the future (in terms of reproductive decisions as well as saving and securing an income stream) if they knew that: 1) They couldn't get guaranteed treatment at the taxpayers' expense when they get sick; and 2) Their children are not guaranteed to be taken care of at the taxpayers' expense if they happen to die or lose their ability to generate income.

And if taxes are lower (or bet yet, non existent), making all those better plans becomes that much easier.