Pollution

Ludwig von Mises Institute Wednesday, March 09, 2005
http://www.mises.org/fullstory.aspx?control=1760

An Austrian Theory of Environmental Economics
by Roy Cordato
The Austrians make for a hard Read, as they tend to speak a language of their own(i.e., their and Our words are spelled the same, but have different nuances). Roy Cordato, though, provides sometimes excellent Theory, as well as excellent observation of other Schools of Economics. It remains true that outside observers can often provide clarity of sight, for Those willing to read their evaluation.

For both Coasean property rights analysts and more traditional Pigouvians, the goal is different. It is to achieve some form of "optimal" distribution of resources. Coase, in his analysis, seeks to maximize the total value of output, and alternative property rights arrangements are seen in this light. As he notes in his classic 1960 article, "one arrangement of rights may bring about a greater value of production than any other" (Coase 1960, p. 16). For Pigouvians the goal is to achieve a Pareto optimal distribution of resources by seeing to it that the generator of negative externalities considers all social costs in making production or consumption decisions. In both cases attention is diverted from those who are party to the conflict and toward finding a "value" maximizing allocation or resources

In environmental policy the polluter pays principle is an outgrowth of Pigouvian welfare economics. The optimal price-output combination will arise in a market when external pollution costs are reflected in the marginal cost of production, i.e., are internalized by the polluter. In other words, if the polluter is made to "pay" a dollar amount that is equivalent to the marginal social costs associated with the pollution that he is generating, "efficiency" will prevail. Generally speaking there are two approaches to applying the polluter pays principle. The most traditional and straightforward is the Pigouvian excise tax. In this case the polluter is forced to "pay" either through a tax that is equivalent to the "pollution costs" per unit of output or per unit of effluence. The second is through tradable emissions permits. In this case an "efficient" level of pollution is determined and permits to pollute which total to this efficient level are bought and sold in the marketplace. The polluter is forced to pay either explicitly by having to purchase permits in the market or implicitly by having to forgo selling the permits that he holds

a central authority must know in advance what the efficient outcome is. In the case of the tax, a central authority must know in advance the exact amount of the externality costs being imposed by the polluter, and the correct price and output, not only for the good in question but, since efficiency only makes sense in a general equilibrium context, for all other affected goods and services. In the case of tradable permits, the knowledge requirements are essentially the same. This is because the central authority must first determine the "efficient" level of emissions for the particular pollutant, which also must be determined within the context of a general equilibrium solution.
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The Austrian use of Property rights definition stands as unenforceable as central authority setting an efficient outcome in advance. Internalized Cost to Polluter by excise tax or Tradable Emission permits do express the failings which Cordato outlines. The only Solution the Author believes viable comes in the form of Government establishing a Market in Pollutants.

Employed Scientists would determine the environmental hazard of any Pollutant, along with the estimated Cleanup cost of each said Pollutant in some measurable unit. The environmental hazard ratings would be scaled 1-10. Polluters would have to pay the Cleanup cost, if the environmental hazard was 1, 120% of Cleanup cost if the hazard reading was 2, 170% of the Cleanup cost if the hazard rating was 7, etc. Pollutant Victims would have to prove measurable units of Pollution upon their property and Person, potentially aided by Scientists employed by the Government. Some Pollutant Costs could also be scaled by deadly duration effect of said units of Pollution, so Polluters would be forced to pay up to 4000% of the Cleanup cost.

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Totally off the Wall
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The Author likes the Assault Rifle XM-8, and believes it should be an ancillary weapon to a Squad formation, but not the primary weapon of the Infantry. The 5.56mm ammunition is too light to be effective past 30 meters, especially with the advent of Body armor, and ineffective over 75 meters even as Suppressive fire. lgl