[extropy-chat] Externalities

[Mike Lorrey]

--- Hal Finney <hal at finney.org> wrote:

re: negative externalities: one can (and I believe it once was in
court) argue that pollution near a factory is compensation for the
factory owner creating employment opportunities there, vs somewhere
else. When people show they don't want the trade off, the factory moves
elsewhere, ergo you get offshoring, maquiladoro, and similar phenomena.

> 
> The classic positive externality is beekeeping, which may benefit
> neighboring farmers by adding pollinators for their crops.  But this
> benefit is not considered by the beekeeper or the people who buy his
> honey.

Actually, they do, and beekeepers generally get paid by farmers to move
the hives to their fields to enhance pollenation, particularly orchard
owners do this...

> 
> Negative externalities are often a cause for opposition to various
> proposals that might well have a net positive effect.  This manifests
> in the classic NIMBY syndrome, "not in my back yard".
>  
> Recently there has been a proposal to build an offshore LNG
> (liquified natural gas) unloading terminal 40 miles south, off of 
> Oxnard. There are only a few LNG terminals in the whole U.S. and we
> are definitely going to need more.  This too is causing strong local
> opposition due to fears that the flammable gas could cause
> disastrous accidents or even be a focus of terrorism.

Locals see a benefit in the form of lower than normal LNG prices due to
transportation cost savings.

> 
> A simpler story happened locally, when a lady tried to get a permit
> to run a day care operation out of her home. There is a strong
> shortage of day care in the area with many businesses having
> waiting lists of five years or longer. (By that time your kid
> doesn't need day care any more.)
> She passed all the inspections, but the neighbors are fighting it.
> They live on a quiet residential street and having a business
> operating next door will negatively impact them due to the extra
> traffic and noise.

Caring for kids should never be considered 'pollution' (no matter how
much noisy brats annoy me) in a residential neighborhood, or a
nuisance, either, like a dog kennel. When you treat people as
pollutants you are going insane with regulation.

> 
> It's the same thing in each case - negative externalities.  And these
> are legitimate complaints.  Why should neighbors have to bear
> uncompensated costs when the larger community benefits?

Are they actually bearing costs? I would bet that having a daycare
center in one's neighborhood would enhance their property values.
Unless the neighborhood is a retirement community, there really isn't
any standing for a complaint. Anybody home during school hours likely
has noisy brats of their own, if they aren't retired, home employed
(just like the day care owner), or disabled.

>  
> This means that charging for externalities is actually an economic
> improvement, as it insures that only projects go forward which are
> economically rational.  But it also means that if externalities are
> not paid for, excess benefits appear and go into the pockets of the
> people
> engaging in the activity; so of course they will oppose proposals to
> compensate for externalities.
> 
> One of the problems with compensation is that it is difficult to come
> up with a formula for a fair compensation level. Once the possibility
> is opened, of course each person has an incentive to exaggerate the
> negative
> impact he feels in order to negotiate a higher level of compensation.
> And meanwhile the proponents of the activity are lobbying to reduce
> or eliminate compensation.  In the face of these opposing forces the
> political process is unlikely to hit upon an economically optimal
> level of compensation.

As I posted previously, market value listing (rather than assessed
value listing) would reflect the impacts of positives and negatives in
the valuation.

Don't let the individual people decide their harm or benefit, let the
market as a whole.


> 
> These are all rather esoteric ideas, but even a simpler and cruder
> approach would seem to be a step forward over the present method,
> which
> is basically for the two sides to yell at each other until somebody
> backs down.  We're going to need offshore oil drilling and many other
> measures as well in order to satisfy our energy needs.  It seems
> obvious
> that paying the communities which are impacted by the wells should go
> a long way towards quelling the opposition which will otherwise hold
> these efforts up for years, until we hit some kind of crisis.  It's
> the same way with other NIMBY problems.
> 
> The truth is, the NIMBYs have a point.  They should be compensated,
> when all the rest of us gain an advantage by doing harm to them.
> Doing this will be more fair, it will improve economic efficiency,
> and it will reduce resistance to much needed development projects.

NIMBYs themselves are theives. Look, for example, at any instance where
an unzoned area votes to have zoning. Some property owners
(particularly residential) who tend to be the majority of voters, gain
large amounts in their property values, while others, like wetlands,
farmlands, etc see dramatic drops in their property values. This is
clearly a taking that is uncompensated.

Mike Lorrey
Vice-Chair, 2nd District, Libertarian Party of NH
"Necessity is the plea for every infringement of human freedom.
It is the argument of tyrants; it is the creed of slaves."
                                      -William Pitt (1759-1806) 
Blog: http://intlib.blogspot.com

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