[vy8vWJlco]

I get your point, but promoting a tax to get the most out of the market is doublespeak. A carrot ("This is better because... and you can use it!") is more "free-market" than a stick ("Don't do that.") - even if I would prefer not to be tempted (or threatened) by either.

[derobert]

It's not doublespeak, it's actually a fairly widely accepted solution to externalities amongst economists.

The basic idea is that some actions you could perform impose costs on people who aren't consenting parties to the transaction. E.g., if Widgets, Inc. dumps the waste from producing widgets into a river, this imposes a cost on everyone downstream.

This would make their widgets cheaper—they're only paying part of the cost of the widget (the folks downstream are paying the rest). With a lower price, they'll sell more widgets.

Markets thus tend to overproduce (vs. what is socially optimal) things with externalities.

There are a couple of ways we take to solve this problem. When the externality is high enough, we prohibit it. E.g., we prohibit murder.

When the externality effects few enough people, and is of a suitable size, they can actually negotiate and resolve it themselves. E.g., if Widgets, Inc. wanted to take water from that river instead of polluting it, thus depriving the downstream farmers of some irrigation, maybe they'd be OK with that for a payment of $X/mo. By making them consenting parties to the transaction, it is no longer an externality, and Widgets, Inc. is now paying the full cost of producing widgets.

Of course, when the externality hits a lot of people, each for a small amount (e.g., air pollution), negotiation is impossible. That leads to the final option:

Do your best to calculate the size of that externality. Then impose that cost as a tax. This is called a Pigovian tax, and also has the effect of making Widgets, Inc. pay the full cost of producing its widgets.

Externalities do not have to be negative; they can be positive as well (e.g., you could clean up a public park). Markets tend to under-produce these, and a similar argument suggests offering a Pigovian subsidy.

Obviously, administering and complying with taxes is not free, and that limits the applicability of Pigovian taxes and subsidies.

Wikipedia has more: http://en.wikipedia.org/wiki/Pigovian_tax

[vy8vWJlco]

Not to disagree with the idea, but I would add that any such tax is at the discretion of the taxing body making it susceptible to difficulties like abuse or negligence. (That makes me wary.)

I would prefer a mechanism without such a centralization of moral authority (ex, Kickstarter rather than taxes). That's the big conflict in free societies: the cohabitation of different moralities. (What is a benefit and what is an externality are decided individually rather than by decree or in the average. I think our desire to average things leads us to think we can work backwards from an average to collective behaviour in cases like these, when not everything is a bijection...)

[foobarbazqux]

How would crowd-funding make a company pay for negative externalities?

[vy8vWJlco]

If we are only interested in punitive measures, Kickstarter is just as able to fund prisons and buy guns and pay for legal offensives as any government program (I don't think most forms of damage need a new law as such). (My point from another comment though was that government actions have a strong tendency to be a punitive, and I do not consider that leadership.) Ideally, governments would see no money whatsoever that people didn't voluntarily commit to specific ends. When record-keeping and communication were slow, the current system made better sense - but now that those things are fast and easy, taxation feels like an anachronism.

To your comment below:

> Those 100 people have nowhere near the resources required to take on the company.

I don't see a big difference between appealing to the public for the resources to mount a legal offense and lobbying campaign to revise the law to better support a cause, vs appealing to the government for the same ends. In the former, the individuals affected retain the moral authority and in the latter, the government is cast as a parent figure which I find patronizing and undesirable (not to mention highly susceptible to corruption and self-interest of officials, with access to a bottomless purse). While we may need the latter in times of extreme duress (war), I wouldn't recommend using it that way unless we actually want government interference to be the norm. (IMHO governments should not even have the capacity for selfish behaviour, so I am trying to think of ways to minimize it.)

[foobarbazqux]

I deleted my comment mostly because I'm not interested in debating libertarianism, it's not personal.

[vy8vWJlco]

FWIW, I didn't think I was (I don't identify with libertarianism). I'm just looking at alternatives.

[jfoutz]

Weird. Most free market folks say the problem with air quality is no one owns it, so there's no incentive to protect it. A tax like this is about as close as you can get to saying, ok, we collectively own the air, and there's a $1.50 fee/gallon of gas for use of the air in your combustion engine.

Collective ownership might be an uncomfortable topic, so i'll go further and say, you're using my air in your car, and I expect to be paid for it. I suspect any feasible plan would look a lot like some large organization charging use fees. But maybe there's some simpler structure I'm overlooking.

[vy8vWJlco]

While I think it's somewhat natural for society to talk about "collective ownership," since the ownership model is what we use for individual transactions, the idea of "public goods" implies that they are "owned/managed by the public" - and that degenerates into "stewardship" by the government "for the public good" (for my/our benefit, even if I disagree, for my part). I definitely don't enjoy the "for my own good"/parental logic - so I don't like the "collective ownership" language we seem to be working with.

I think it would be better if individuals (and governments, to the limited degree I can rationalize them) acted pro-actively/responsibly, rather than defensively (tax, tax, tax...). IMHO, a better model would be to grow (to "invest" not "subsidize") what the public deems worthwhile, driven by intelligence and creativity ("leadership"), rather than perpetually trying to put out fires through punitive intervention (tax, tax, tax...). (Why centralize decision-making if not to aid leadership?) Bringing something to the market through collective action doesn't diminish the market - it is the market. I'm not saying punitive measures are ever off the table, but they should be the last act of a desperate will.

This could be as simple as using approaches like Kickstarter more (instead of taxes), but that depends on people keeping the money they already have.

IMHO government is mostly the sum of our negative/fear-based responses (digging in our heals against "threats" leading us to tax, and inspect, and...). That governments are as large as they are - and that we are taxed as much as we are - reflects a culture of fear.

[jfoutz]

I have a working solution for getting to work - i drive my car. Over the life of that car, i expect to pay about 25 cents a mile.

The investment approach assumes there is some technology that either can be added to my car, or replace my car. This technology would need to lower the cost of ownership, and do so at a profit. In my specific case, you've only got about $10k left to work with over the remaining life of the car, and that's coming from gas, insurance, maintenance and repairs budgets.

I'm just skeptical that that much room for improvement exists. Cars are a very mature technology. They have an (unfair?) advantage that a whole bunch of infrastructure is in place to support them. I would guess at least a trillion dollars has been spent optimizing cars and car manufacture. An alternative would need to overcome some pretty big obstacles.

Self driving cars provide enormous potential for underutilization of existing cars, but it's really hard to get around the problem of requiring millions of cars from 8-9 AM and 5-6 PM. There are gains to be had, and all those incremental 1-2% improvements over a hundred years have improved efficiency greatly. The point here, you can use fewer self driving cars to serve the transportion needs - just as much gas would be used, but the environmental savings come from less metal and glass and energy to shape the materials.

I'm just skeptical of even a billion dollar kickstarter moving the needle very much. Your optimism is commendable, but the only solution available to us today is using that billion dollars to somehow discount the purchase of slightly more fuel efficient cars. Even that is only a few percent improvement. Cities like Huston need to move the needle a lot, if they want kids to be able to play outside.

[WalterBright]

What a tax on, say, pollution, would be called is "internalizing the externalities". It fits in quite well with free market principles.

[jfoutz]

I was specifically trying to counter "promoting a tax to get the most out of the market itself seems like doublespeak."

The parent is being Mr. weasel word with "seems like" but I'm guessing that's just sloppy writing.

Also, I agree with you. Tax on pollution is probably the best solution. I couldn't think of a way to put pollution tax into a short argument. Fee for "storing your waste" doesn't have quite the same punch as "using my air"

[WalterBright]

A tax on pollution has other advantages - it funds the government in a manner that does not discourage productive behavior.

[vy8vWJlco]

> The parent is being Mr. weasel word with "seems like" but I'm guessing that's just sloppy writing.

Fixed. Thanks for the input.

[contingencies]

Part of the issue here is that to describe such entities there needs to be a means of standardization.

We saw 'carbon credits' devolve in to specific-exchange linked, unique entities that were not interchangeable across borders. That made meaningfully adopting them as environmental units to stake a claim for the value of environment in the present-era systems very difficult. That situation perhaps evolved partly because nobody could otherwise agree on an appropriate level of auditing, and partly because .. well .. established interests. (Without nationalizing and centralizing these things, their potential for decentralized issue versus centralized government fiat issue poses a threat to both sovereign currencies worldwide and the vast profits of connected financial services industries.)

Historically, part of the control effected against change within the financial environment is that SIX in Switzerland on behalf of the ISO has controlled the major ISO4217 global currency and commodity registry, locking out innovation and essentially refusing to issue new codes. People have been avoiding that gridlock by making up unofficial codes like 'BTC' for Bitcoin and such. I recently proposed registry of these values via the IETF at https://datatracker.ietf.org/doc/draft-stanish-x-iso4217-a3/ however it's expired pending a new release at the moment (adding Litecoin, etc.)

(On the off chance anyone's hitting OHM2013 later this month in Holland, I'm planning to give a talk there on this subject and related matters at the intersection of politics, finance and technology.)

[wisty]

A tax isn't really central planning (except in a very blunt way, which governments aren't horrible at doing). It's when governments get into the nitty-gritty (put wind turbines on buildings, because it looks good, despite any turbine with blades smaller than a jumbo jet is inefficient due to the quadratic relationship between blade length and power) that they screw up.

Do you have a bigger problem with central planning, or with taxes? Because taxes aren't going away any time soon, and at least "sin taxes" can reduce bad behavior (while not discouraging hard work and investment). And industry standards are arguably a form of central planning.

[vy8vWJlco]

I have a bigger problem with taxes. Central planning is fine IMHO assuming everyone involved is onboard - otherwise the ship should stay in the dock to the degree people still want off. For what it's worth, I am fond of industry standards when they are documentary in nature and not prescriptive (the difference between designing something to be perfect and picking a winning technology to distill).

[saraid216]

It's not an incentive or a threat; it's a change in the rules of the game. When they patch Starcraft to increase the damage that a spore crawler does to biological units, that's not an incentive or a threat; it's a change in the rules of the game.

[vy8vWJlco]

I can't think of any rules that aren't enforced by threat. (The equivalent of patching Starcraft in the real world makes you rich or lands you in jail for tax evasion. The government's patch is only accepted because of the threat of force behind it.)

[anonymoushn]

Even if we all believe taxation is theft, we can still talk about which taxes and which expenditures are better than others. Given the choice between the state coercing you using the threat of violence and the state coercing you using the threat of violence in such a way that some public good is achieved, it seems natural to prefer the latter.

[saraid216]

> The government's patch is only accepted because of the threat of force behind it.

Uh, some of us accept the government's patch because we agree with it, or because we want to play the same game that everyone else is and the government happens to be a conveniently centralized entity for deciding which patches go in and which do not. Like Blizzard. We also accept that hacking your own patch in either means you can't play on the ladder with everyone else or that it's an action worth of receiving a ban in response.

It's called "establishing a free market".

[vy8vWJlco]

I'm sorry - I used "accepted" when I should have used "chosen," since self-determination was implicitly my end. With that in mind: eagerness does not mean you had a choice (though perhaps that's unimportant to you).

There is only a choice if the alternative was actually an option. When the government can force you to eat cake, it hardly matters if you may have enjoyed that first piece. What matters is that you will be eating it one way or another. (That is not what I would call "establishing a free market" - that's not even a free lunch.)

[saraid216]

I agree that there was no choice.

So what? I don't have a problem with that.

I recognize that not having a choice is scary, but I find it foolish to base a worldview off fear.

Justify the need for choice, please.

[vy8vWJlco]

"..., and the pursuit of happiness."

If not having choice is scary (your word), which I would say is a synonym for "undesirable", I cannot be said to have the right to pursue happiness without it (choice).

> "I find it foolish to base a worldview off fear."

The only sense in which I'm basing my worldview "off of" fear is by asserting the right not to live in it. (In that sense, I am also basing my worldview off of starvation - as I am eating breakfast.)