True Free Markets (2)
There is one commodity that looks like it's properly priced: petroleum!
Which points out the laughably disingenuous way that politics is conducted here, and probably everywhere.
Our national candidates are both smart enough to know that higher petroleum prices are much more like a solution than a problem. But neither of them believes the American electorate has enough intelligence to understand the point. And so neither will come out and admit it.
They could be right. An interesting guy who was a senator from Connecticut, Lowell Weicker, famously took a position in favor of higher gas prices. And later lost to... Joe Lieberman. An interesting guy who was President of the United States, Jimmy Carter, famously took positions in favor of conservation and nuclear power. And later lost to... Ronald Reagan.
Depressing.
I like to think, however, that there could be someone out there with the persuasive power to tell the truth to the electorate and get away with it.
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Thursday, August 07, 2008
Tuesday, August 05, 2008
True Free Markets
If I had to boil the proper function of government down to two propositions, they would be:
1. Protect the people.
2. Free the markets.
No sane person argues with the first, but the second seems to be kept way in the background.
There are so many corollaries, but this post deals with one: price the externalities.
The bureaucracy in my perfect government would consist largely of economists who would look to see where the pricing functions of the markets are failing. For example, in cases where producers are causing damage without paying for it.
There is plenty of policy judgement inherent in this: what's the damage, what does it cost, how wide is the net. An example: is the true cost of petroleum being captured? What about the cost of the military operations that are deemed necessary to maintain supply sources?
Or, what about the multi-source pollutants that go into the Mississippi River, are carried downriver, and create dead areas in the Gulf? Agricultural producers, I would imagine. Is this cost priced into their products?
Cap and trade is a good stop on this road. First we have to reach an enforceable consensus on the cost of carbon dioxide emissions, but if we do and we get it right, then use the government to capture the cost so it is priced into products.
This is not the sole answer to all social ills. There are special problem areas, like capitalism's evident failure to match economic value of individual labor with our moral sense of what people should have. Better pricing and efficient markets do not solve this. But leave that for other posts.
In the meantime: Price the externalities. Let the markets respond and allocate resources properly.
**********************************************************************************
If I had to boil the proper function of government down to two propositions, they would be:
1. Protect the people.
2. Free the markets.
No sane person argues with the first, but the second seems to be kept way in the background.
There are so many corollaries, but this post deals with one: price the externalities.
The bureaucracy in my perfect government would consist largely of economists who would look to see where the pricing functions of the markets are failing. For example, in cases where producers are causing damage without paying for it.
There is plenty of policy judgement inherent in this: what's the damage, what does it cost, how wide is the net. An example: is the true cost of petroleum being captured? What about the cost of the military operations that are deemed necessary to maintain supply sources?
Or, what about the multi-source pollutants that go into the Mississippi River, are carried downriver, and create dead areas in the Gulf? Agricultural producers, I would imagine. Is this cost priced into their products?
Cap and trade is a good stop on this road. First we have to reach an enforceable consensus on the cost of carbon dioxide emissions, but if we do and we get it right, then use the government to capture the cost so it is priced into products.
This is not the sole answer to all social ills. There are special problem areas, like capitalism's evident failure to match economic value of individual labor with our moral sense of what people should have. Better pricing and efficient markets do not solve this. But leave that for other posts.
In the meantime: Price the externalities. Let the markets respond and allocate resources properly.
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