tag:blogger.com,1999:blog-20142791.post113598027459369900..comments2024-03-11T07:41:19.149-04:00Comments on The Perfect Substitute: The EPA and your walletUnknownnoreply@blogger.comBlogger7125tag:blogger.com,1999:blog-20142791.post-18317905287081747182014-01-10T04:41:31.203-05:002014-01-10T04:41:31.203-05:00So my views are obviously slanted. I am not employ...So my views are obviously slanted. I am not employed by the EPA, but do conduct research in an EPA lab. And I'm Matt's sibling. I'm not an economist, so you may want to slam me and my naive tips. 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There could very well be people out there that wouldn't pay one cent more for gasoline for a cleaner environment; there could well be some people that would pay $10 more per gallon. The regulations smooth all of these people into one group. At best, the EPA's regulation hit the mean public preference for a clean environment, in which case preferences are balanced but nearly no one's are matched.<BR/><BR/>The problem, if we're to get into the gasoline issue, is not the gasoline-- it's the cars that people drive. I could drive a hybrid vehicle and someone else could drive an SUV, but we're both still subject to the same tax rate. That example is a bit extreme; but now consider two engines that get the same mileage per gallon, but emit different amounts of pollution. Taxing gas does not get at this problem. It's similar to taxing every cassette tape sold due to piracy. Not every person will use each tape for piracy-related use to the same extent, yet every buyer has to pay the same tax, and hope that everything shakes out in the end. In the meantime, this distorts the pricing mechanism and imposes, among other problems, a deadweight loss.<BR/><BR/>I would agree that pollution is impossible to <I>fully</I> internalize. This is no reason to impose blanket regulation; tradeable rights have worked in commons-related problems in the past, most notably (in my mind) in Iceland's fishing industry.<BR/><BR/>The TVA example highlights something that people tend overlook-- there are not to be an endless supply of tradable pollution vouchers. Without a scarcity of vouchers, there's no effective market for them, nor an effective means of preventing pollution. Various principalities, be it at the state, country or city level can decide the level of pollution they want and move forward. Competition between principalities to attract residents will help increase efficiency. Granted, there are still spillover effects-- but taken to the extreme, the spillover effect of LA's smog is negligible on Fairbanks.<BR/><BR/>Though the TVA example has a much easier solution-- privatize the river.<BR/><BR/>And, naturally, you can not purchase the right to violate someone else's property rights, as murder is example 1a of that. Alas, I don't believe there exists a commons problem in murder as there does with pollution. (Drunk driving is a more interesting example, though.)Matt E. Ryanhttps://www.blogger.com/profile/00290146649328322694noreply@blogger.comtag:blogger.com,1999:blog-20142791.post-1136489417115238002006-01-05T14:30:00.000-05:002006-01-05T14:30:00.000-05:00Dave,The transaction costs of accurately identifyi...Dave,<BR/><BR/>The transaction costs of accurately identifying pollution amounts are certainly something to be dealt with. In the original example of gasoline, though, I'm not sure that there would be any additional transaction cost above what knowledge is already available about automobile emissions today. There still exists a problem of who is to make sure that those remain accurate-- but I would rather have taxpayer money spent towards better defining property rights than making sure gasoline is free of additive X in 2006 and additive Y in 2010.Matt E. Ryanhttps://www.blogger.com/profile/00290146649328322694noreply@blogger.comtag:blogger.com,1999:blog-20142791.post-1136488627327970882006-01-05T14:17:00.000-05:002006-01-05T14:17:00.000-05:00Matt,I agree with your comments, but I would like ...Matt,<BR/><BR/>I agree with your comments, but I would like to play devil's advocate. You said that "The better solution is to internalize the externality and allow for tradable pollution rights". I agree that an internalization of externalities is the best way to go by far, but what about those externalities that are very difficult to internalize due to transaction costs. The glib example, I suppose, is something that harms the ozone. How can the costs imposed on millions be accurately internalized to the person who caused it considering the practical impossibility of identifying the person and the extent of damage? How would we measure the damage? We can't just take people's word on how much they would pay to not have the damage.Davidhttps://www.blogger.com/profile/09677258044243356922noreply@blogger.comtag:blogger.com,1999:blog-20142791.post-1136487924630599972006-01-05T14:05:00.000-05:002006-01-05T14:05:00.000-05:00Dirtier environments are almost certainly somethin...Dirtier environments are almost certainly something that people, ceteris paribus, would prefer less of. The mistake that the EPA makes is that it assumes that all people value a clean environment to the same degree, and "charges" everyone the same amount by imposing regulation and uniformly raising the cost for everyone by the same amount.<BR/><BR/>The better solution is to internalize the externality and allow for tradable pollution rights. Those that desire to pollute more must acquire the rights to do so. It's similar to desiring more property-- rights must be acquired to achieve that goal as well.<BR/><BR/>With regards to directly versus indirectly causing the price level to raise, I think it's a matter of how far down the chain of events we can attribute to "directly." The EPA doesn't raise prices, that's true-- but they do impose regulation, and regulation raises prices. In the same light, Exxon Valdez didn't "directly" kill any wildlife-- it just spilled oil.<BR/><BR/>As to what Player 1 should offer, it depends on a number of things-- communication between the players, whether it's a multi-stage game, whether the game is played more than once, etc. In the simplest one-stage games, mean offers were usually never below 30% range-- well above the theoretical anything-greater-than-zero level. As to what you should offer? Probably the same answer when you know you're holding the best cards in poker early in the hand-- whatever gets you the most money without the other guy running away.Matt E. Ryanhttps://www.blogger.com/profile/00290146649328322694noreply@blogger.comtag:blogger.com,1999:blog-20142791.post-1136145528097922812006-01-01T14:58:00.000-05:002006-01-01T14:58:00.000-05:00Do you ever stop to think that maybe the oil compa...Do you ever stop to think that maybe the oil companies are exploiting people? It's a matter of fact that the OPEC monopoly allows them to do this. And the EPA plays an important role in protecting resources that are often infringed upon due to negative externalities. Sheesh. You free-market types need to leave the church of milton friedman for once and have a glipse at the real world.<BR/><BR/>DonaldAnonymousnoreply@blogger.com