Not quite Rev. Fraser, not quite

Recently on BBC Radio 4\’s Stephanomics programme, the economist Patrick Minford, argued we ought to extend markets to cover air. Shocking, I know. Take a deep breath. It\’s still free. But given the omnivorous desire of some economists to subsume absolutely everything within their purview, maybe we can\’t take that for granted. If people can sell you expensive bottled water that dropped freely from the sky, one day they\’ll be flogging you air like in Sesame Street: \”I got something you need and I can sell it to you real cheap, it\’s real important,\” says Bert to Ernie. He goes on to sell him a whole bottle of air for a nickel. And Ernie thinks he has a bargain.

The argument for this madness is as follows: the trouble with markets as currently conceived is that they don\’t show up the full costs of industry upon the environment. So what is needed is to extend markets to cover the commons: trees, rivers, air, and so on. Anything scarce needs to be subject to a price mechanism so that limited resources can be managed by preference and choice. In other words, the trouble with capitalism is that we don\’t have enough of it. Sure, if big companies are using the environment as a free dustbin they ought to pay for it.

The question is how. The right way is through taxation. But for others, following the Nobel prize-winning economist Ronald Coase, it is by privatising the commons, thus creating a market in so-called externalities.

Fortunately, this argument isn\’t going anywhere politically.

Umm, this argument has won. What do you think cap and trade on CO2 emissions is?

3 thoughts on “Not quite Rev. Fraser, not quite”

  1. Sure, if big companies are using the environment as a free dustbin they ought to pay for it.

    The question is how.

    And so we get all the flavour of the “right” answer without any of the intellectual carbohydrates. How marvellous. Perhaps Fraser would deign to tell us how he gets to his conclusions next time, given that taxation is manifestly not the only answer and therefore needs defending if it is the right one.

  2. First, the air isn’t free. The Clean Air Act has enforcement costs, so we pay for air.

    Second, the Commons actually work (mostly: the Tragedy of the Commons is an aberration, not a fate). So why privatise?

  3. “Scarce” – air?
    In Asimov’s fictions about human residences on the asteroids, perhaps: on a world where population is limited by food production rather than the Oxygen in the atmosphere, no, just no.

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