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?