The X-istence of Externalities

by Don Boudreaux on April 11, 2010

in Environment, Growth, Myths and Fallacies, Property Rights

Pingry, commenting on this post, writes

And so if continued growth can reduce pollution and environmental harm after some point, why should third parties be subjected to dangerous spillover costs before that point?

Should they just “deal with it” so that future generations can face less spillover costs after reaching a certain point?

Or should polluters be forced to internalize their spillovers so that all innocent people can be spared such a market failure?

Why assume that greenhouse-gas emissions are an externality that ought to be internalized?

PERC‘s Terry Anderson and I were talking recently and Terry pointed out that the concept of ‘externality’ implies a prior property right.  For example, if I have a right to sleep soundly at night in my home, then noise created by my neighbor that penetrates into my nighttime bedroom is indeed a negative externality on me.

But if I choose to try to sleep on a bench inside of a jazz club, the jazz-club’s music will keep me awake but it is no externality imposed on me.  The reason, of course, is that the jazz club has a right to stage musical performances within its premises – a right that supercedes my right to sleep in that club.

So who’s to say that each Chinese person’s right to the fruits of economic growth are superceded by each non-Chinese person’s (or even each Chinese person’s) right to be free of whatever increased health risks might result from continued economic growth in China?

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