--- John Foster <[log in to unmask]> wrote:
[snip]
> (a) externalisation through cost-free environmental damage
This is wrong. An externality is not "cost-free". An externality is
where the cost is not borne by the economic entity creating the
externality, but is borne by others.
> (b) externalisation through the cost-free utilisation of
> non-renewable
> raw materials, and
This is not an externality, but merely the use of a resource.
> (c) the externalisation of social costs and their monetary
> valuation.
I am not sure what this means. A social cost is a cost that considers
both private costs (i.e. the costs borne by various economic entities) and
external costs. In many cases the social cost is greater than the private
costs. In this situation, overproduction results and the economy is
inefficient.
It is sort of disingenuous to also talk only about external costs. There
are also external benefits.
Consider the following simple example.
The (marginal) cost of a product is given by
C(x) = 2 + .5x
The private benefit is
B(x) = 10 - .5x
The external benefit is given by
E(x) = 2 - .1x
Now, in this case a market would result in an output determined by
equating the private cost to the private benefit
2 + .5x = 10 -.5x
or x = 8.
If the external benefits were taken into consideration we'd have
2 + .5x = 10 -.5x + 2 -.1x
or 1.1x = 10
or x = 9.1 (approximately).
That is, there is under production.
So by only looking at half the picture you may not be making things better
off.
> [essentially these are 'avoidance costs and capital costs of nature,
> except
> social costs].
The costs are only avoided by the entity creating these costs, however
these costs are still borne by someone.
> Neoclassical
> and classical theories interpret slavery as the "result of *comparative
> cost
> advantages* and the *varied provision of factors*" but in reality the
I am sure this is crystal clear to everyone John (well except me...and
hell I am very familiar with neoclassical economics). However, maybe you
could rely on less jargon and actually try to explain these concepts.
> thought structure that supports slavery is maintained by "means of
> violence
> and racist ideology, which existed for the benefit of the privileged
> minority within the system. Apartheid and migratory labour, the
> dualistic
> coexistence of homelands, skyscrapers and wealthy villa districts,
> privileged rights for the few and lack of rights for the many are
> weakened
> forms of slavery, but, however, also represent a model of wealth
> increment
> through the externalisation of social costs which has been practiced
> into
> the present."
Why am I suddenly thinking, non-sequiter here? I mean we went from some
jargon shrouded reason why neoclassical economics actaully supporst
slavery, to jibber jabber about homelands, skyscrapers and weakened
slavery.
> The need for global reform of externalisation of costs to the
> environment
> and to societies is not going to be solved by free trade, but fair
> trade...recognizing the disparities of nations and communities within
This does not follow. Free trade with corrections due to externalities is
not fair trade. Fair trade, by and large is a buzz word for those who
essentially support policies that will attempt to control the flow of
goods across internation boundries.
A while ago I posted a link to a paper on sustainable development and the
authors pointed out that free trade would do much to help with
environmental problems. John has argued that in many developed countries
there are problems with over-irrigation, and a heavy reliance on chemical
fertilizers. The authors point out that part of this is due to the fact
that farmers are protected from competition from other countries. A move
towards free trade would remove those protections and thus remove the
incentives to over-irrigate and use chemical fertilizers to such levels.
> "Free trade is an effective instrument of allocation in a market
> economy. in
> conjunction with the limitless freedom of a privileged minority to
> externalise costs, free trade can metamorphosise itself in development
> and
> environmental policy into an efficient instrument in the establishment
> of
> non-sustainable structures.
Now, why do I get the feeling there is a contradiction. The problem in
free trade, or markets, but the conjunction of free trade and a market
economy with limitless freedom to externalize costs. So remove the
limitless freedom to externalize costs and the problem is solved.
> Herman Daly in his criticism of the neoclassic growth model which
> supports
> luxury consumption was certain that "[e]conomic growth as traditionally
> understood - that is, growth of the national product or national income
> -
> was recognized...as inherently driving the economy to a scale, that is,
> a
> level of throughput, which may exceed the environment's carrying
> capacity....His work on *steady state* economics elaborates the
> implications
> of acknowledging that the earth is materially finite and non-growing and
> that the economy is a subset of this limited global system. Hence
> economic
> growth is possible, or 'sustainable,' as long as throughput does not
> surpass
> these limits." [from the Words of the Prize Committee, Kenneth Boulding
> Memorial Award by ISEE. 1994]
Dang John, I thought you were very hostile to sustainable development.
Personally I can see one arriving at Daly's conclusions using a standard
growth model, but with the addition of the appropriate constraints that
represent such things as the finiteness of many resources and also takes
into account the fact that the environment probably is a factor in the
typical consumer's utility function. I mean there aren't too many people
that like to live in a crappy, excessively polluted world. I don't think
you need to jettison the "neoclassical growth models", but simply augment
them to be more realistic models.
Further, if you check the literature these days neoclassical growth
models, aka the Solow growth model, is pretty much out of use for its
failures to predict various real world growth paths. Solow type growth
models were replaced with endogenous growth models.
Steve
=====
"In a nutshell, he [Steve] is 100% unadulterated evil. I do not believe in a 'Satan', but this man is as close to 'the real McCoy' as they come."
--Jamey Lee West
__________________________________________________
Do You Yahoo!?
Yahoo! Shopping - Thousands of Stores. Millions of Products.
http://shopping.yahoo.com/
|
