oVo wrote:There is obviously a monetary value to the industry that cuts it down and the civilized people who displace the indigenous residents of the region.
no shit. it's timber. timber or palm sugar or whatever else is tangible and easily monetised. carbon sinks and global ecological systems are not
You mean there are no private ventures that rely on a healthy, continuing ecological system? Are you really sure about that? And those private venture enterprises (that are absolutely part of the markets BTW) certainly put a value on those same ecological systems that are their bread and butter. A number that private individuals (such as yourself) can actually purchase stakes in said companies, if you so choose.
Valued at zero. Pffftttt.
Basically all private ventures rely on a healthy environment to continue operating, in the long run. And yet we still have the global warming problem.
We undoubtedly do have this problem, but it's not just from the developed countries but also from the developing nations. I've already mentioned how government control distorts the price mechanism (and I hope you check that post out), but the question hinges upon what is best for correcting for this problem: democratic/authoritarian (China) process or the market process--in evaluating the tradeoff between current consumption and investment with future consumption and investment (including the costs of climate change).
It's a huge debate because there's much uncertainty involved, but with the link I posted earlier, the worst-case scenario for the US seems relatively cheap.
khazalid wrote:[ if you're gonna try and be a smartass, you should be making a better fist of it than that.
'it is currently valued at zero' / 'it is not proerly valued and monetised'.
the problem is not that it is valued at '0' - it's that the (free) market lacks the capacity to give it a value. essentially you're making the same statement thhat i am, only wrong-er
C'mon, man. I've already addressed your concern here:
thegreekdog wrote:Okay. Do you think it likely that a company would be willing to spend $X to purchase land, build a power plant (of that company's choice), invest in relevant infrastructure, and then compete with the primary power provider in the area? Compare to trucking and aeroplanes. Hell, compare the regulations, nevermind the industries themselves.
So, with government-granted monopoly power and its obstacles for competition, you'd end up with the outcomes which we are currently debating. Deregulation of the degree which I insist goes beyond your framework of investments. For example, many factories which require power already have their own power plants (vertical integration); however, at times they are prevented from competing with the municipal-protected power plants of some cities--e.g. NY city. They can't compete on retail prices--which are the government-controlled domain for the status quo firms. If you allow people to undercut the profits of those large producers, then you'll get many innovative ways in bidding down that profit to zero. This is why a lot of companies which benefit from regulation do not want deregulation.
Another example--at the micro level--is people building their own sources of electricity. After decades, some have finally been allowed to get paid for the electrical surplus they provide on the grid (e.g. people with solar panels on their rooftops). If you drop many of these regulations and let those prices float, then you'll get more competition, more efficiency, better quality, and lower prices. That's the history of any relatively free market-provided good.
I don't disagree with any of that, but it further proves my point I think. The regulation and genreal government intervention with respect to utilities is so prevelant and instrinsic that it would be very difficult to reverse. I'm not saying it isn't desirable. I'm saying it's not desirable for the stated goals.
Metsfanmax wrote:What exactly do you mean by better results? You mean, more planes in the air, thereby increasing greenhouse gas emissions and accelerating global warming?
Well, it depends on the productivity of the resources. In econ., we call it the marginal product of input X. With government regulation for such industries, the outcomes are hardly from Pigouvian taxation nor do you get Pareto optimal results. Instead, you end up with government-protected monopolies with their inefficiencies and their prices beyond consumer value (cuz shit, dawg, you know that the marginal revenues of those firms are below the market demand curve).
We could have very low emissions, but that would require transportation by horse and buggies; however, that's not the optimal opportunity set. Think of how badly the poor would be hit with those kind of transportation costs. What is best is efficiency set by free pricing because centrally planned control over those prices fail in that field. Regarding market prices equating social costs, that goes back to my post on how government intervention distorts those prices. Whenever we criticize the market for some failure, we must always consider the entangling role which government plays in those prices.
People want passenger jets, and they want trains, electricity, water, and what not, but in order to have the most efficient system for gearing people toward what they pay for, then you'd want freer prices and freer competition. That efficiency and innovation would result in the optimal amount of emissions--it counterintuitively requires government to get out of the way in a large degree beyond which most people imagine (so, I'm not saying ZERO government control, but that's another debate, which I'll gladly get into).
Where you and I disagree is perhaps on a more fundamental level. I view the role of government as discouraging the use of fossil fuels. In other words, I agree that the effect of much government environmental policy (though certainly not all) has been to decrease efficiency and increase waste. However, to the extent that this has decreased demand for fossil fuels, I think it's a good thing. On the subject of the carbon tax, if it worked ideally the way a Pigovian tax should, I've not read a single economist that objects to it. The objections I've read from economists are largely on the basis that they think that rent-seeking will result in a law that just isn't what we originally wanted.
People want passenger jets, but people don't want global warming. So the market should be searching for a way to provide those passenger jets without burning fossil fuels. (If there was a way to avoid the global warming problem just by burning fuels more efficiently I'd be with you on this one -- but that just won't happen.) But if fossil fuel prices are cheaper, there's less incentive for the market to do that. Therefore the government should be setting the price signal to encourage investment in those alternative fuel sources, without requiring costly mandates to invest in X technology, when the government is A) not likely to pick the best technology and B) that technology might be obsolete in 10 years. That's why the carbon tax is the best policy.
So, to understand where you and I are on this issue, the first thing to clear up is whether, if the Pigovian tax could work as it optimally would, you would be in support of the carbon tax. If so, then we'll discuss the problem of rent-seeking and how much that would decrease the effectiveness of the law. If not, it's probably because you think that either the global warming problem is not that bad, or you think increased efficiencies (and decreased waste) will be enough to decrease emissions to the levels needed to stabilize the climate. I think the evidence just does not support the latter view, but let's clear up which side of the fence you're on first.
thegreekdog wrote:How much do you value climate change?
Thats actually quite hard for me to answer; and its predominantly because wind, hydro and geothermal energy (all of which are low emissions compared to say, gas/coal) are the marginal cost generation options in New Zealand without any intervention; therefore valuing climate change @ zero does not result in market failure in my local energy sector (though i'd argue strongly that the same cannot be said about the transport sector - but we account for this somewhat by having very high taxes on petrol/gasoline).
But not everyone lives on a wet, volcanic rock in the roaring 40's. And climate change is a global issue. Is NZ going to get compensated by China in the rare situation where our climate changes negatively? What about if all our low lying areas get flooded? I am sure the US/China and other big emitters will be very generous if these low probability, high risk situations eventuate...
BBS wrote:Look, as far as energy goes, release government control over the prices and the competition which entails dropping the ratebase regulation. Grant legal recognition over the 'right-of-access' for powerlines (buried and over the streets) for any company which wishes to hook into the grid (natural monopoly arguments are really a myth in this case). Allow for negotiation between firms wanting to tap into other firms' powerlines.
I'm talking about not only deregulating wholesale prices (which we've somewhat got in the US), but also retail prices, so that any shortages can be met, or surpluses whittled away. However, in order for this to work, you'd need to drop the barriers of entry into that market. You can't have the status quo firms sitting comfy with no threat of competition; otherwise, this deregulation would fail.
That whole Northeastern mess in 2003 (?) was due to government-mandated retail prices. The problem was exacerbated when the President told the head bureaucrat to cap the wholesale prices. I've been talking to this guy, Ray, a financial analyst in the US energy sector, and his article is a great read. I'd suggest you indulge yourself--while at work.
Can you expand on how this would work in practice. Not saying it cant, I am just curious to see how it would stack up against the very much standard practice of regulated prices for Transmission and Distribution.
Also dont forget the System Operator is also generally accepted as a natural monopoly, and as far as I am aware there are no examples where price is not regulated. Can you expand on how this could be handled in a free market way too?
Generally speaking "messes" on electricity systems come from two main situations: Energy shortages or Capacity shortages.
I am a proponent of hands-off, incentive or voluntary regulation in the case of energy shortage avoidance: Let the market sort itself out, but provide information, recommendations or guidelines that assist the market participants decision making (as there is some pretty complex IP related to this area which in itself provides a pretty hefty barrier to entry). This basically means generators and retailers are free to price electricity* however they choose.
The second type is slightly more complicated and I am ok with it being fairly strictly regulated. I say this for a number of reasons: Firstly its extremely complicated, but complicated in a deterministic way: there are a whole bunch of complicated requirements that need to be managed to get power from Generator X to Consumer Y; but if you know what generator X is, and what consumer Y is, you can employ some walk sock & sandle wearing uber-nerd to work it out the optimum way in which to do it (i.e. the technology is very mature). Secondly the cost is rather static; you need to shift more power? You build more transmission lines, physics has not left you with any other options im afraid. And finally once you recognize the first two reasons, you can then combine them with the fact that the dominant (and most variable) cost component is de-regulated (i.e. generation and retail operations), you will not be unduly holding up progress of alternative goods and services with intervention.
Note I have purposefully simplified things by limiting my explanation to "transmission lines". But it is similar for distribution, and system operations: You decide what your appetite for risk is (i.e. how many situations like 2003 in the Nor'east can we tolerate?) and get your engineers to design your system appropriately. The knowledge problem doesn't really have an impact here because the usual answer to that question is none (and its surprisingly easy to design a system where this is possible). Bear in mind this falls apart a little when you have more than one regulator... especially when they compete with one another in a political landscape as toxic as the one in the US...
* note that this price does not include transmission, distribution and system management costs; often these are included into retail tariffs, basically part of the price is freely determined by the market, and part of it is regulated.
I go to the gym to justify my mockery of fat people.
thegreekdog wrote:Okay. Do you think it likely that a company would be willing to spend $X to purchase land, build a power plant (of that company's choice), invest in relevant infrastructure, and then compete with the primary power provider in the area? Compare to trucking and aeroplanes. Hell, compare the regulations, nevermind the industries themselves.
So, with government-granted monopoly power and its obstacles for competition, you'd end up with the outcomes which we are currently debating. Deregulation of the degree which I insist goes beyond your framework of investments. For example, many factories which require power already have their own power plants (vertical integration); however, at times they are prevented from competing with the municipal-protected power plants of some cities--e.g. NY city. They can't compete on retail prices--which are the government-controlled domain for the status quo firms. If you allow people to undercut the profits of those large producers, then you'll get many innovative ways in bidding down that profit to zero. This is why a lot of companies which benefit from regulation do not want deregulation.
Another example--at the micro level--is people building their own sources of electricity. After decades, some have finally been allowed to get paid for the electrical surplus they provide on the grid (e.g. people with solar panels on their rooftops). If you drop many of these regulations and let those prices float, then you'll get more competition, more efficiency, better quality, and lower prices. That's the history of any relatively free market-provided good.
I don't disagree with any of that, but it further proves my point I think. The regulation and genreal government intervention with respect to utilities is so prevelant and instrinsic that it would be very difficult to reverse. I'm not saying it isn't desirable. I'm saying it's not desirable for the stated goals.
The underlined can apply to the trucking and airliner industries during the 1970s, yet they were to a degree deregulated which is why I don't understand your contention here.
What are the stated goals? I don't understand to what you refer in your last sentence.
khazalid wrote:[ if you're gonna try and be a smartass, you should be making a better fist of it than that.
'it is currently valued at zero' / 'it is not proerly valued and monetised'.
the problem is not that it is valued at '0' - it's that the (free) market lacks the capacity to give it a value. essentially you're making the same statement thhat i am, only wrong-er
C'mon, man. I've already addressed your concern here:
Well... if businesses have problems in determining the carbon sink, I find it amusing that people push for government ownership. How would government fare any better?
ftr - i have never actually made the claim that government would fare any better, but i have no problem making it now, because it almost certainly would. the problem is an inherently collective one and must be solved by collective action. there are other forms and manifestations of collective action than central government, but none of those would make a blind bit of difference.
if you are looking for an example we have a very good one from recent history. how was the problem of CFC and the ozone layer solved? the free market? did the companies involved in the proliferation of CFC's have the ability to properly evaluate and monetise the impact of their actions? no.
had i been wise, i would have seen that her simplicity cost her a fortune
thegreekdog wrote:Okay. Do you think it likely that a company would be willing to spend $X to purchase land, build a power plant (of that company's choice), invest in relevant infrastructure, and then compete with the primary power provider in the area? Compare to trucking and aeroplanes. Hell, compare the regulations, nevermind the industries themselves.
So, with government-granted monopoly power and its obstacles for competition, you'd end up with the outcomes which we are currently debating. Deregulation of the degree which I insist goes beyond your framework of investments. For example, many factories which require power already have their own power plants (vertical integration); however, at times they are prevented from competing with the municipal-protected power plants of some cities--e.g. NY city. They can't compete on retail prices--which are the government-controlled domain for the status quo firms. If you allow people to undercut the profits of those large producers, then you'll get many innovative ways in bidding down that profit to zero. This is why a lot of companies which benefit from regulation do not want deregulation.
Another example--at the micro level--is people building their own sources of electricity. After decades, some have finally been allowed to get paid for the electrical surplus they provide on the grid (e.g. people with solar panels on their rooftops). If you drop many of these regulations and let those prices float, then you'll get more competition, more efficiency, better quality, and lower prices. That's the history of any relatively free market-provided good.
I don't disagree with any of that, but it further proves my point I think. The regulation and genreal government intervention with respect to utilities is so prevelant and instrinsic that it would be very difficult to reverse. I'm not saying it isn't desirable. I'm saying it's not desirable for the stated goals.
The underlined can apply to the trucking and airliner industries during the 1970s, yet they were to a degree deregulated which is why I don't understand your contention here.
What are the stated goals? I don't understand to what you refer in your last sentence.
The stated goal of the deregulation of the utility industry is to provide greater competition and the ability for alternative forms of energy generation to compete (and by alternative, I don't mean wind, solar, etc.; I mean something different than what's already in place).
More than trucking or airlines, utilities are dependent upon fixed assets. Fixed assets, by their nature, are hard to move. Thus, you can't build a nuclear power plant on top of a power plant that uses natural gas. You need to find alternative land or else raze the natural gas plant and then build the nuclear plant. The amount of capital that goes in to doing that is staggering (especially if the government is not giving you tax credits, cash incentives, or low interest loans). In other words, because your local public utility has a strangehold on the land, fixed assets, and infrastructure (due, mostly, to government regulation and intervention), deregulating the utility is the first, super duper tiny step, in generating any kind of competition for the local public utility.
This is not difficult to understand unless you're willfully misunderstanding (which I think you are). Unfortunately, industries are different. The trucking industry and the public utility industry and the fast food industry cannot be viewed equally.
