For the externalities in (4), it’s important to remember that not internalizing the externality creates a lot of moral hazard, though, because Coase’s theorem rarely applies in practice. For example, the steel mill could often have been built at a different location for slightly more cost (say, $10k), which they will not do if they know the efficient move will be to not tax them. Thus a $40k inefficiency. And the theorem would rejoin with “well, the owners of the resorts will pay the mill >$10k to initially build on the new spot, which makes things efficient again”, but then of course you open up the opportunity for all sorts of inefficient blackmail if you don’t fulfill the perfect information requirement of Coase.
Obviously none of this contradicts the nuance you were adding, but I just wanted to spell this out lest we see anyone waver in their moral resolution to internalize most externalities.
lest we see anyone waver in their moral resolution to internalize most externalities.
If I find out that internalizing externalities is harmful, I don’t want to do it! It might be harmful to moralize this, in case it makes it harder to change our minds?
There are plenty of things you should still resolve to do. You don’t want to throw the baby out with the bathwater by maintaining maximum irresolution so you’ll never have difficulty changing your mind. Just change your mind when important evidence comes in—and in this case, I’m trying to point out that it is not important evidence against internalizing externalities. (It is evidence against levying the full externality cost and failing to try mitigating trades that reduce that externality cost.)
I think I basically mean it straightforwardly. In my mind it is pretty similar to other moral injunctions like “tell the truth” or “speak up for the bullied”—it is important to resolve to do it ahead of time, because in the moment it might be quite hard and costly to do so. So if someone were to start talking about how actually the bullied need to learn to stick up for themselves, etc etc, I would want to remind myself and others that while this is true, it shouldn’t change my moral resolution to stand up to bullying. (It’s perfectly fine for people to discuss whether maybe we shouldn’t stand up for them, but if someone gives an argument that doesn’t apply, or evidence that later turns out to be false, I want to again reiterate the resolution.)
Maybe this is overkill or something but I think it feels pretty straightforward to me. I think sometimes my moral resolutions do in fact get eroded by people questioning them, and not “re-committing” afterward.
For the externalities in (4), it’s important to remember that not internalizing the externality creates a lot of moral hazard, though, because Coase’s theorem rarely applies in practice. For example, the steel mill could often have been built at a different location for slightly more cost (say, $10k), which they will not do if they know the efficient move will be to not tax them. Thus a $40k inefficiency. And the theorem would rejoin with “well, the owners of the resorts will pay the mill >$10k to initially build on the new spot, which makes things efficient again”, but then of course you open up the opportunity for all sorts of inefficient blackmail if you don’t fulfill the perfect information requirement of Coase.
Obviously none of this contradicts the nuance you were adding, but I just wanted to spell this out lest we see anyone waver in their moral resolution to internalize most externalities.
If I find out that internalizing externalities is harmful, I don’t want to do it! It might be harmful to moralize this, in case it makes it harder to change our minds?
There are plenty of things you should still resolve to do. You don’t want to throw the baby out with the bathwater by maintaining maximum irresolution so you’ll never have difficulty changing your mind. Just change your mind when important evidence comes in—and in this case, I’m trying to point out that it is not important evidence against internalizing externalities. (It is evidence against levying the full externality cost and failing to try mitigating trades that reduce that externality cost.)
That makes sense. I guess I’m mostly reacting to the last sentence, which adds a moral aspect.
(I’m also not 100% sure how much the last sentence is a joke, or deliberate exaggeration?)
I think I basically mean it straightforwardly. In my mind it is pretty similar to other moral injunctions like “tell the truth” or “speak up for the bullied”—it is important to resolve to do it ahead of time, because in the moment it might be quite hard and costly to do so. So if someone were to start talking about how actually the bullied need to learn to stick up for themselves, etc etc, I would want to remind myself and others that while this is true, it shouldn’t change my moral resolution to stand up to bullying. (It’s perfectly fine for people to discuss whether maybe we shouldn’t stand up for them, but if someone gives an argument that doesn’t apply, or evidence that later turns out to be false, I want to again reiterate the resolution.)
Maybe this is overkill or something but I think it feels pretty straightforward to me. I think sometimes my moral resolutions do in fact get eroded by people questioning them, and not “re-committing” afterward.