Re: [unrev-II] Economics and the Garden of Eden

From: Paul Fernhout (
Date: Tue Jun 06 2000 - 07:45:19 PDT

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    John -

    Thanks for the clarifications.

    John \"sb\" Werneken wrote:
    > I have two general quibbles with your elaboration: (1) I do not agree that a
    > theory that can be reduced to an absurd result under extreme conditions is
    > necessarily wrong; (2) I am more concerned with how we decide, than with
    > what we decide (means, not ends).

    Good points. I think the focus on how we decide is very well put.

    > As far as "clean air" goes, if I owned some, I would not want it sullied.

    The point is that you (as an individual) probably would not own any
    clean air.

    For example, consider how the FCC has planned to give away spectrum for
    HDTV to existing broadcasters; this is analogous to giving carbon
    credits to existing polluters in proportion to how much they pollute. In
    all likelihood, "clean air" would initially be sold to the highest
    bidder. It is likely that Dow Chemical or midwest coal burning power
    plants would have more ready cash and credit to purchase the rights to
    clean air than you or I. Then anyone coming down with lung cancer would
    have no right to sue, because they had no economic ownership right to
    clean air. "Sorry Mr. Jones, but you did not own any clean air because
    your great-grandparents sold the right to it to send your grandfather to
    Princeton. Your lawsuit against Mega-Polluter Corp. is denied."

    That is related the point I was trying to make with my comment on
    business only responding to the interests of those with money. That is
    why there is not considered by business for there to be a significant
    demand for food in India or China.

    > I have seen EPA regulations reported as requiring @200,000,000 invested in
    > order to eliminate enough pollution to statistically avoid one death. If
    > life is priceless, why is it so rare that anyone would spend more that
    > $1,000,000.00 to provide life-saving treatment? If $1,000,000.00 is more
    > than we are actually willing to pay for a life when we have the chance, how
    > does $200,000,000.00 become an acceptable cost?

    I agree -- sometimes these assessments are absurd. There does need to be
    some prioritization of limited investment funds.

    However, why should any company be allowed to pass on external costs
    (like deaths)? If it costs $200 million to fix a problem, then obviously
    the cost of that business activity may be considered too high by the
    company, and that process should be shut down. But here we get into
    deeper issues and vested interests. If the company is already running
    and will lay off people who will go on welfare, the costs of the broken
    implicit promise to the employees is again made into an external costs
    (i.e. paid by the taxpayer for welfare payments).

    In our economic system it is not usually possible to remove distributed
    dividends from shareholder's pockets or wealth retroactively from people
    who briefly owned a stock. But, realistically, if a bunch of people
    engage in an activity or support it, and only years later do the
    enormous external costs become apparent, then in a "fair" economic
    system those participating and investing individuals should pay. That
    really means shareholders (and perhaps even employees). But the limited
    liability system of stock ownership prevents that. The argument for
    limited liability is that otherwise investment would not happen because
    it would be too risky. This issue would certainly need to be revisited
    in a system where everything is "owned", and perhaps should be revisited

    I think the deeper issue here is again external costs -- and despite the
    concept of everything being owned, there will always be external costs
    in terms of hard to prove things like health risks or hard to quantify
    things like community disruption. Why should any company be allowed to
    pass on the costs of health risks and death to consumers? One could
    make an argument that that is the cost of having access to goods and
    services. That is the argument for the Forest Service selling old growth
    timber that costs more in taxpayer forest roads to produce that timber
    companies pay -- because the end result is supposedly a good economy and
    cheap timber goods for U.S. citizens (although now much of the lumber
    goes to Japan).

    The point as you put it is "who decides?". The answer is that in our
    system, the entities with money. More and more often this means decision
    makers are immortal corporations who are for most practical purposes
    above the law because they can't be imprisoned and their charters are
    rarely revoked.

    The counter argument is again that this is what is practical. It is a
    compromise between accountability and initiative. But we need to
    acknowledge it as a compromise. And that means, it needs oversight to
    make sure the compromise is not abused. And that means laws or a moral
    code governing conduct.

    > Of course an individual or a corporation is better, given the rights to own
    > and to sell. Then there are clear incentives for conserving value, clear
    > ways of establishing precedence when values conflict, and a mechanism of
    > competition to allow better methods to come to prominence.

    But it seems, these are not done as well as they could be. The whole
    need for a OHS/DKR/Bootstrapping is to be able to do these things
    better. And also, fundamentally, the question is what entity is
    benefiting from these decisions (the public or the company). To quote
    William C. Norris, "Business exists to meet societies unmet needs". If
    business stops meeting society's needs, then that social contract needs
    to be reexamined.

    > Yellowstone and the great national parks were Teddy Roosevelt in 1901-1909,
    > not FDR or the 1930's. And not much of a fight either. As head of the
    > organization owning the land (federal government) he simply declared the
    > parks created by executive order. Ownership at its best.

    You're probably right on the dates; I need to find my reference for the
    political infighting behind this.

    > The average family income in America is an un-Plutocratic 39,000.00. But
    > still enough that wages and subsidies (social security, medicare,
    > foodstamps) grant far more than the necessities of life to most of us.

    Average means there are people above and people below (unless you live
    in Lake Woebegone "Where the kids are all above average"). My major
    point is that markets often don't work for the people below average.
    That is why we have welfare programs; that is why we have free public
    education; that is why we have OSHA and workplace protection laws.
    Speaking worldwide, most families probably don't make $1000 a year. Does
    this mean they are not entitled to clean air or clean water or an

    Part of this is what we consider to be basic human rights. This differs
    by culture. In America, people have a right to work where they want, and
    live where they want, and get health care of their choice, if they can
    afford it. In the USSR, people had a right to a job, an apartment, and
    healthcare, whether they could afford it or not, but they had little
    choice about the quality. Maybe the issue here is, what fundamental
    rights do people have in regard to clean air and clean water, and access
    to other environmental resources or the neccesities of life (however
    that is defined).

    The deeper point is that we are defining the characteristics of an
    economic network through policy and related laws. One principle for
    example is you can't take things from people by force. Why make that
    law? Isn't it "fairer" to say only people who can defend their
    possessions by force have a right to keep them? But instead we have
    police and a legal system subsidized by taxes.

    So, having made the point that we decide how to structure the economic
    network, the issue is "how should we structure it?" Obviously we want to
    encourage individual initiative in producing the things people need, and
    likewise we want to encourage people to be responsible about the
    resources they have at their disposal. I think we are both in agreement
    with this.

    A monetary system is a way to do this, and even on "Star Trek Voyager"
    people get "replicator credits" they swap. However, no one talks about
    "replicator credits" on "Star Trek: The Next Generation". Why? Because
    the Voyage crew are alone, living off of scarce resources. The
    Enterprise crew has starbases to refuel them and is part of a wealthy
    network. My point? Beware of using "scarcity model" thinking in
    designing economic systems for the future. The points you make about
    selling "clean air" imply a scarcity. Perhaps if there is considered to
    be enough basics to go around, then the need to pollute to produce SUVs
    will be seen as "vanity", not a basic necessity. There is talk about
    thinking through a "post-scarcity" economy. It may have very different

    Indira Gandy said a few decades ago something like every U.S. citizen
    contributes more to pollution than a village of Indians. The path to the
    future might lie more in the direction of Duane Elgin's "Voluntary
    Simplicity". We must decide between when current costs in pollution
    support necessity and when they support Vanity.

    For example, as an undergraduate, I transferred from a cheaper state
    college (SUNY Stony Brook) to Princeton. Why? Probably in large part
    "vanity" (plus a host of other noxious reasons -- arrogance, greed,
    selfishness, etc., and maybe a couple good ones). If I had banked the
    difference in cost (or just dropped out and save all the cost) and
    invested it in the stock market, I would probably be independently
    wealthy today from it. Or, that money might have lifted one hundred
    Africans out of poverty or starvation. Of course, I might then have
    ended up like that well known college drop-out (Bill Gates), and
    certainly the software world would have benefitted from Bill Gates
    having a liberal arts degree.

    Spending "the environment" to have SUVs may mean that in a hundred years
    we may *have* to live in environmentally controlled domes which are
    harder to maintain (where everyone owns a slice of air) rather than just
    living openly on the planet Earth. People who can't afford a dome will
    just suffer and die. When our great-grandchildren ask why the world is
    like this, would we really have a better answer than "vanity"?

    > When everything has a private owner, there are no "external costs". Those
    > damaged without compensation can and do sue, and they collect, if they can
    > convince a panel of laymen that they are correct as to damage and cause.

    Some people say if the poor are given money from the rich they will
    mismanage it and it will end up back in the hands of the rich. While I
    don't totally agree, I think there is some truth to this. The
    implication: many people will in a short while not own "clean air" or
    "clean water" if these are made ownable commodities.

    > I think my actual position though is fairly consistent. I see this marvelous
    > "new economy" and I see so many people demonstrating the benefits they have
    > received from two great trends in America: the trend of the individualist
    > capitalist ethic, and the trend of the social investment in the community's
    > future (particularly in education & in infrastructure). I hear a lot of
    > voices denying the value of the capitalist tradition. I hear lots of other
    > voices claiming that the "new economy" owes nothing to the society as a
    > whole and in fact deserves to be left completely free of any restraint or
    > impost, on the grounds that it was entirely self-created.

    The thing about "America": We must never forget that there were tens of
    millions of people living in "America" before 1492. Many of these people
    had a very sophisticated and peaceful cultural system. These people were
    ruthlessly exterminated by biological warfare (blankets intentionally
    contaminated with Smallpox, and to a lesser extent introduced V.D.),
    overt military action, forced death marches (the "Trail of Tears"),
    creation of addictions (i.e. selling alcohol), and treachery (repeated
    violation of legal agreements). Had this happened in a few years instead
    of a few centuries the enormity of it would have been more apparent. The
    end result was vast amount of land wealth, mineral wealth, timber, and
    raw materials for the immigrants, protected from conflicts by vast
    oceans. On top of this, much of the early wealth was in the South was
    produced by slavery, resulting in the suffering and deaths of millions
    of Africans and their descendants (because it was harder to enslave the
    Native Americans -- they knew the land and could easily run away). I
    credit much of American's early success to these factors -- not to the
    political or capitalistic system -- and to an extent, the later success
    builds on the wealth of the early success. We must never forget the
    genocide behind the creation of the American way of life. For
    references, see "A People's History of the United States" by Howard

    Why were the Native Americans and imported African Americans exploited
    and exterminated? In part, they had little economic power, and in the
    case of the Native Americans had a very different model of land
    ownership (hunting rights vs. defended enclosures). When one talks about
    ownership of everything, perhaps one should also think about giving
    America back to the original owners, the Native Americans, and
    compensating Africa and African Americans for their losses. But
    frankly, this will be considered too expensive and won't happen (except
    in token ways) and their impoverish descendants don't have the funds it
    takes to buy justice on that scale. The bottom line: when you talk about
    privatizing everything, remember the way American land ownership was
    privatized from the Native Americans, and think deep and hard about who
    the next genocide might be against.

    Personally, what I get out of this portrait of American history is that
    to deal with the guilt of living in and profiting from a society with so
    much blood on its hands, we need to use the resources we have for all of
    humanity, to in a small way make up for the behavior of our ancestors
    and our own continued participation in the resulting society.

    -Paul Fernhout
    Kurtz-Fernhout Software
    Developers of custom software and educational simulations
    Creators of the Garden with Insight(TM) garden simulator

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