Ken Nelson

Who pays for the sign?

Economists call costs that fall outside the buyer seller relationship “externalities”.  So, for example, if you hire a cheap illegal alien landscaper, you get landscaping, he gets money, and I get the externalities of his healthcare bill, lower wages if I’m a landscaper, school trouble, cultural impacts and gang crime.

When I bitch about illegal alien costs, economists say “just put the externals in the price”.  Okay… how?  I don’t have access to the off the books transaction between the sleazy homeowner (you) and the illegal alien landscaper.  And if I did make it harder, say for instance, by building a fence, might that hurt our economy?

So we have three things we need to know when dealing with externalities:

• where to collect the cost
• what is the cost
• what are the costs/side effects of collecting the cost

Now lets flip the situation… Imagine you have the perfect place to charge for externalities, but gosh darn it, no externals in sight. But you want money… what to do?

You invent an externality!

I just described global warming.  Different groups invented the global warming externality for various money centered reasons.  Scientists found that the threat of global warming yielded research funding. Politicians like that global warming can be used to regulate, control and tax. And socialists find it useful to distribute wealth or prevent wealth creation.  There was no “grand conspiracy” – just recognition of a useful tool.

But what of the three requirements to properly use externalities do we know about the proposed global warming externality?  Only one of three.  We know where externalities costs could be collected (Cap & Trade, Carbon Taxes).  We do not know if the externality cost really exists (google “climategate”).  And if it does we don’t know what the impact would be of collecting the externality cost (high energy costs, bad economy, etc..) .

Why prematurely collect externality costs on CO2?  Come back when you know more than how you will charge me.