Adam Smith argued that everyone will ultimately benefit when each person acts out of self interest. For a long time now, economists have now shown that Smith’s view was naïve, and that even rational people will act in ways that leave everyone worse off. This dysfunctional process leads to an over-exploitation and destruction of common resources known as the Tragedy of the Commons:
Free access and unrestricted demand for a finite resource ultimately structurally dooms the resource through over-exploitation. This occurs because the benefits of exploitation accrue to individuals or groups, each of whom is motivated to maximize use of the resource to the point in which they become reliant on it, while the costs of the exploitation are distributed among all those to whom the resource is available (which may be a wider class of individuals than that which is exploiting it). This, in turn, causes demand for the resource to increase, which causes the problem to snowball to the point in which the resource is exhausted.
The October 19, 2007 issue of Science (available only to subscribers online) contains a short article about three economists (Leonid Hurwicz, Eric S. Maskin and Roger B. Myerson) who have recently been awarded a joint Nobel Prize in economics for their work regarding “mechanism design theory.” This theory
aims to find schemes, or mechanisms that in sure that acting in self-interest will indeed lead to benefits for all. Today, its applications range from how best to auction broadcast rights and other public resources to contract negotiations and elections.
How does mechanism design theory work? It starts with the recognition
that unbridled self-interest doesn’t always lead to the greater good. For example, if the people of the town were asked to chip in to build a bridge, each person would benefit by underestimating his or her share and letting others bear the cost. So for lack of funds, the bridge would never get built. That’s sort of a logically unavoidable lose-lose situation is known as a Nash equilibrium.
Hurwicz explored ways of tweaking the rules “so that the most beneficial state and the inevitable equilibrium state are one and the same.” It seems undeniable that the free market, if allowed to run amok, is destructive to our long-term societal needs. I was concerned about this issue in an earlier post, although I was perhaps melodramatic with my title. What kind of tweaks does mechanism design theory offer to the markets?
“It’s a little Machiavellian,” says Gabriele Demange of the Paris school of economics. “You design a game so that in the end the Nash equilibrium comes out to be what you want.” For example, each person could be required to pay what others think the bridge is worth, thus eliminating the incentive to lie.
The article in Science suggests that mechanism design theory has promising applications in areas such as climate change.
Unrestricted free-markets are a proven method of depleting valuable resources. It has happened over and over. One of the most dramatic examples is the lack of commercial fishing in the North Atlantic Ocean, formerly teeming with fish. Nonetheless, it is commonly argued among conservatives that government is incompetent and destructive whenever it intervenes in the economy, and that the freewheeling and unrestricted efforts of individual independent entrepreneurs are our only hope. This blind faith in the “free market” often takes on a religious fervor.
I don’t dispute that entrepreneurs are great at some things, such as stocking the shelves with goods and services demanded by consumers. It is equally clear, however, that a society with long-term ambitions needs to somehow hook its energies to those long-term aims.
The unregulated free market reminds me of the way natural selection works. Neither unregulated markets nor natural selection “see” into the future or “try” to achieve any particular at long range end. That which ultimately evolves from either process is not necessarily “sought” by the real-time actors. The result, again, is often the destruction of valuable resources upon which those short-term actors (and others) critically depend.
With notable and relatively few exceptions, corporations are short-term, shortsighted self-interested amoral entities seeking immediate high profit at the expense of preserving public resources. When they are not regulated, corporations have repeatedly functioned to destroy valuable public resources. They are especially pressured to run toward short term profit by the unregulated hedge funds that essentially run them.
I am not familiar with the nuts and bolts of “mechanism design theory” beyond the sketch presented in Science, but it sounds intuitively correct that free markets need to be tamed and tweaked in order to maintain some focus on critically important long-term needs.
Your analysis of capitalism is missing one important factor: private property. You talk about "tragedy of the commons" and the result is correct. However, this scenario leaves out the possibility of private property rights. We eat cows like crazy in this country. Why is there no shortage of cows? Because cows are privately owned and the farmer, in his own best interest, makes sure he always renews his cow supply which benefits everyone who likes to eat them. Do some farmers ever run out of cows? Perhaps. But this is due to mismanagement. Lots of businesses run out of capital due to mismanagement and go out of business. That capital is then reallocated to other businesses how can batter manage them.
Back to public property. "Public" property by definition is property that is unowned. However, property unowned by individuals such as public lands (actually owned by the government despite the "public moniker) are often the most polluted and quickly depleted since allocation is by fiat rather than by the market. If the long-term value is of no concern to you, what incentive would you have to take care of it? This applies both to renewable and nonrenewable resources. In the case of renewable resources such as federal lands used for grazing, ranchers have no incentive to make sure grass is replanted. In the case of nonrenewable resources such as coal, mining companies simply strip away all that they are allowed by fiat without any concern for the resale of that property once the coal is depleted. Sadly, under this scenario, private property owners who make have been financially hurt by the federally-sanctioned mining have no recourse in the courts as they would have under a purely capitalistic system.
What is the alternative to private ownership of resources? Government control. Under this scenario, not unlike the Soviet Union, resources are controlled by fiat and doled out not in a rational manner but in the most politically expedient manner. Lacking a rational, price-driven manner of allocation, shortages occur, people starve and politicians gain power.
In the end, if you want responsibility taken away from the market, you are inevitably asking the government to take control of it and government solutions always involve men with guns to provide "enlightenment."
Unrestrained capitalism has other problems…a news story last week reported that American girls who grow up in high-income families (i.e., incomes above $150,000 per year) are four times more likely to be depressed than American girls in other families, while boys who grow up in high-income families are twice as likely to be addicted to drugs or alcohol. Thus, not only do children of poor families suffer from gross disparities of income distribution, but children of rich families do, too.
Free market capitalism is not a bad system, but when left unrestrained it can apparently lead to some of the same sorts of cruelties that occur in (unrestrained) biological evolution; e.g., all animals in the food chain will suffer and die, even those at the top. The question is whether this is the outcome we want, or whether we prefer to regulate capitalism to try to reduce overall suffering. It remains an open question whether short-term gains are compatible with long-term gains; e.g., whether regulated capitalism (to more evenly distribute wealth) could both reduce depression and substance abuse among rich children while simultaneously improving life elsewhere. High-tax, high-benefit countries (e.g., Scandanavia) suggest that regulated capitalism can have great results, at least over a few generations.
Naomi Klein writes this at Huffpo:
http://www.huffingtonpost.com/naomi-klein/guns-be…
Here's the other side of the fence, those who believe that the government is feckless and that the free market should lead the way on environmental issues. This article from Salon.com features the ideas of Ron Paul:
Enviros may roll their eyes at a candidate who dismisses the U.S. EPA as feckless and disposable, who believes all public lands should be privately owned, and whose remedy for an ailing planet is "a free-market system and a lot less government." But Ron Paul, the quixotic libertarian U.S. rep from Texas, has a bigger cult following online than any other presidential candidate, and has won unexpected attention in the GOP debates with his provocative ideas. Some of those ideas arguably have environmental merit.
http://www.salon.com/news/feature/2007/11/29/gris…
Joe Pulcinella: You argue that public property by definition is "property that is unowned.” I would contend that “public property” is, indeed, owned, that it is owned by the public and that public ownership can work well (though it doesn’t always work out well). When it doesn’t work well, it is often because we have a corrupt political system that causes incompetent and corrupt leader to be elected. We can do a better job that we do, without throwing all government regulation overboard.
Where the caretakers of public resources are wise and good-hearted, that property will be carefully administered for the benefit of the public. There are numerous examples of this system working. The Lincoln Memorial comes to mind. It is maintained meticulously. Consider, also, federal courthouses. Consider most government owned libraries, schools, fire trucks, highways and (until recently) national parks.
Where the public caretakers are incompetent, government doesn’t take care of its property and it fails to carefully regulate private resources. When we elect leaders who care, government does a much better job of taking care of all forms of property for the use and enjoyment by the U.S. citizens.
That property is privately owned doesn’t determine whether it is well cared for. Whether it is cared for well has to do with the quality of the owner. Many people fail to properly change the oil in their own cars (whereas many people who lease cars take meticulous care of them). Many home-owners have allowed their own homes to deteriorate to the point where they themselves are financially damaged when it comes time to sell their homes. People certainly “own” their own bodies, yet they abuse those bodies by over-eating and exposing themselves to terrible risks (gambling, drugs).
Therefore, I don’t buy the private versus public ownership distinction you raise as an infallible strategy for preventing the wasting of valuable natural resources. Are there some cases where private ownership is better? You bet. I wouldn’t want to rely on the government to provide and maintain my house, for example. I am much better positioned and motivated to properly maintain my own house.
You raise the privatizing of all property combined with lawsuits as the solution. I assume that you are suggesting that all land, as well as all air and water, should be privately owned. This would (as I understand your argument), cause private owners to be motivated to take care of all incredibly valuable resources. In many cases, I would agree with you. The paradigm example would be privately owned land where the damage is repairable and easily detectable. If my neighbor empties his trash can over the fence onto my lawn, I can easily detect that he did it (I’ll find his bills among the trash) and I can go to court to stop him from doing this in the future. It’s not so easy to keep track of damage to moving resources, however; moving resources such as water, air, water and wildlife. Nor is it easy to identify the damage or culprit when the damage is to underground water supplies or the cumulative effect of soil contamination or air pollution.
I am a lawyer. I believe that the judicial system is incredibly important. The judicial system can keep financially powerful people from hurting those who are financially vulnerable. Government regulation can also function in this manner.
I also know, however, that it is often incredibly expensive to litigate cases. Immense numbers of claims are not financially feasible to bring, even though they should be brought. Many people just can’t afford to pay an attorney to litigate bona fide claims. Many wrongdoers become immune because they hide behind shell corporations or they don’t have money to pay a judgment. The securitization of mortgage instruments is a perfect example. Many people have been defrauded and horribly damaged, thanks to the unwillingness of the government to step in and stop the blatantly despicable activity of wealthy corporations. Where is all that corporate money now that the damage is done and lawsuits are flying? Laundered. Held by distant companies up the food chain that are successfully shouting their innocence at courthouses, though the system was rigged from the start to protect them and encourage them to act irresponsibly. The money that should be turned back over to defrauded homeowners has been shifted into private hands far from the now-bankrupt mortgage companies. Those shell corporations with their once-impressive names now litter the legal landscape. Those individuals responsible for the damage are often untouchable because they, themselves are without assets or because they are successfully hiding their assets (e.g., the current Ambassador to the Netherlands). All of this damage was caused by private companies running amok. The government could have stepped in a stopped the mess ten years ago, but didn’t.
Do courts offer a solution to everyone, everywhere? Absolutely not. Let’s take the example of a landowner (a mining company) that is releasing mercury or lead into the environment and that the chemicals, over the years, cause brain damage to dozens of children. Is it really better to prohibit government regulations? What happens if the damage is not detected for a dozen years? What happens if the company is not financially healthy when the problem is detected? What if prosecuting a lawsuit will cost millions of dollars, due to the technical complexity of the subject matter or the scorched-Earth tactics of the defendant’s lawyers, such that no private attorney is willing to take the case to help the brain damaged children? Is it really better to let children become brain damaged, then to offer the parents money for the damages, rather than having strictly enforced regulations in place to prevent the problem in the first place?
And who is it that would ultimately control the lawsuits that will keep everything fair in a private-ownership society? It’s the government that maintains the courts—the court system is one of the three branches of government. And the government-controlled courts control the outcome of private property suits through all kinds of legal substantive laws and procedural rules. The courts can affect the outcome of cases through its rules on standing, burden of proof, causation (but-for causation and proximate cause), equitable defenses, and their definitions of duty and foreseeability. Through these techniques, the courts can put up formidable barriers to lawsuits. On the other hand, there are, indeed, frivolous lawsuits out there. The courts are therefore not a panacea. And, yes, courts can function to essentially regulate industry. They do it in different ways than the executive or legislative branches, but the courts can effect government regulation.
My suggestion: Why not continue to use a combination of private property and preemptive government regulation? Why not regulate the market where unregulated private owners have too much power and too much temptation to damage others and where private lawsuits are too expensive, too unlikely or too late to matter?
Why not clean up our election laws, so that we will have better-motivated public servants who will give a damn about public property? Then we will have regulations that are considered more carefully than otherwise.
Why not tweak the market through well-considered government regulations to make sure valuable resources are not squandered by private owners? Why not require bonds and threaten government penalties, for instance, with regard to those private owners who would be tempted to ruin “their” land, sell that ruined land at a steep discount as a cost of doing business (because it is now permeated with toxic chemicals), then move on and do it again and again?
People don't starve only under government system akin to the Soviet Union of old. People often starve, even when the government is not a precipitating factor. No one is advocating for a U.S. system that functions like the old Soviet Union. People are also vulnerable in a “purely capitalistic” system. There is great power to be had even in a system where the government keeps its hands off. The question in any governement system is who has the power, not whether there is power. The exercise of power by private parties can be as sordid and wrenching as the exercise of power by governments. Equal opportunity abuse.
Can U.S. government do a better job than it is doing creating and enforcing good laws to protect the public good? Absolutely. Is a purely private system the answer to protecting the welfare of U.S. citizens?
I’m not convinced.
Your response was kinda lengthy so I don't have time to go through it point by point but I will say that you hit the nail on the head in the first couple paragraphs. And that point was that all we need are the right people in government to do the right things. Here lies the problem. When we allow the government to consolidate huge amounts of resources under its control, the stakes are so incredibly high that it attracts all the worst elements to government. Being a lawyer, I'm sure you can attest to this. We will never get angels or even good people to run these programs. And even if we did, they cannot know all the information that needs to be known to make rational decisions on its use. In the absence of rational decision making, you have politically expedient decision making. It doesn't matter whether we're talking about schools, the Internet, parks or libraries.
Another problem I have with your response is the concept that in the absence of omnipotent government, the people would be antagonistic toward each other and lead to a society mired down in lawsuits. Given the rest of the world as an example, the most prosperous countries are those with the most individual liberty. After all, I got my morning coffee from my favorite shopkeeper and didn't have to fight him for it. And by prosperous I mean on an individual level, not a so-called "national greatness" level where it is denominated in the amount of money shot into space or by AIDS awareness.
And just what is the "public good?" Is it what most people want? If so, isn't that tyranny of the majority against the minority? We don't have to search to far for examples of that going awry. Should we really sacrifice what is good for us as individuals for the sake of a public good? If so, who is to say what exactly is good for the public? Without a rational method of determining this, what is to stop the personal whims of a politician from trumping your wishes? And what is you happen to disagree with a politician on a certain program which he deems as a public good? Should you be allowed to opt out? History is littered with the dead bodies of those who have tried.
If it makes you feel any better, corporations, to the extent that they are evil, can only be so by using government as a club against the rest of us. After all, without government support, I can always opt out of a company's product should I so desire. And believe it or not, at the end of the day, every company in the free market must please its customers to stay in business no matter how big.
I'm answering out of order but in regards to public ownership of a public goods, if you don't have any control over it, you don't own it. I'd bet that where you live as well as where I live, we can see examples of government having its own way with public goods such as open land initiatives. Just two years ago, our wise Elders took money from us to preserve open space in our township. For our own good, of course. Today we are fighting a losing battle against a giant cell tower going up on that same land. We're also dealing with eminent domain issues here, too. Seems the government can't keep its hands off private goods, either.
And please don't forget that by asking the government to give you what you want, you're simply asking them to be a proxy pickpocket of the rest of us.
Joe, I haven't read the article in Science because I don't have a subscription, but "mechanism design theory" doesn't sound like regulation. I assume it is about ways to put a value on things that obviously have a value, like clean air and water, but which the invisible hand of the market is too dumb to value. It actually leads to less regulation. This was the approach that was taken to deal with sulfur dioxide pollution and acid rain. Companies had to buy "licenses to pollute," which sounds like environmentalist heresy. But once a dollar figure was put on the pollutants going out of the smokestack, the smart companies got clean and sold their pollution credits. I think also the overall supply of credits was decreased gradually by the government buying them back and putting them out of circulation. This led to better results at lower cost than regulation, from what I've read.
Actually, the concept of intrinsic value (as opposed to market value) was first popularized by Marx.
Vicki, we are talking about a fundamental philosophical difference. The current regulatory regime of "permissible" emissions and 'tradeable" pollution credits implicitly says that it is OK to trespass on the bodies and properties of others as long as you don't exceed a set of VERY arbitrary "limits". The libertarian philosophy states in essence, three things about you, and everyone; 1) You have the right to your own life; 2) You have the right to your justly-acquired property, and; 3) you have the right to be free of the initiation of aggression against those two things. From these principles, you can deduce a complete corpus of law. The current pollution regime in essence completely violates all three principles. A libertarian order calls forth a rational way to allocate scarce resources such as land (and water and air over that land) in the most economic manner possible by homesteading or trading, not by government-sanctioned trespass or neglect.
Karl Marx? Is that comment to be taken in an ad hominem or an ex hominem sense? http://dangerousintersection.org/?p=1821 🙂
More precisely, it seems to be an attack on an idea (intrinsic value) by suggesting that that idea is associated with a person who people don't generally like.
Despite his caricature in the popular culture, Marx was an empathetic fellow who was truly distressed by the plight of workers, who were (and are still) often treated wretchedly. His proposed system of government was fundamentally flawed, in my view. But his flaws (we all have them) don't necessarily mean that everything he said was ridiculous.
Joe, how does Marx make use of his concept of intrinsic value?
Actually Erich, he's referring to Marx's embrace of the Labor Theory of Value, which I believe originated elsewhere but was promulgated by Marx because it supported his theories. Essentially, the Labor Theory says that the proper value of a good or service is (or should be) largely determined by the amount of physical labor inputs expressed as wages, in other words the price of goods should essentially be a buildup of all of the labor wages that went into their production.
And this seems like it might be plausible, due to the tendency of the price of goods and wages toward the marginal revenue product of labor. But it utterly fails to account for the need and the price of capital.
However, Carl Menger and later Ludwig von Mises put forth and proved the Subjective Value Theorem which holds that the price of goods is (or ought to be) set by the valuations of all the individual participants in a market for those goods (or services) and this theorem is no longer seriously disputed.
Among other things, it accounts for capital, as well as the returns to capital, also called profit, and the role of each in an economy in determining exactly the right goods and right prices. It succinctly elucidates the connection of supply, demand, and price, and how, in a free market, prices invariably tend to the market-clearing level.
Joe says:
"A libertarian order calls forth a rational way to allocate scarce resources such as land (and water and air over that land) in the most economic manner possible by homesteading or trading, not by government-sanctioned trespass or neglect."
OK, how would that work? How would you divide up things like air and water? How to account for facts like that the methyl bromide used to fumigate the soil to grow the strawberries in my fruit salad thins the ozone layer over Australia?
One idea I came up with was to give every one a fixed "account" for natural resources, At every purchase, you'd deplete not only your bank account but also your personal resource account. You could spend more for organic strawberries raised without methyl bromide, but you would spend less of your resource account. You could also enrich your bank account by selling some of your resource shares. If you exhaust both your personal resource account and don't have enough money to buy more, you could earn back "resource credits" by doing environmental restoration work or similar. Obviously this needs a lot of re-working by the mechanism design propeller-heads, but I think it would be fair. It also has the potential for massive wealth transfer from the first to the third world, which would be cool!
Vicki,
The chief underlying problem with Libertarianism is its unspoken assumption of a rough equality of self between people vying for those resources. "Special needs" do not come into the Libertarian equation. This includes an assumed equality of health, of language skills, of education, and some kind of beginning wealth that might somehow militate against one or two individuals accruing more than their "fair share"….but since that does happen, Libertarianism tends to go along with Objectivism that that is somehow "natural" and so it cannot be right to call upon government to balance the scales.
Libertarianism sounds good on paper, but in the real world where one has to deal with people in all shapes, sizes, temperaments, proclivites, and dispositions, it simply cannot function.
Don't worry Mark, I'm just having a little fun. I know that the Libertarians can't even run a cruise ship, as this article by China Mieville shows.
Mark and Vicki,
At least allow that a true property-rights regime, with a right against pollution trespass (including trespass on your own body)would be a better philosophical point to start from than the crazy "permissible" pollution scheme we have now? After all, you yourself point out that, despite current regulations, harm is still occurring – won't property rights give even the smallest landowners some leverage against polluters?
Oh, and libertarians don't claim to know how a particular thing should be run, only that government should run near to nothing.
I’m picking up a lot of government-can-do-nothing-right rhetoric from the libertarians out there.
Look, I’ll admit, the government can screw up badly, especially when we elect inept or corrupt politicians. But will the libertarians out there please admit that the government can sometimes do very good things? And by this I mean good things that would not ever happen in the absence of a government mandate? If you libertarians can’t admit this, you lose all credibility with me.
Here’s an example to consider. There’s a relatively new government rule that requires food manufacturers to list the amount of trans fat contained by their products. That trans fat amount must be displayed right on the label. That rule was enacted on July 11, 2003, by the Food and Drug Administration (FDA) Prior to the enactment of that rule, food manufacturers resisted it. They argued that they just couldn’t get rid of trans fats for a variety of reasons relating to food-processing and economics. They made these claims despite widespread evidence that trans fats were harmful to humans: Trans fats raise ("bad") LDL cholesterol and lower ("good") HDL cholesterol. http://en.wikipedia.org/wiki/Trans_fat In 1994, it was estimated that trans fats caused 30,000 deaths annually in the US from heart disease.
The government persevered on this issue, though, and . . . lo and behold! Manufacturers are now proudly specifying that their reformulated products contain ZERO trans fats. It’s a great selling point, it’s healthier and it really wasn’t impossible to remove those dangerous trans fats.
I suppose that libertarians would argue that government is always bad or inept and that this trans fat rule was yet another example of government overstepping it’s proper role. Note, though, that this is not government telling business how to make food; rather it is a reporting requirement, allowing the consumers to know what is in their food. I suppose a libertarian might argue that 30,000 additional annual deaths is a worthwhile price to pay to keep government out of our lives. I disagree, and there are many such cases where relatively minimal government intrusion can produce similar widespread results. Anti-cigarette public service announcements impressed me back in the mid-sixties when I was only 8 years old.
So let’s hear from the libertarians. Was the trans fat USDA rule a proper exercise of government power? If so, aren’t you on the slippery slope? Aren’t we then in territory where we should be distinguishing between good government and bad government rather than some government versus no government?
We live in a complex society where it takes coordinated social action to fix many sorts of problems. Private individual efforts often don’t have a chance when the problem is widespread and expensive to fix. We can sit around and wait for “someone” to fix these big problems or we can work together to fix them in a proactive intelligent way. Good government is our way of coming together to solve problems. Government doesn’t always have horns and a pitchfork.
That said, we are now in an era were big money has shamelessly infested our government, where the corporate media is complicit, and where our leadership is paralyzed by its well-tuned corrupt instincts. I consider this to be a problem with the people running the government rather than a problem with government per se.
Vince said:
—At least allow that a true property-rights regime, with a right against pollution trespass (including trespass on your own body)would be a better philosophical point to start from than the crazy “permissible” pollution scheme we have now? After all, you yourself point out that, despite current regulations, harm is still occurring – won’t property rights give even the smallest landowners some leverage against polluters?—
One point—whether it would be better or not, the bottom line question is: who would enforce it? All the mechanisms that would keep it from devolving into brush warfare between isolated property owners are–wait for it!–government institutions.
Mark, I agree with your previous comment.
A society can't just say they don't want to have some overall power capable of trouncing individual rights. There will be power; you can't just leglislate power out of existence. What you can do is decide how you want to assert it. If it's not in a legislature, it will be in the courts. If you want to shrink all three branches of government, power will show up in other ways, such as large corporations. Wherever you stomp out power, it shows up somewhere else.
If you want individual rights, you have to fight for them everyday in an organized fashion. In theory, U.S. citizens rely on their government to defend their individual liberties. That's the theory. Where it isn't working, the citizens need to wake up and participate in their government in order to get things back on track. These days, we REALLY need to wake up.
I'm not against establishing a right against chemical trespass. The problem is establishing who, exactly, trespassed and put certain persistent chemicals in my body fat and organs. Most pollutants are like dioxin – you can't pinpoint the source because there are so many potential culprits. There are a handfull of chemicals that can be pinpointed to specific manufacturers – Teflon and Scotchguard are examples of products that break down into unique chains of molecules that have no other natural or manufactured source. Right now, as I understand it, I would have to prove that those chemicals are harming me before I could get compensation from DuPont for putting them in my body. I think a case could be made that Dupont has more of a responsibility to prove that they are not harmful before they contaminate me. But even if we agreed to shift the burden of proof, there would need to be some sort of entity with as much power as DuPont to enforce my right against chemical trespass.
Vicki – you raise an important issue that needs to be considered by all of those people who claim that everything (including air, water, soil) should be private property and that people can always go to court to enforce their rights.
Court is terrifically expensive and time-consuming. Litigating claims raises numerous issues relating to liability, causation and damages. The proof of each of these issues can be extremely expensive, so expensive that many legitimate claims are simply not brought. Showing that a particular form of pollution was created by X entity, that it caused an injury and the extent of the injury it caused each require highly trained experts with regard to environmental contamination cases. Again, many victims of these injuries will never find a lawyer to help them because of the economics of litigating, not the merits of their claims. I have seen hundreds of bills charged by experts in lawsuits. They range from a few hundred dollars (this is rare nowadays) up to several thousands of dollars (quite common) up to tens of thousands of dollars (these occur regularly).
You also raise an even more important point: Why wait for an injury? Why not regulate dangerous activities beforehand, to avoid the need for numerous expensive suits after the fact? And remember, suing will only get you money; it won't mean that you or your child never got injured by that exposure to benzene or lead.
I'm a lawyer. I sue companies that cause injuries. But I think that there are usually better ways of addressing dangers to prevent injuries. I am puzzled by objections to environmental regulations that "interfere with the free market," in light of the widespread evidence that the free market (the invisible hand, if you will) is NOT protecting many people, much of the time.
In sum, it is insane to allow coal plants to spew out mercury-infested combustion products that harm people–all of this in the name of the "free market." Instead, we need to regulate polluters, to make certain that their plants are properly equipped and operated. It is a poor alternative, indeed, to tell those people with brain-damaged little children that they can sue the utility to TRY to recover millions of dollars to provide lifetime therapy for their children.
Hence, the idea that motivated my original post: sometimes, the "invisible hand" needs a hand.
Erich said:
—I am puzzled by objections to these regulations on the basis that they “interfere with the free market,” in light of the widespread evidence that the free market (the invisible hand, if you will) is NOT protecting many people, much of the time.—
What's the puzzle? Every delay—for research, for testing, for due consideration of potential customers' rights, etc—means that a new product is not on the shelf being purchased and MAKING MONEY. Regulation means that, in the case of really new products, patents get delayed, and someone else might beat you to it. The objections are based purely on the false urgency of market "requirements". (A not particularly harmful example is the barcode reader. Several companies were working on the tech. If the one that finally developed it had just waited a year or so, they could have figured out how to make it to read the numbers already there instead of barcodes. But they couldn't wait. Competitors might have denied them they rightful marketshare.)
On the flipside of this, there is the quite legitimate concern that government regulatory agencies can be bought. I remember back in the 70s when plastic bottles were being introduced, that two companies were in direct competition for FDA approval—DuPont and Monsanto. Now Monsanto gets a lot of grief and you have to wonder why sometimes. They'd developed a bottle that was both reusable and biodegradable. DuPont got the approval for their non-reusable, nonbiodegradable bottle. Why? The testing labs determined that the Monsanto bottles were carcinogenic. How did they determine this? They ground bottles up and shoved the powder up the vaginas of female rats UNTIL A TUMOR DEVELOPED. It was later determined that to absorb the same quantity of particulate, one would have to drink something like a hundred gallons of Coke a day for months on end for particle migration to deliver the same level. Who paid for the tests? DuPont.
It really is a Who Do You Trust question more often than not.
This can, of course, be fixed. But it leaves us with the aforementioned patent problem.
Mark T. writes: "Regulation means that, in the case of really new products, patents get delayed, and someone else might beat you to it."
It's not quite clear to me what point Mark is trying to make, but, as a former patent practioner myself, I must say that Mark's above comment is flat wrong. In more than 15 years of practice, I've never heard of a patent getting delayed because of any "regulation." Indeed, if I recall correctly, the only basis upon which the government can delay issuance of a patent is if the Defense Dept. declares the invention a national secret. Otherwise, inventors are *constitutionally* entitled to get patents for their inventions. This is not to say there aren't sometimes serious delays in getting a patent, but these are due to a lack of qualified patent examiners in the PTO. Congress loves to raid the PTO budget to fund other pet projects.
As regards FDA approval, the FDA reviews evidence presented to it by the manufacturer. If a company wants FDA approval and doesn't get it, then the problem almost always lies with the company. Agency delays are almost always the result of political pressure; for example, the Bush Administration causing the Agency to delay approval of RU486, or the delays in the 1990s for breast implants because the Agency was still smarting from the grilling it got from Congress for approving silicone implants that later turned to have problems.
I would ask Mark to elaborate on his arguments.
Grumpy,
The question Erich posed was why regulation is opposed. My response has to do with perception, not reality. Regulation that might actually work to keep bad products off the market are presented by corporations as wrenches in the gears. The reality, as you point out, rarely jibes with the perception, but there you have it. They are working against the possibility of regulation that would somehow prevent profit making. It is the mindset of those who feel that any hoop put in their path to jump through is a life or death threat to the "natural" processes of the market.
I did not mean to suggest that it has ever been the patent office's job to determine safety. But what if it was? We have agencies to determine the suitability of food, of television and radio content, and after-the-fact agencies that trigger Recalls. Not much of a step from that to before-the-fact regulation.
It's a species of paranoia.
One more point, Grumpy,
My comment on patent application had nothing to do with the patent office process—but if regulation meant a delay in the development of a new product by one factor which allowed a competitor to get there first, then regulation would be seen as Bad. I was talking about a situation in which the patent office would not even see the product due to other regulatory requirements.
Mark T. — thanks for following up. As regards gov't regulation, the regs generally (at least ideally) impact all competitors equally — that's often the reason why regulation is needed: because no individual competitor would take the necessary steps unless others do likewise. Environmental regs come to mind — the first company to spend on upgrades faces higher costs, causing the whole industry to delay until the gov't steps in to demand it of everyone.
As regards safety, the PTO is not staffed with experts on that subject; thus, is unequipped to address it. Likewise for other agencies not tasked with addressing it. Likewise, assigning multiple agencies to address the same issue unnecessarily multiplies the cost of compliance, making U.S. companies at a disadvantage relative to non-U.S. competitors.
True, many products don't make it to market for safety reasons, but this is true for all competitors. Seen from the vantage point of the consumer, forcing 'bad' products off the market creates opportunities for innovators who can build a 'good' product to satisfy the need, thereby benefitting the consumer in the long run.