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“If EVERYBODY is irrational, then how can we expect them to make rational decisions all or even most of the time? Libertarianism assumes a rational...”
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“What if economics is to move away from being a self-centred academic discipline interested only in working out the consequences of its own...”
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Dr. William Rees on ‘The Dangerous Disconnect Between Economics and Ecology’
From The Institute for New Economic Thinking:
The world economy...
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But in economics, core and oft-used assumptions necessary to make many theories work, such as “everyone has...
Have you ever considered why you pay for water? May I introduce my favorite economic pondering: Lauderdale’s Paradox, originally thought up only as a vexing puzzle by James Maitland, the eighth Earl of Lauderdale (1759-1839). Lauderdale speculated that there was an inverse relationship between public wealth (anything we enjoy) and private riches (anything that we enjoy but is scarce).
The paradox:
Applying the logic provided by Lauderdale to natural resources we find something scary.As environmental resources become degraded, and thus more scarce, private markets appear for them. To obtain the same level of benefit we previously enjoyed from an environmental resource, we must now purchase that benefit from those who control these private markets. (see Herman Daly for more)
The problem: This is easily explained by using the example of plastic water bottles. An obvious necessity, from which we all benefit, that is privatized and rationed at a profit whilst polluting and otherwise harming the environment. One must wonder, if scarcity makes things profitable - what incentive is there to protect them? Indeed, this is what is known as a perverse subsidy. For example: A river runs past one city on its way towards New York City. This other city is brimming with polluters and litterbugs, and all the garbage flows right down the river to New York City. The public supervisors of NYC have two options: spend $3billion on a water sanitation plant, or pay $1billion to the trashy city so that they will clean it up. But they just spent $1billion to receive a benefit they previously received for free! Further, the other city is now being paid for littering.
Consider: What incentive does the Dirty City have stop polluting?
It’s About the Definition of Wealth
In the example above we see how there is an economic incentive to trade public wealth for private riches. However, Lauderdale himself knew not of scarce resources. The 1800’s were a joyous time of thoughtless natural resources exploitation. Even then, in the hay-days of imperialism, Lauderdale postulated this theory. Why? Because Lauderdale saw public wealth, or intrinsic value, as part of humanities total benefit. Under that logic, he assumed that no one would ever accept payingto receive the same total benefit. Unfortunately, in our age we seem to measure wealth in private riches - and completely neglect their effect on public wealth.
Please, let me know what you think. How could the NYC river disaster could have worked out differently?
