Coase Colored Glasses

Sunday, February 06, 2005

Coase gone wild?

Recently a University of Colorado professor has gotten himself into trouble for some insensitive remarks regarding the victims of the 9/11 attacks (here). President of Harvard University, Lawrence Summers, has also found himself in hot water of late for his remarks at a women scientist’s convention (here). This is not the first time President Summers has rocked the boat with what some would call politically incorrect remarks. As the chief economist at the World Bank Mr. Summers wrote an internal memo in 1991 that outlined three reasons why the World Bank should promote the movement of “dirty industries” (polluting industries) to less developed countries (here).

The reasons Summer’s outlines in his memo are very much grounded in the Coasian concept of relying on market allocation of pollution rights to there most efficient position. On a normative level Summer’s comments are disturbing, on the other hand if economic efficiency is our goal his proposal has a great degree of validity.


Although the adoption of Coase has been widespread within the U.S., I am not so sure that Summer's proposal has as much acceptablility by other countries around the world. Especially in countries with a large Green faction the idea of receiving alien toxic waste is unthinkable. Indeed, the transaction costs on an international level seemingly kill Summer's proposal.

1 Comments:

At 10:55 AM, Anonymous Anonymous said...

A good question would be to ask what the results of the policy would ultimately be? Will the factory boost economic growth in the third world country? Is the factory cleaner than the alternative methods used?

By pushing the economic potential of a nation outward you develop an infrastructure that is abe to innovate and clean itself up. Look at the United States in the early 1900s, we ran some of the dirtiest factories around, but as we became more and more wealthy, we were able to clean up our machinery and provide products that were inconcievable many years ago.

Yes, Coasian solutions often appear to be crass, politically incorrect, or even downright evil to the lay man, but as you look at the process and results it provides, it becomes clear that not only is it not wrong, it is the most moral solution to the situation.

About pollution, the most polluted rivers are in some of the most impoverished locations where sending our dirty factories would provide a cleaner alternative than currently is available.

To add my politically incorrect viewpoint, those "green-party-fascists" can go play in a nest of hungry anacondas. Many developing nations don't have the luxury of thinking about the environment, and being forced to do so cripples their ability to act in a productive way, which in the long-term is likiely to provide cleaner and more efficient results.

 

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