I am really sick of Democrats blaming businesses for the problems in our country

[Dumpy Dooby]

Originally Posted by Dylith

Then why don't we simply look at plain old economic efficiency, and at how businesses in a pure capitalist system would exclude many economic factors (such as externalities) from a cost benefit analysis. We can even pick a specific topic such as air pollution or the economic value of lives saved due to building new roads in order to reduce traffic congestion.

There are private costs and benefits and then there are social costs and benefits. If you want economic efficiency then the ideal goal would be to find a way to maxmize both.

And again, if the citizens of an area can demonstrate that the emissions from a factory's production process have yielded a negative effect, then it is the duty of that company to compensate them for whatever they have lost. Additionally, it is in the best interest of a company to yield positive effects within society in order to build reputation (in a Capitalist system, reputation is a company's most valuable asset).

Consider British child labor laws around the turn of the industrial revolution. Child labor improved the standard of living for many families throughout England. Child labor allowed women to dress in cotton and children to receive sufficient nutrition (just two examples, but I'll gladly go into more detail if you like). The first child labor laws were to prevent the government from abusing children (they were underfed and forced into virtual slave-labor by state officials). When the state imposed regulations on all child labor, many of the larger factories just got rid of all their child labor because they didn't want to deal with the threat of the state. This lead to children migrating to smaller unregulated factories. So who came out on top during this whole fiasco? The factories that maintained a reputation for treating their child labor properly and providing them with food and non-strenuous work. Who came out on the bottom? The smaller factories that continued to abuse their child labor until they were no longer under the radar of the regulatory committees.

So there's a real-world example of how positive externalities can most definitely play a role in a cost benefit analysis, especially when reputation is something that is extremely valuable to a company.


That said, I'm not sure what part of...

Civil courts. Right now businesses are encouraged to reduce negative externalities because of the threat imposed by government fines. I would like to see that deterrent initiated by the financial threat of the presumptive victims. That way if a business does harm a large sum of people, those people are at liberty to sue the negligent businessmen.

...that you missed, but it seems that you completely ignored me there.

[Dylith]

Originally Posted by Dumpy Dooby

And again, if the citizens of an area can demonstrate that the emissions from a factory's production process have yielded a negative effect, then it is the duty of that company to compensate them for whatever they have lost. Additionally, it is in the best interest of a company to yield positive effects within society in order to build reputation (in a Capitalist system, reputation is a company's most valuable asset).

That said, I'm not sure what part of...

Civil courts. Right now businesses are encouraged to reduce negative externalities because of the threat imposed by government fines. I would like to see that deterrent initiated by the financial threat of the presumptive victims. That way if a business does harm a large sum of people, those people are at liberty to sue the negligent businessmen.

...that you missed, but it seems that you completely ignored me there.

It isn't that easy, it may be easier when it comes to land pollution (pretty obvious that I am hurting you if I dump toxic sludge onto your property and your give birth to a child with three heads as a result), but this is why I chose the topic of air pollution, because it isn't cut and dry like that.

say I develope chronic bronchitis, that could have happened for many reasons, from a more natural cause, to the coal factory down the street, to the people in town who drive their cars everywhere, to my neighbor who is burning leaves in his back yard.

In this case pollution may have caused my condtition, but how do I prove that in court? Further more how could I possibly prove that a specific company's pollution was what caused my condition?

I would get eaten alive in court by corporate lawyers.

Yet, we see very clearly that cities which have more air pollution also proportionatly have more residents suffering from poor health and from things such as chronic bronchitis. What specific pollution caused my specific case of it is a mystery, but it is fact that if we were to lower pollution levels then we would lower the incident rate of health problems that are related to air pollution.

It is for this reason that we have a government to regulate air pollution output. We find a middle ground that takes into account both society's gain from pollution reduction and the private marginal costs associated with pollution reduction in order to find a socially efficient level of output for the factory. If left to itself the business would only take into account its own marginal costs and would ignore the extra damages that it is doing to society.

Your suggestion would work for cases where it was clear that a specific company was doing specific harm to specific people, but in the case of air pollution it isn't that easy.

So there's a real-world example of how positive externalities can most definitely play a role in a cost benefit analysis, especially when reputation is something that is extremely valuable to a company.

I am not suggesting that without government regulations companies would go hog wild and start flinging babies off of roof tops. I am not one of those people who consider big business "evil." What I am saying in this case is that a private firms cost-benefit analysis is going to look different from a state cost benefit analysis when it comes to the same project. Companies will take into account reputation, but only so long as it maximizes their profits. The government can take into account all costs and benefits and appoint a socially efficient level of output even if that means telling companies to produce at a level that will yeild less profit for the private company.

furthermore even if corporations have tarnished reputations, the nature of our global market system allows these companies to simply sell their good elsewhere. Even if their is moral outrage over a companies actions, that doesn't mean that the company is going to be willing to change its tune. Look at Wal-Mart. Accused of many questionable labor and opperating practices, but they still do a lot of business why?

Because:

1.) Consumers lack perfect information about the companies from which they purchase products.

2.) Consumers don't care (or even if they do, not enough to discourage buying) because they aren't the specific people being affected by it and would rather take advantage of lower prices that are a result of such questionable practices.

You seemed to be opperating under the notion that "what's best for society is what is best for private business owners." which to some level will be true (much more so than many liberals or socialists will admit to) but it won't be true to the socially efficient level of output.

It may not be the doom and gloom world that some socialists predict without government regulations everywhere, but it most certainly wouldn't be socially efficient.

[tbone]

Originally Posted by David Octavius

T-Bone, you post entirely too infrequently start posting more! You seem to be a smart guy and I agree with most of the posts I've seen but I must disagree with calling most of the population "stupid". A college degree does not signify, in it of itself, intelligence. I'm sure you know a few politicians who have graduated from top tier schools that seem to be a few pennies short of a dollar.

Moreover, intelligence is a shifty word that has more than one definition. Common sense is a form of intelligence, so is emotion, book learning, theoretical thinking, pragmatic problem solving and creative thinking. I would venture to guess that true intelligence, when looked at collectively in society, should be a combination of all those I just listed plus many more. A society full of theoretical thinkers is just as flawed and "stupid" as society full of common sense thinkers.

The reason I say this is because its a very fine line between government looking out for the best interest of the people with some regulations (which I agree with) to becoming a nanny state. By calling into question the intelligence of the population is to consider that the people are not mentally equip. to handle it.

My view is that the people are, and that although we do indeed need protection for big things like food safety that we cannot do on our own, other things we need to fail at so we can learn from it and apply it to other situations instead of depending on government making a rule for every situation - causing the rise of the nanny state.

Thank you! I used to be a regular poster by 3 kids under 4 and a 60-70 hour a week job has cut down significantly on my time to post.

I agree, neither a college degree nor a high school diploma is a true test of intelligence, however it's really the only measure we have unfortunately. I live in appalachia and may be slightly jaded in this line of thinking.

I also agree, we don't want a nanny state.

I do however think the government has a role in protecting the "average" citizen, however that is defined. I think expecting the average citizen to understand subprime mortgages, predatory lending, and the risks involved is unrealistic. The average joe IMO sees a way to get a house and sees others getting rich off of real estate and jumps at the chance.

Had this average joe not been in this situation, he may have indeed been a contributing member to our country and economy, instead of a drain by having a foreclosed house and declaring bankruptcy.

I'm not saying increased regulation is the answer to every problem we have. Maybe the government puts more money into education and awareness instead of regulation? But I do feel there is a duty on the part of the federal gov't to protect average citizens from predatory and unscrupulous practices, especially when it effects the entire economy.

[lew]

Originally Posted by tbone

I also agree, we don't want a nanny state.

I do however think the government has a role in protecting the "average" citizen,

You can have one or the other, but not both.

[Phantom]

Originally Posted by lew

You can have one or the other, but not both.

Why does it have to be black vs. white?

[ballz2wallz]

Democrats have been in office now for what, 2 yrs? Surely their (in)action has affected our economy in some way? Given the status of our current economy, I'd say more negative than positive.

Or will everyone blame the former Congress for the "mess" that the Democrats have to clean up? Record-breaking earmarks are hardly an attempt to clean anything up.

[kombayn]

Anything the Democrats have tried to pass gets the veto by the President. If they get a filibuster proof congress and Obama is our President then things will start getting done. I just hope that they kick Nancy Pelosi out as the Speaker of the House.

[tbone]

Originally Posted by lew

You can have one or the other, but not both.

It's called a "com-pro-mise," look it up, it would do politicians a hell of a lot of good to learn that one! You don't have to be extreme one way or another, there is a middle ground.

[lew]

Originally Posted by tbone

It's called a "com-pro-mise," look it up, it would do politicians a hell of a lot of good to learn that one! You don't have to be extreme one way or another, there is a middle ground.

It's not about compromise.



It's about the obvious contradiction between wanting a government that isn't a "nanny" government but also "protects" its citizens.


If it protects its citizens, it's functioning in a nanny manner. By the very definition of 'nanny.'

[lew]

Originally Posted by Phantom

Why does it have to be black vs. white?

Because his two choices are black and white.