(11-06-2013, 10:10 AM)eppie Wrote: OK, great, so why is it we still don't include costs of destroying our planet and valuable resources such as biodiversity in the price of things? Is it that economists don't agree on this or do they find other things more important?
This is the question of externalities, one of the oldest questions in economics. It arises when the effects of the actions of agents are not limited to consenting parties. This specific version trades under the name "tragedy of the commons," and has since the days of Adam Smith.
Why do we not include the price of externalities in goods? We try, but it's really hard. Specifically, it's hard in terms of contract specification. How do we come up with these prices? To whom are they paid? Who benefits, but doesn't have to pay (free riders)? Economists have spent an unbelievable amount of time studying these questions.
Everything I do affects everyone around me. If I buy a park and turn it into parking, my decision to pave paradise and put up a parking lot improves some peoples' lives quite a bit (mine, my family, people who want to park in my lot) and harms others by a little (people who liked the trees, people who breathe oxygen) and had an ambiguous effect on others (homeowners and businesses nearby).
So, if I want to do that, whose permission do I need? What title, what license, what agreement must I have? Do I need to mail out cheques for 0.00000000001 cents to each and every person on the planet for destroying 1/1000000000000th of the global biodiversity? Is there some national or international group that regulates this? Who gives them the authority, and how do they exercise it? The problems get very tricky, very fast.
Mostly, we just give up on internalizing externalities, and just regulate things. Thou shalt not. But then you have to coordinate across borders, which we are notoriously bad at.
Quote:I mean market economy is only possible when we wouldn't influence the place we live...for continuous growth you need a more or less infinite source of energy and raw materials. Wind and solar energy would fit in this picture, and our economy will be based on that in time.....but why is that process going so slow, I mean if economists tell us we should?
Is there some other economic system that overcomes the 2nd law of thermodynamics, that functions forever and frictionless?
Wind and solar power must be built, installed and maintained. The people who do the manufacturing, installation and maintenance need to eat, live somewhere, and not freeze to death. That means they need houses, which means materials. They need to eat, which means food. They need to be taught how to do these things, which requires schools, which requires buildings and teachers and materials. These things must stand in some priority to one another. Things have prices, if only implicitly, and once you are exchanging things at prices, you have a "market economy" of some kind.
Most economists are not energy economists, and they're certainly not engineers. It is not their job to decide what power plants to use. It's their job to figure out incentives and effects - IF we want more solar, how do we make that happen, and how will that change the rest of the economy?
If you're wondering why the transition to solar is going slowly, you don't need an economist. You need a political scientist. Mark Jacobson at Stanford, probably the biggest booster of a 100% renewables power grid, did some calculations on price. We're talking about roughly $100 trillion dollars installation over the first 10 years, plus maintenance afterwards. That's a completely insane amount of money (10% of total global production!) and I think it's still a serious underestimate. But the reason we don't do it, is because we don't want to pay that price. If you think we should, then take it up with the people who make the decisions about how to tax and spend: Governments, not economists.
-Jester