In a pure free market, what incentive is there for a profit-maximising firm to invest in costly new technologies such as green technology or more fuel efficient energies? Surely there is a place for government to subsidize investment in these new technologies?
Why would a firm invest in something which brings primarily positive external benefits but nearly no internal ones?
If a firm can't make money off of it, then it shouldn't be the one inventing it - that would be bad business. If there are truly positive benefits, then there is profit in it for someone. In the case of green energy, the profits are in finding a more efficient and sustainable energy source, which, as fossil fuels become more scarce, will become cost-effective. In a true free market, if it isn't cost-effective now, it means the time hasn't come for the technology. This would, however, require that the just costs of business (such as pollution) fell on the appropriate parties (i.e., the polluters). In our current system of injustice, that is not the case. A free market in private law would fix that.
Right, because free market firms don't ever invest in cleaner energy sources. They still use lumber and peat! Cleaner technologies are only developed in socialist countries, where they use much cleaner energy than in capitalist countries!
In the case of green energy, the profits are in finding a more efficient and sustainable energy source, which, as fossil fuels become more scarce, will become cost-effective.
It has little to do with fossil fuels becomming scarce. Fossil fuels aren't actually becomming more scarce. We're not using natural gas instead of lumber now because we ran out of lumer, but because natural gas is more efficient than lumber. Saying that a energy source is cleaner is just another way of saying that it is more efficient, so the free market provides a natural incentive to use cleaner energy sources. In the last 150 years, energy sources have been getting progressively cleaner and less carbon intensive. Coal is cleaner than peat and lumber, oil is cleaner than coal, natural gas is cleaner than oil, and nuclear is cleaner than natural gas. That has been a progress in the free market, before social engineering do-gooders were even aware of the topic. Now suddenly they proclaim only socialism can provide cleaner energy, the free market couldn't possibly do that. This is so far removed from factual reality that it's getting funny. Anticalitalists are grasping for the last straws in their attempts to find something wrong with the free market after the utter defeat of socialist ideology.
And the whole notion of "sustainable" energy is religious nonsense. All energy forms are perfectly sustainable, the question is how much effort it requires to produce it.
You've just strawmanned the whole argument, in fact you should probably be a spokesman for big oil.
Take for example biofuels. Where is the incentive for a firm to invest in biofuels when there are far more efficient (but more polluting) sources of energy out there already? Why should it compromise its profit making to 'act green' so to speak? Firms don't take into consideration the external benefits, only the internal ones. Its not in a firms interest to look for more sustainable energy sources, so the government must provide incentives to do so.
So, in a free market, where is the incentive say for firms to invest in alternative energy sources?
RonPaulLol: Where is the incentive for a firm to invest in biofuels when there are far more efficient (but more polluting) sources of energy out there already?
Where is the incentive for a firm to invest in biofuels when there are far more efficient (but more polluting) sources of energy out there already?
You are not reading carefully. Current sources of energy are more "efficient" (while more polluting) exactly because property rights are not being respected. In a system of private property and free markets, the price of each energy source would reflect the damages (torts) to which the polluter would be exposed by property owners damaged by his pollution. The current system of "public" ownership and pollution laws (corporate privileges granted by the state) prevents the free market from pricing the pollution damages into each product. IF all effects (external and internal) were priced in, then there would be true market demand for more efficient alternatives. "Green" is inherently good and "efficient" in a free market exactly because the "non-green" options would simply cost too much in tort and damages -- not because everyone must be made to hug and kiss trees.
As I said in the other thread. You are simply ignorant of basic economics.
In a free market, firms can be sued for pollution (just like they were before the progressive courts decided that wasn't in the national interest back in the early 20th Century). That's the obvious incentive. Being first on the market for a new, more efficient fuel is another great incentive.
What incentive does the government have?
The consumer controls what the free market produces - not the manufacturer. The manufacturer makes whatever it is the consumer wants, within the constraints of what is profitable. If the consumer wants a certain type of product, it become viable for someone to investigate how to make it.
You think the voter comes down with a case of unusual common sense, foresight, intelligence, wisdom and knowledge on voting day, such that they will vote for a government which will persue the best economic central plan, concerning environmental worries or whatever else is important to the voter?
Why can't the same voter, who has to go shopping every single day, just choose to spend money on products which are 'environmentally friendly', or whatever it is they want out of them?
Is this really about imposing the preferences of a minority onto the majority?
Are you really asking, "What if I have this theory about the end of the world that most people do not think is true. I happen to know that if they stop using certain every-day staples and products that they really like, the end of the world won't happen. Because I do not have the capacity to convince, and they don't have the capacity to listen, I am worried that they will keep using these products, and the end of the world will happen. Am I entitled to put a gun to their head and force them not to use these products, because they won't do it voluntarily, and no one will believe my theory?"
Big oil would hate what I say, they want more government intervention to cartelize the market. The whole climate scam was their idea.
Biofuels are hugely inefficient, some studies even suggest that there is a net energy loss. That means it requires more fossil fuel energy to harvest, ship and process the crop than you get out of it. That's why there is no incentive in the free market to develop biofuels, it's a wasteful racket that only exists because of taxpayer subsidies for the wealthy corn lobby.
There is no trade-off between profit and environmentalism. Environmental improvement happens when it is in the interest of their profit motive to develop cleaner energy. As for example the switch from lumber to coal, or that from oil to natural gas shows. Companies did this because of profits. Yes? Then obviously the empirical facts show that the free market does lead to cleaner energy. For centuries the free market has sucessfully provided cleaner energy, but suddenly socialists proclaim that the free market couldn't possibly provide cleaner energy? Would you people just fricking look at the empirical facts.
The use of greener energy has always been a result of progress in the free market, and to the degree that environmental socialism wastes societies resources and makes us poorer, it delays the progress of cleaner technologies. So far the net effect of environmental socialism has been environmental destruction. For example the anti-nuclear energy movemnet has led to a greater reliance on coal. And subsidies for biofuels (the kind of incentives you want more of) caused a lot of rain forest to be destroyed.
In a free market externalities would be compensated, it is the current government monopoly legal system that protects polluters so they can externalize their costs.
As I mentioned, the whole notion of "sustainability" is religious nonsense that makes the ridiculous assumption that current resource stocks should last forever without any changes. But obviously there will be changes in the future, resource stocks are replenished. It is as if we had gone through extraordinary lengths in the late 19th century to make the use of horses possible into eterntiy. Which would have been silly. It's nonsensical to impose some sort of self-rationed poverty in the name of making consumption "sustainable".
RonPaulLol: In a pure free market, what incentive is there for a profit-maximising firm to invest in costly new technologies such as green technology or more fuel efficient energies? Surely there is a place for government to subsidize investment in these new technologies? Why would a firm invest in something which brings primarily positive external benefits but nearly no internal ones?
The market invests in oil drilling even though that takes years sometimes decades to pay off. That doesn't require government subsidies. The market also invests in auto manufacuting plants, and that's a huge risk that also takes years to pay off. That doesn't require government subsidies.
If the market can do these things, then why not research?
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"Take for example biofuels. Where is the incentive for a firm to invest in biofuels when there are far more efficient (but more polluting) sources of energy out there already? Why should it compromise its profit making to 'act green' so to speak? Firms don't take into consideration the external benefits, only the internal ones. Its not in a firms interest to look for more sustainable energy sources, so the government must provide incentives to do so."
You answered your own question by asking it. Firms want to maximize profit and if pollution-intensive forms of energy are more efficient (partially because firms don't have to pay the costs of pollution), then that's what they'll invest in. Pollution aside, that is a good thing for society. If so called green energy isn't profitable then it's a waste of resources. Opportunity cost is everything.
That said, the cost of pollution isn't borne by energy producers or consumers so it's hard to tell whether or not it would still be profitable if the market were really free.
You've also alluded to the fact that firms won't invest in something that brings external benefits with no internal ones. This is true, but might lead you to believe firms won't invest if they expect someone else to copy what they've researched. Terrence Kealey has done a lot of work on the economics of science and how firms spend on R&D. He found an OECD report that stated that it costs about 60% of the original R&D cost for a new company to copy that technology. However, in order to have the ability to copy others' technologies, you have to already have the facilities and staff trained and doing research in the relevant field. This basically means you have to invest in new technology in order to be able to copy another firms R&D, so companies that want so called second mover advantages have to also be aiming at first mover advantages.
"You've just strawmanned the whole argument, in fact you should probably be a spokesman for big oil."
Uhh was there even an argument presented? It seemed like pure assertion to me.
The funny thing is, in a free market if you feel that some technology should be invested in you're free to go ahead and do that. Maybe then you'd figure out why others might not be doing the same thing or you'd make a ton of money.
It's a question begging the question. Maybe the externality is not so positive as hippie tree-huggers feel. Maybe it is and the lack of environmental forensics leaves a hole in disincentive structure.
RonPaulLol:Take for example biofuels. Where is the incentive for a firm to invest in biofuels when there are far more efficient (but more polluting) sources of energy out there already? Why should it compromise its profit making to 'act green' so to speak? Firms don't take into consideration the external benefits, only the internal ones. Its not in a firms interest to look for more sustainable energy sources, so the government must provide incentives to do so. So, in a free market, where is the incentive say for firms to invest in alternative energy sources?
This is the problem with your entire premise. You're operating under the assumption that the government knows more about what the people want, than the people themeselves. Or, at least, that the government knows what's best for people, better than the people know themselves (and that the people in government not only have the authority, but the duty to force everyone else to do what the people in government think is best.)
These are a lot of assumptions, and quite frankly, they're quite dangerous, if not downright idiotic.
Below are some resources which comment on the subject of the environment in a free market:
thanks for the replies and links.
how will property rights be assigned to the atmosphere and oceans in a free market. if a company pollutes, causes acid rain and this comes down over a million houses, how will they pay compensation to these million people? how can you prove that the acid rain was caused by them? if a company dumps their waste in the ocean, who will collect the damages? who brings the case against the company?
furthermore, without government subsidies, what incentive is there for scientists to research fields such as climate and global warming? who provides the funding for this, and how can we tell that they do not have an agenda?
(i havent gone through the links yet, so i dont know if any of the above questsions have been answered yet.