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How does the Free-Market protect environmental waste?

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matthewloewen posted on Tue, Oct 25 2011 5:00 PM

In terms of externalities, how can the free market stop a company from exploiting its workers overseas, or dumping toxic waste into a river? In Alberta we have a huge problem with the tar sands. Vast sections of that province have been stripped, water dirtied etc, with little effort on part of the companies working there to clean up their mess. Yet, as a consumer, I should stand up against this. But I don't, and I am a person who knows about this problem. Is that not a failure in the free market?

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The market has pollution. Failure of the free market. Ergo, we should not have a free market.

 

Hitler killed millions of people. Failure of the state. Ergo, we should not have a state.

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Bert replied on Tue, Oct 25 2011 5:20 PM

Law, Property Rights, and Air Pollution

I had always been impressed by the fact that there are a surprising number of individuals who never use their minds if they can avoid it, and an equal number who do use their minds, but in an amazingly stupid way. - Carl Jung, Man and His Symbols
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how can the free market stop a company from exploiting its workers overseas

Don't buy products which haven't been certified fair trade.

dumping toxic waste into a river

Easy: property rights

Vast sections of that province have been stripped, water dirtied etc, with little effort on part of the companies working there to clean up their mess.

What greater right to the land do you have than the companies?

 

as a consumer, I should stand up against this. But I don't, and I am a person who knows about this problem.

Seems like you should be regulated, not companies.

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No, in a free market all area could be owned. This would include rivers and people would likely not want their rivers being polluted. It is the government that stops rivers from actually being owned.

Furthermore who's currently supposed to be looking out for the environment? The government. Who is failing you? The government.

Finally we do not live in the free market.

At last those coming came and they never looked back With blinding stars in their eyes but all they saw was black...
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Welcome to the forum, matthewloewen!

matthewloewen:
In terms of externalities, how can the free market stop a company from exploiting its workers overseas, or dumping toxic waste into a river? In Alberta we have a huge problem with the tar sands. Vast sections of that province have been stripped, water dirtied etc, with little effort on part of the companies working there to clean up their mess. Yet, as a consumer, I should stand up against this. But I don't, and I am a person who knows about this problem. Is that not a failure in the free market?

Even under a state, there's no way to guarantee that no business will ever exploit workers (overseas or elsewhere) or dump toxic waste into a river. So I think it's unrealistic - if not unhealthy - to think otherwise.

With that said, I daresay a major problem with the Albertan tar sands is that the province of Alberta owns them. Per Wikipedia: "The Constitution Act, 1867, Section 109 ensures the province full ownership of the lands and resources within its borders." The provincial government is apparently unwilling to hold companies responsible for the pollution they cause in and around the Albertan tar sands.

On the other hand, it's not a market failure if something is "uneconomical" to do because "too few" people want to do it. That's like saying the fact that a new Chevrolet Corvette costs around $50,000 or more constitutes a "market failure".

Hope this helps!

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Non parit potestas ipsius auctoritatem.

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Everybody, thanks for posting your responses.  I think they are awesome.  If you must know, I did not propose this question, my cousin did.  I answered him almost as appropriately as you guys have, but I just wanted to amuse myself and see how everyone else would respond.  I agree that this is more a failure of government than the free market, if you would define it as a failure at all.

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The question boils down to this. We hear of atrocities that (supposedly) the free market creates. We become furious. How could these companies do these things? Dirtying up those pieces of land and leaving them a mess?

Well, what's it to you? Was it your land? No. Did you have investments in the land? No. Just because you sit hours in front of the TV, does that mean government should shut off your TV and prod you into a gym and make you study Plato and Kant so that you can become a better person, because you waste your life away? No.

It comes down to this: unless it's yours, you have no formal power over it. Just as gyms can't force you to join them, you can't force companies to stop destroying their own land.

If you care, you will try to attain a change in consumer tastes. You will get people to stop doing business with these companies.

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matthewloewen:
In terms of externalities, how can the free market stop a company from exploiting its workers overseas, or dumping toxic waste into a river? In Alberta we have a huge problem with the tar sands. Vast sections of that province have been stripped, water dirtied etc, with little effort on part of the companies working there to clean up their mess. Yet, as a consumer, I should stand up against this. But I don't, and I am a person who knows about this problem. Is that not a failure in the free market?

If everything is owned by someone, there are no externalities. You dump waste into a lake, the owner is going to sue you. You dump toxic waste anywhere, and somebody is going to complain about it. Pollution as such only exists where property rights don't. It is not a failure of the free market, but lack of it.

The free market stops companies from exploiting it's workers overseas the same way it does at home: through competition. Employers have to compete for labor and employers that treat their employees nicely will have to pay them less. Better conditions are simply a way to pay workers, and pay is a function of productivity. Therefore, conditions get better when workers get more productive. (Also because all the stuff we produce means we can afford the luxury.) The reason developing countries have such horrible working conditions is that they lived under socialism for a longer time than the west, which means they couldn't develop their economies, which means that they are less productive.

"They all look upon progressing material improvement as upon a self-acting process." - Ludwig von Mises
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What constitutes exploitation of workers in your view?

As for river pollution, the free market is a socioeconomic system based on property rights. All the individuals and businesses that are located near a river and have been using it as a source of clean, fresh water have acquired a property stake in the (clean-ness of the) river. One single actor can't just start polluting the entire system as it would violate the property rights of all the other users.

The fact that Alberta has these problems indicates that property rights are not clearly defined or not defended by the courts. It has become a mixed economy, and dirty wastelands are the result.


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Well of course, this environmental destruction is occuring under our current system which is failing the environment.

Since preceding comment have laboured the point of property rights, I will switch tack. Economic growth is another solution.

Firstly, more growth means more efficiency and less waste per unit of output. Secondly, economic protection is an economic good. Poor people in, lets say, Africa have little if any involvement in environmental protection because they simply can't afford to. They are more concerned with goods higher on their value scale, i.e. food, shelter, etc.. The reason we can devote time and money to environmental protection is because we have satisfied all our higher valued goals on our value scale. Thus, only because of our greater productivity can we devote our own resources to help the environment.

'' The greatest enemy of knowledge is not ignorance, it is the illusion of knowledge.'' Stephen Hawking

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Bert replied on Tue, Oct 25 2011 5:55 PM

This reminds me of a documentary I watched on Netflix called Water (I think that's the name...).  Anyway, the documentary talks about 3rd world countries and what's happening to their water supply, and even though I had some problems with the documentary there was one example that couldn't be more perfect.  The documentary shows how private businesses and corporations, even foreign to those countries, get control of the water, delay very beneficial projects, and charge them more for the water compared to their local governments.  It does show a reality of what's happening, but it'll make the layman assume that's that, and in reality there's no way that could happen without those governments being paid off and letting it happen for their own benefit, and that those people do not really own their own resources.  Now, there was one part of the film where Nestle got some contracts to pump water from a local reservoir to sell (this was in Michigan I think), and what happened to those neighboring those streams that benefited from those streams?  The water stopped.  The townspeople took Nestle to court and that they wanted them out and to stop pumping the water (they are pumping the water, paying no one to do so, and selling it - to them they are profiting from their resources, but of course it's the local government who owns the lake).  What happened was sort of unbelievable and believable at the same time, after weeks (or months) and taking them to court at first they were not allowed to pump, then the local court decided they can pump, and were allowed to pump through the trial, and continue to pump.  All the townspeople who used those rivers wanted Nestle out, and their local government said otherwise.  This is the most blunt example that those governments will be lobbied or bribed to pay into outside interests, so even when the local government had ownership (and the government suppose to represent it's people) they literally sold those interests down a river that dried up.  The townspeople got nothing.

I had always been impressed by the fact that there are a surprising number of individuals who never use their minds if they can avoid it, and an equal number who do use their minds, but in an amazingly stupid way. - Carl Jung, Man and His Symbols
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Interesting point: Standard Oil, the mythical "big baddie" of the "laissez faire" capitalism at the turn of the century was actually quite environmentally-friendly. They rose from a hectic market which only made use of some of the products made from petrolium and were able to extract many other useful materials from the raw good than the smaller competitors. They sought to minimize waste (and hence costs), and whenever there were leaks in their barrels here and there they rushed to fix them (lost revenue) and called independent agents to verify their work. Environmentalism + self-regulation.

Just more evidence that antitrust policies hurt environmentalism.

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Indeed. Oil companies don't want oil spills. But at the same time, they'll be happy to let others pay for them when they do occur.

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