The use of antibiotics creates a huge negative externality resulting in superbugs, bugs resistant to antibiotics. Taxing the use of antibiotics could solve this problem. Why not tax them, and what are alternative solutions?
Do you have any evidence that's impossible to produce better drugs (and methods) to deal with these superbugs?
Of course you don't, so why are you saying that a tax (which will outright kill a lot of people who could have been saved) is the only solution to deal with the problem?
Sorry, where did I make any of the claims you're attributing to me?
Coase: Why not tax them, and what are alternative solutions?
Why not tax them, and what are alternative solutions?
I hate to sound like a broken record but the market seems like a great solution instead of a tax...
My Blog: http://www.anarchico.net/
Production is 'anarchistic' - Ludwig von Mises
How could the market solve this problem?
You could try the Coase Theorem. I don't see why you're allowed to apply incentives to show that the market will have a tough time handling this, but for some reason don't have to apply incentives to the state. Also, a consequentialist solution shouldn't create more externalities than it solves.
The Coase theorem is George Stigler being silly.
Agreed. It's an empirical question.
On the margins, taxing the use of antibiotics wouldn't. I agree that it's no argument for the state's existence and current activities, but given those....
Coase: How could the market solve this problem?
by creating alteratives to kill bacteria
Coase:The Coase theorem is George Stigler being silly.
Coase:Agreed. It's an empirical question.
Coase:On the margins, taxing the use of antibiotics wouldn't. I agree that it's no argument for the state's existence and current activities, but given those....
Once again you are not asking an economic question, you are using a metaphor. You are also ignoring expectations:
http://mises.org/Community/forums/t/25089.aspx?PageIndex=3
The question you are asking is either a moral or legal question in a void, not in real life and in practice with people who are relevant to the decsions being made - hence the question becomes incomprehensible. We live in a market world, the market IS everything that we can put in context, and we live in a world of expectations where people make their day to day calculations within some form of a market context.
No matter what: the market "solves the problem", and "creates the problem"
"As in a kaleidoscope, the constellation of forces operating in the system as a whole is ever changing." - Ludwig Lachmann
"When A Man Dies A World Goes Out of Existence" - GLS Shackle
Isaac,
That in no way solves the problem of the externality.
Sieben,
Ok.
Clearly one doesn't have to do anything...? You lost me.
Sorry, where did I say that? Maybe I read too much into your initial point. I thought you were arguing that a state creates externalities, so it shouldn't tax antibiotics.
Agreed with OP. Austrians here are using the typical obsfuscation tactics like they love to when the debate doesnt go their way - like denying categorical relevance of topic, rejecting alternative solutions due to methodological distaste (oh noez its an empirical issue we dont deal with this!), rejecting the problem all together(and you guys call keynesians lacking common sense?). Really guys, get real. Austrian economics may have some merit but in this situation government is the solution, its that simple. I bet even Ron Paul would agree with it.
I was waiting for some "real" after you said "get real". It seems the only offering is still smartasses trolling along, trash talking with no "real" ideas at all. I could answer the same way I did the last time a topic on disease control came up. The question is, why would anyone give the time of day? As if there isn't enough of that crap here to bore everyone to death.
Why does it not solve the externality? and how does a tax solve the externality then?
this situation government is the solution
This may be the case (and I suspect it is, in the situation that is trying to be set up) - but that still doesn't mean anything in economics. And if it does it falls in the realm of expectation.
New antibiotics won't change the problem that people don't bear the full costs of using antibiotics. Taxes make them bear more of the cost than they would naturally.
how do you know? It would be nice to go into the future and see what products arise but that is impossible
To be fair, there are also positive externalities involved in antibiotic use as well as intergenerational and uncertainty issues to consider. To make things even more interesting you've also got the whole "how much is a human life worth" issue to solve, which has always been a little tricky. So I guess in this case I'm actually going to have to side with the libertarians on this one - even under a bunch of simplifying assumptions the efficient solution is going to be really, really difficult to find. I'd probably recommend the government staying out of this one. Of course, the government could always provide funding to scientific research on the issue, which seems like a pretty good idea to me if these superbugs are that big of deal.
That said I don't think anybody came up with a satisfactory answer to this one relying on this market to come up with some answer magically smacks of naive dogmatism and saying that the tax will cause people to die really doesn't get the whole externality business. (Of course, when arguing for libertarianism its much easier to assume that the market is totally fucking awesome!)
That said I don't think anybody came up with a satisfactory answer to this one
There will be when someone is genuinely interested and not merely playing eternal skeptic.
"Coase" the poster on this forum (not the actual economist) asks a question:
"What about anti-biotic resistent bacteria? How will market handle them?"
This is only a question someone who does not know economics can ask. This would get you low grades if topic for economic essays. For, it is a question of the sort, which has no relation to economics:
"What about rain? How will the market handle this?"
"What about earthquakes? How will the market handle them?"
"What about gravity? How will the market handle this?"
"What about ugly housing, unpleasant lawns, ugly babies, old people, etc., etc. ?"
"There are neither floods nor hurricanes nor earthquakes nor misery in Socialist Paradise," said Chinese Communists. This was interpreted by them to make no announcement of predicted earthquakes during the Cultural Revolution, resulting in hundreds of thousands of deaths and as many homeless.
This question deserves one or both of two answers to such questions: 1. It won't, and so what? What is it about forces nature and of disasters? What about 2. If it does, only through capital accumulation and better technology in our future. In this case, periodic discovery of new antibiotics or treatments. "There are no externalities," said Mises, "in relation to the world as a whole."
"It is neither the business of government or markets to plant trees on hills."
For, it is a question of the sort, which has no relation to economics: "What about rain? How will the market handle this?" "What about earthquakes? How will the market handle them?"" "What about ugly housing, unpleasant lawns...
For, it is a question of the sort, which has no relation to economics:
"What about earthquakes? How will the market handle them?""
"What about ugly housing, unpleasant lawns...
Wait, how is it that a question about optimal resource use has nothing to do with economics? Actually, all of the issues you raise above are interesting because for the most part in almost any part of the world the government is involved in providing the associated good of water drainage, disaster relief and attractive urban areas.
Listen, government provides these goods, so there should be some prima facie belief that there is some justification for government doing so. Of course, you can work under the assumption of Mises where there are no externalities, but that just isn't true. Me blowing smoke into somebodys face doesn't change any price anywhere in the world, even if it does cause disutiltiy to one or more people. Now, of course, you could argue that this is only true if land is publicly owned and that in the case of private markets every single action would be transmitted through the price mechanism. But, that's an empirical statement which Austrians have nowhere given an adequate answer to (and, its a pretty extreme answer too).
So far in this topic the answers to market problems have been to a) assume that the market is bad ass as can be b) assume the market is totally fucking awesome and c) assume that government is always and everywhere completely useless.
Here's what's so awesome about the externality argument to me: it completely undermines Mises argument about the price system. If it turns out that certain uses of resources aren't always factored into the price system, there's so reason to assume that it's the best way to distribute resources.
^ yeah. I'm just asking a question about the appropriate response to negative externalities, as it can no longer be claimed that the market "works."
Why can't certain uses of resources be factored into the price system? Why can't the use of water be factored into the price system? Or disaster relief? Or attractive urban areas?(attractive to who?). The government fails to provide disaster relief everytime one happens(and even goes as far as to impede private efforts to do so). Are the failures of FEMA after Hurricane Katrina and the problems with the Tsunami in japan considered government failure? If not- then why not?
Why can't the market provide a solution to anti-biotic resistant bacteria? Taxing anti-biotics will simply take it underground, people who have bacterial infections still need them. Taxing the use of anti-biotics to prevent spread of anti-biotic resistant bacteria is a plan to ensure more death.
I'm not saying the market can't, I'm asking for your justification for why we should assume that it will. Look, if you've got good evidence that the market can handle anything throws in its way then please do present it. But in the area of health, the market seems to not have done too good of a job for the vast majority of diseases out there, especially given that this area is ridiculously subsidized. As I've said many a time in this topic, assuming that the market is perfect is obviously going to lead to the conclusion that the market is perfect, but it's a shitty argument.
And please people, do try to understand the whole argument that the OP is making. Of course taxing anti-biotics is going to reduce their usage and cause an increase in deaths that could have been prevented by their use. That much is micro 101, the difficult part is that there is some efficient level of deaths that we might well currently be above. And if we were to reduce those deaths we might well prevent a whole load more deaths in the future.
That's not quite what I said, I said that the government currently intervenes in these areas in almost every society in the world. So why shouldn't we assume that there's a good reason for the government doing so? Look, if it were true that the areas in which government intervened could either be explained by strategic reasons or were randomly distributed then I'd agree this argument sucked. But as it is there's plenty of areas where the government intervenes basically everywhere. So I think it's quite plausible that this came about because the market couldn't do it.
Water drainage possesses economies of scale and public goods properties, attractive urban areas have public good properties and pecuniary externalities. Disaster relief is tricky and not one I know a whole deal about, so I'm not going to try to get into it.
Coase, like I said, I think it's a tricky issue because of uncertainty issues, positives externalities, intergenerational concerns and the like. So I think that the appropriate response depends on a number of variables, amongst which I think a) likelihood of this becoming a significant problems b) timing of this becoming a specific problems c) size of the potential problems d) size of positive externalities in antibiotic use and e) likelihood of us finding a solution.
If it turns out that there are large positive externalities in antibiotic use (seems likely to me) then maybe Pigovian taxes wouldn't be such a good idea. Likewise, if it turns out that through scientific research we can find a solution to the problem and that this is quite likely to occur then maybe we should just subsidise research on the area. On the other hand, if it turns out that there's a large probability that this turns into a signficant problem and science won't have much of an answer, then maybe Pigovian taxes are the way to go.
Coase: The use of antibiotics computer anti-virus programs creates a huge negative externality resulting in superbugs, bugs computer super-viruses/worms/bugs resistant to antibiotics anti-virus programs. Taxing the use of antibiotics anti-virus programs could solve this problem. Why not tax them, and what are alternative solutions?
The use of antibiotics computer anti-virus programs creates a huge negative externality resulting in superbugs, bugs computer super-viruses/worms/bugs resistant to antibiotics anti-virus programs. Taxing the use of antibiotics anti-virus programs could solve this problem. Why not tax them, and what are alternative solutions?
Look, if it were true that the areas in which government intervened could either be explained by strategic reasons or were randomly distributed then I'd agree this argument sucked. But as it is there's plenty of areas where the government intervenes basically everywhere. So I think it's quite plausible that this came about because the market couldn't do it. Water drainage possesses economies of scale and public goods properties, attractive urban areas have public good properties and pecuniary externalities. Disaster relief is tricky and not one I know a whole deal about, so I'm not going to try to get into it.
Governments everywhere intervene in currency markets- is this because markets can't handle currency? More and more governments are getting involved in regulating the internet- do they really have a good reason to do so? I'm not really satisfied with the argument that because the government has been involved in something for X amount of time in X amount of countries that translates to market failure. Seems to me more like that those are the types of things where the government can exercise mass control and force the most people to be subservient and dependent on them.
What public goods properties do attractive urban areas have(and again who are they attractive for?). There's plenty of ugly to be found in government created structures and towns for me personally- I don't really understand this perhaps you could clarify.
On the other hand, if it turns out that there's a large probability that this turns into a signficant problem and science won't have much of an answer, then maybe Pigovian taxes are the way to go.
Obviously science is the only thing that will have an answer- but besides that- why the assumption that taxes will prevent widespread anti-biotic use? It never will, people who need anti-biotics will get their hands on them no matter what they have to do. It'll certainly increase crime and cause more human misery than the proponents of such taxes wished to prevent.
EinT, Coase, ponder this:
Markets solve problems of/in reality. Bureaucrats solve problems of/in models of reality. The fatal conceit is the one of humans equating models of reality with reality itself. Expecting to know how markets could solve problem X, implies arrogance about how close one's model of reality is to reality itself.
Why are questions of following sort not subject matter of economics or science?
"What about ugly housing, unpleasant lawns, ugly babies, ugly people, unkillable bacteria, and so on"
What do these questions have in common?
Point 1.
Whatever is not capable of being produced is not any economic good. How does government or anyone else "provide" "rain" when people want "rain" and cute babies instead of ugly ones? It does nothing of this sort; on the other hand, people can produce more or less potato chips and computers.
Potato chips and computers are goods. Rain, ugly babies, antibiotic resistent diseases and so-called "externalities" are disasters.
No; rather government does something else when it claims to "provide" externality-related "goods" (point number 2.)
Point 2.
There are no things with effects external to the whole world and all its people, says Mises. This is merely most famous saying in all economics: there is no free lunch. Someone pays. Guyot said it earliest: somebody always pays.
In all cases, somebody already pays for goods on market: people who buy them, if they are sold, or people who produce them, if they fail to be sold.
In same way, somebody already pays for disasters, in our whole world.
In all cases, effects external to cause are paid by somebody; always. In most cases, these effects are not even caused by people, e.g., bacteria or rain or earthquakes or ugly babies.
Government merely uses force to change who pays, say, by causing other people totally unaffected to pay costs of someone losing their crops to floods. Government contributes absolutely nothing to "correcting" problem of disasters, because neither government or markets have disasters under their control.
So what? So why should other people pay? We can affect quantity of goods and who pays for them. We cannot affect quantity of disasters, merely who pays for them. But why should government change who pays for disasters?
What you "externality needs government to correct"-people are arguing about is:
who pays, which is value judgment.
Why, you say, government can provide pretty building and cute babies and rain, because it can:
a) tax companies in favour of tourists.
b) tax mothers in favour of onlookers
c) tax all people, instead of letting costs of flood or dry season fall exclusively on farmers, as they normally would.
This does not produce anything. This merely says some people must pay instead of other people who would otherwise pay, depending on whose votes are more numerous.
Science does not deal with value judgments. Values are just A, B, C, ...
Markets do not fail, if people you like have to pay for disasters, as opposed to people you dislike. Maybe your making the value judgment, personally, when you say markets fail to provide for disasters?
Gravity does not cease to apply to objects in physics when a baby is falling out a window as opposed to when a rock falls out a window. Neither imply gravity is "bad." In both cases, these things go "crunch" when they hit the sidewalk. No more. No less. (William Sumner's famous example).
Scientists do not say this is good or bad, they merely say it will happen if things get chucked out of windows. Scientists do not "side" with the babies against gravity. Since: gravity is neither "good" nor "bad;" rather, scientists say: "don't throw babies out of windows, dummy."
When rain, cute babies, pretty lawns, sunrise, earthquakes can be actually produced or not produced, as opposed to something merely endured by humans, i.e., when technology--additional capital--makes these things themselves capable of being actually changed, then the market deal with them and they enter the province of economics. When this happens, they are treated as economic goods just like computers and potato chips. By markets. Not by government. Government redistributes, but never produces anyything, either way.
I'm rather amused that the best argument against a tax comes from a non-Austrian. In any event, I agree with the points EiT made regarding the tax.
z1235,
Yes, there are many other negative externalities.
thelion,
It's an issue of optimal resource allocation.
nanotech solves.
"Its an optimal allocation issue."
Allocation is NEVER separated from production, if this is max-min situation; max results for min effort.
And when cost falls upon people from the sky, who cares who pays. There is no optimal solution, merely redirection of costs "to or from farms, builders, patients, etc." There is no sufficient reason, unless personal preferences or "morals," on moving this cost any way at all.
There is no max-min problem here, so optimality never touches allocation when it is separate from production.
VALUE JUDGMENT. Not part of science. Not part of mathematics.
(Read Ludwig Pohle, 1911.)
Let pay whoever is affected by disaster. To say that I owe you money because hail broke your roof is pure value judgment. Of course market has nothing to say on it, and neither does science. Unless technology exists to regulate QUANTITY of hail fallling on your roof. In which case, market deals with this quite well.
Another way to think about this: there is no question of optimal solution, because quantity of cost is always fixed. There is no maximization. There is no minimization. Goverment never changes quantity of "externality;" it does not discourage, but merely causes other people to pay what other people would have paid.
You do not discourage rain or earthquakes by taxing people to cover damage incurred by other people. You do not discourage ugly building by taxing them, you merely cause other people to pay for putting up ugly buildings than normally would. VALUE JUDGMENT.
When technology permits, market, then, really does minimize cost and maximize want-satisfaction. But only then.
Coase: Yes, there are many other negative externalities.
What's (your definition of) a negative externality? Did you just suggest that anti-virus software be taxed (banned?) because it results in the 'negative externality' of stronger computer viruses?
Negative externality is a consequence of an action that affects someone negatively who is not party to the decision. And yeah, tax that. Not ban.
I have to say, I find it a little odd that an Austrian is arguing that price changes won't cause people the change their economic behaviour. It kinda belies the whole Austrian argument about the efficacy of markets! Of course, what I think you're saying is that the demand for antibiotics is relatively inelastic, which seems quite likely.
Listen, I agree with you that the tax is a bad idea, and personally I think you raise a good point about the elasticity of demand for antibiotics and other unintended consequences. My main point is that our armchair speculation won't solve this, but that it might be possible for some economic theory combined with empirical data to find some sort of solution, I don't think writing taxes out of the question with some half baked arguments against externalities is the wya to go though!
I actually do think that governments should intervene in currency markets! But this isn't an argument I want to get into right now. I don't think you got my point though, I'm not saying that a government intervening in an area proves that the market has failed, but I do think that it does warrant the presumption that the market has fallen short of the mark in that area. Look at packaging requirements, whatever you think of them, there's been an pretty steady trend that as what goes into our food becomes more complicated governments have responded by stepping in and mandated list of ingredients etc. Now, you might think this is a bad idea in general, but there is an economic argument in favour of it in terms of asymmetric information.
I suppose the obvious answer is that attractive urban areas possess both public goods properties to some extent: non rivalry in consumption and non excludability. What I mean is that if I expend a lot of time making my house exceedingly attractive (thereby pushing up property prices in the surrounding area) then I've provided a good to others. Of course, this happens less than would be optimal because the incentives aren't there for people to do this.
You're equivocating, markets solve a very narrow problem of profit maximisation on behalf of individuals. Now, there will be times that this solution falls largely in line with the type of solution we're talking about. Assuming that this is the case from the get go is just another instance of libertarians assuming their conclusions: markets are awesome!
The type of solution we're talking about is an ideal solution about resource allocation under unfavourable conditions. Yes, of course, there will be all sorts of considerations mitigating against this hypothetical solution working in practise. And if they're large enough that would suggest a policy of non intervention in this specific case. But... the reality is that by most economists' yardstick the government has done a good job in a number of instances. Either way, whether or not we can implement these ideal solutions, or at least approximate them, doesn't mean that we shouldn't try to find this solution.
At the end of the day, as usual, we need empirics and theory...
I have to say, I find it a little odd that an Austrian is arguing that price changes won't cause people the change their economic behaviour. It kinda belies the whole Austrian argument about the efficacy of markets! Of course, what I think you're saying is that the demand for antibiotics is relatively inelastic, which seems quite likely. Listen, I agree with you that the tax is a bad idea, and personally I think you raise a good point about the elasticity of demand for antibiotics and other unintended consequences. My main point is that our armchair speculation won't solve this, but that it might be possible for some economic theory combined with empirical data to find some sort of solution, I don't think writing taxes out of the question with some half baked arguments against externalities is the wya to go though!
I don't think writing taxes in with pretty much NO argument as to why they'd work is the way to go. What is the claim? That raising taxes on anti-biotics will lead to people choosing bacterial infections and death and this will help stop the spread of anti-biotic resistant bacteria? I am blind to see how this passes for a positive solution.
Of course, absolutely it'll cause people to change their economic behavior- people will spend less on other goods so they can afford anti-biotics. If they can't do that, they will steal or go through the black market to obtain it. Anti-biotic use isn't an expense that people can forgoe like buying a different set of clothes. I mean its obvious you already understand this, but you are still holding onto it so I'd ask if you could please explain in what situation a tax on anti-biotics could help give the result you want? Taking into account any unintended consequences.