Yay, We're Saved. UChicago Economists Discover "Externalities", Invoke Friedman On Climate

[hatrack]

EDIT

Two current economics professors elaborated on Friedman’s view and applied it to the 21st Century problem of human-induced climate change. “What’s happening when we turn on the lights, when the power is derived from a coal plant, or when we drive our car, is that carbon dioxide is emitted into the air, and that’s sprinkling around damages in Bangladesh, London, Houston,” said Michael Greenstone, the Milton Friedman Professor of Economics at the University of Chicago and the director of the Energy Policy Institute of Chicago.

“And those costs are real, and they’re not being reflected in the costs of that electricity or the tank of gas. Emitting carbon dioxide into the atmosphere does allow you to produce electricity more cheaply, but there’s a whole other set of people who are being punished or penalized. It’s a poor idea of economics.”

Greenstone and Steve Cicala, an assistant professor in the Harris School of Public Policy, argued that the market for energy operates without accounting for its full costs — without compensating people throughout the world who experience damages caused by the emission of greenhouse gases during the production of energy.


Ed. - Yeah, no shit Perfesser . . .

Cicala defined an “externality” as an effect on a third party caused by the mutually beneficial exchange that occurs in a free market. For example, there’s a benefit to the power company when it produces electricity and sells it to the consumer, and there’s a benefit to the consumer when electricity is available for purchase. But when a third party not participating in that exchange suffers costs without compensation, the market has produced a negative externality.

EDIT

http://www.forbes.com/sites/jeffmcmahon/2014/10/12/what-would-milton-friedman-do-about-climate-change-tax-carbon/

[jwirr]

1. Oh, Lord, please save us from ourselves. I had hoped that these people would have given up on the

Chicago Boys games. Of course they are right but the place on value on the right thing to do and not do. They leave the third party hanging.

[unblock]

2. re-discover might be the better term. some of us have been talking about externalities for decades.