“Be kind, for everyone you meet is fighting a hard battle” - Often attributed to Plato but likely from Ian McLaren (pseudonym of Reverend John Watson)

Sunday, May 31, 2009

Letting the market do it

I've reiterated my small "l" libertarian leanings (see here for example) on many occasions. Therefore, it would be reasonable to assume that I would be sympathetic to an argument such as the one presented by the Mackinac Center for Public Policy. This is a more focused example of the market oriented philosophy that would also look to market solutions for greenhouse gas emissions, peak oil and its consequences, and pretty much any other issue.



And I am sympathetic to these arguments. But I've come to believe that the market is incapable of providing solutions within the time frames that are relevant to these problems. Many of them, in particular, peak oil (and peak pretty much anything pertaining to natural resources), anthropogenic global warming, and ocean acidification are in this category. The "purchase decision" for solutions to these problems (assuming that solutions even exist) must be made far in advance of any obvious benefit of the purchase. This is one ingredient in a recipe for market failure.



Further, the "market" is dependent on the efficient and accurate transfer of information. Anyone who searches the internet for "anthropogenic global warming" will be bombarded with conflicting information presented as absolute fact. It's almost necessary that he or she become an expert to sort through the noise. And this is not unintentional. The professional noise makers are well aware that destroying the efficiency of the information systems upon which those who make the purchase decision rely is a recipe for maintaining the status quo. This is, of course, their aim.



It's not impossible for purchasers (in this case, the electorate and the population as a whole) to make long-term decisions at short term pain, such is the case for 401K plans, IRA's, insurance purchases, and others. The difference is that (relatively) accurate information about the costs and benefits is available and that someone can make money by providing both the information and the product. Such is not the case when the product is greenhouse gas reduction and reduction in rates of energy utilization, or, to a lesser extent, an increase in vehicle fuel economy. These are, in my opinion, clear examples of market failure.



My friend Michael, over at Only In It for the Gold, is struggling over the failure of the market to provide accurate information. He's a climate scientist and an expert in geophysical modeling. The information gap has become so important to him that he's considering changing his career direction in an attempt to close it. I wish him all success and recommend my readers follow him. There's a link in my blog list at the right side of this page that captures his latest posts.

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