08 December 2009

Do what you will. Accept the consequences.

Last winter LabRat wrote an excellent manifesto of sorts which included the following:
Atomic Nerds | LabRat | These Things I Believe

There is only one natural right: to do as you will. There is only one natural duty: to accept the consequences. The rest of society is a negotiation from this starting point, from contract law right on up to the death penalty.
This is obviously a lesson which Mr. Terrance Watanabe of Omaha, NE needs to learn. Watanabe is coming off what is believed to be the biggest loosing streak in Las Vegas history, having lost $127 million. He personally accounted for 5.6% of Harrah's annual revenue in 2007. Watanabe is now suing Harrah's for allowing him to continue gambling, including allowing him to bet while drunk.

It is against NGC rules for casinos to allow patrons to gamble while visibly intoxicated, but this is a year-long bender we're talking about. At no point did he come down to earth and realize he should walk away? At one point he was banned from the Wynn because it's CEO determined he was compulsive. Shouldn't that be a wake-up call? This isn't a series of bad decisions one night, this is a whole year. It's bad enough passing the buck on this one, but trying to do it for an entire year is ridiculous.

Do what you will. Accept the consequences.

(Thanks to JAH for bringing Mr Watanabe's shameful cop out to my attention.)

Anyway, that's just a lead-up to this post from Porch Dog, in which Jim considers whether Chevron is investing in safer oil tankers because they care about the environmental impact of oil spills or because they want to avoid the government-imposed costs of a clean-up.
But Chevron, in the example Walt discusses, isn’t responding to the scarcity of oil or to rising energy costs when it hypes it’s spill-prevention policies. Chevron adopted those policies as a means of responding to laws that holds them accountable for their spills and forces them to clean them up. Since cleaning up a spill after the fact is more costly than additional precautions preventing the spills to start with, Chevron works very hard to not spill this precious world-turning commodity. The market demand to hype those preventative methods is a more clear cut example of greenwashing than the other two, since, I think that Chevron would go back to cheaper shipping methods in a heartbeat if the law were relaxed. Coke and Walmart however have adopted policies out of a much more real necessity. Water is becoming more scarce regardless of the regulatory environment. Energy costs are going to continue rising until some economical alternative energy is developed.

It’s superficial analysis, admitted. However, for me it highlights one of the things I say often enough. The government is not some alien force that acts on the supposedly free market from the outside. It is an economic actor. It is a customer and it is also the voice of all customers. This is a situation where oil was artificially cheap because oil producers like Chevron previously were able to ignore the true cost of their product and then transfer that savings to their customers. The people of Prince William Sound suffer directly from oil spills but the rest of the country/world has cheap oil. As a result the voice of the majority allows Exxon et al to carelessly dump oil all over the damned place and costs being what they are, it’s cheaper to dump a few million gallons than to implement more careful shipping methods. Economics! But we don’t want a world where that happens, so we pass a law that says, you want to be in the oil business, you need to clean up your mess. Pass the costs to your customers. They will either keep buying or they won’t. We did and now Chevron is “going green” out of economic necessity.

I have a hard time being against this policy, which of course means I’m a socialist or something.
I actually have a hard time being against these sorts of policies as well, so I sure hope that doesn't make one a socialist. The way I see it, this is a situation where there is not a natural or private mechanism to make people accept the consequences of their actions, so society must create one. Government stepping in to see that people accept the consequences of their actions shouldn't be that controversial.

Two provisos though:

(1) Jim mentions government as acting as the "voice of all customers." The process of using government to make people pay the appropriate cost for their actions gets skewed when it becomes the "voice of customers who bitch the loudest to their congressmen." There's a thin line to walk between the legitimate protection of a minority's rights, such as the property rights of residents of Prince William Sound, and imposing costs on a faceless majority in order to protect the narrow interests of a vocal few. I have no recommendations for how to walk that line, I just think we need to remain aware of it.

(2) Allowing the government to impose costs that the market fails to do only works when the government gets closer to the "true" cost of an action than does the marketplace. In the case of an oil spill this is a fairly straightforward procedure: you know how much money it costs to do the clean-up operation, and then fudge it upwards to account for the damage that can't be undone. Many situations are much more ambiguous. We have no earthly idea how much damage would be done by a marginal ton of CO2 emission, and we probably never will. In many situations the government-imposed cost is arguable more wrong than the market-imposed cost. For instance, a pack of cigarettes costs society about $0.50 in extra medical care, but taxes on a pack are over ten times higher than that in many jurisdictions. Are we better off with a cost which is $5 too high or $0.50 too low?

(The external cost of cigarettes are estimated all over the map, so maybe you think 50 cents is too low. (This brings us to another point: how can the government correctly set the price if no one can agree on what the "right" price is? That's why Pigovian taxes are great in theory but I oppose them in practice. I have no faith we will succeed in setting a correct price by legislation.) Never mind that, it's just an example. Accept that there is some commodity for which the government has done a terrible job of correcting a price mis-set by the market. Transfats come to mind. And unpasteurized milk. And milk generally. And water. And Pima cotton. And mohair. And cardboard. And ethanol...)

I don't object in principle to government making people pay the cost for the actions when other means fail to do so. In practice however, it can be as difficult for the government to arrive at a good price as it is for a market.

1 comment:

  1. Yeah, the "voice of all consumers" thing is really a shady line all round. I think there is a conceptual truth in there but I'm not really getting to it at all. As for the rest, I generally agree but not without provisos of my own.