7.13.2007

Make it Pay to Not Pollute

Sorry for the flurry of Friedman posts, I just can't help it.  Injecting market forces into reining in pollution has always been a pet interest of mine, and Friedman treats the subject sublimely.  Business gets blamed for belching poison into our air and water, and yet Friedman writes that it's the consumer and his wants that are the main cause.  Business is but a conduit, translating inputs into desired outputs; and the outputs consumers desire happen to either require a certain amount of pollution, or the reduction of that pollution would drive the costs of those products to levels that would make them undesirable to consumers.

Rather than putting caps on pollution, most economists agree that taxing it would lead to better outcomes.  In this way, products whose production process led to more pollution would end up costing more, which is fair.  And producers would have a financial incentive to figure out how to reduce pollution and remain profitable: sustainability in both the environmental and economic sense.  (Some the shrewdest companies in the world, anticipating the eventual tax on carbon, are already figuring out innovative business models that allow for profit maximization in light of this new cost.)

Importantly, we'd get more knowledgeable about how to best reduce pollution.  If a small tax caused pollution levels to plummet, hooray for Mother Earth; with minimal disruption to the prices we're used to paying, we've drastically lowered our negative impact on the environment.  But if a large tax caused pollution levels to fall only slightly, we'd understand that we'd have to take a different tack, and we'd have large amounts of tax revenue to undo the damage or figure out an alternative.

Pardon the pun, but this'll never fly because the thought of allowing businesses to pay their way out of not polluting feels, well, dirty.  And yet business is driven by profit, and profit comes from innovation, and innovation has resulted in some extraordinary advances in processing and technology that have led to cleaner air and water and a generally safer and more sustainable way of living than what was experienced say 100 years ago.  So why not put that profit motivation into motion for the most optimal benefit of businesses, consumers, and the environment?
Post a Comment