Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP
Path: utzoo!mnetor!seismo!gatech!hubcap!ncrcae!ncr-sd!hp-sdd!hplabs!hplabsc!taylor
From: haas%gr@cs.utah.edu (Walt Haas)
Newsgroups: comp.society
Subject: Re: The Impact of Inventions
Message-ID: <2143@hplabsc.HP.COM>
Date: Tue, 30-Jun-87 17:37:07 EDT
Article-I.D.: hplabsc.2143
Posted: Tue Jun 30 17:37:07 1987
Date-Received: Wed, 1-Jul-87 07:18:37 EDT
References: <2041@hplabsc.HP.COM>
Sender: taylor@hplabsc.HP.COM
Distribution: world
Lines: 41
Approved: taylor@hplabs

Kurt Guntheroth writes:

> Why should people not be motivated by short-term profit? ... The mistake
> philosophers and politicians make over and over is to arrogantly believe
> that their consciousness is powerful enough to firmly grasp and control
> all aspects of a society... What is needed is a change in the environment
> that will cause society to evolve naturally into a 'better' organism...
> why not simply demand that undesirable effects be taken into short-sighted,
> profit-minded consideration by taxing them, regulating them, or removing
> the limits on liability for them?

First let me say that I consider this basically an excellent idea, and it is
one that I have given a great deal of thought to.  However there is a basic
problem in attempting to do this in a representative democracy.  The problem
is as follows:  Suppose I manufacture something which has a slight social
cost which is borne by the general public, but the profits from sale of the
thing all come to me.  Let us say for example that I make $10 million per
year in profit from this thing, and the total cost to the American taxpayer
is also $10 million per year.  Now I have a *VERY* strong incentive to keep
receiving the profits from this product, but each citizen (let's say there
are 240 million of them) can recover only about $.04 (10/240 dollars) by
forcing me to pay all the social cost of my product.  Now suppose a political
movement starts with the intent of forcing me to eat all $10 million in
social cost by paying that cost myself.  If I did this I would lose my
entire profit, so naturally I would have to raise my prices, thus losing
sales.  Suppose that I were to raise prices somewhat and lose 20% of my
sales, I would then lose about $2 million (probably more) in profit.  So
it is worth $2 million a year to me to make sure this social movement fails,
and only $.04 a year to you to make this movement succeed.  Guess who is
going to lobby their elected representative harder?

The biologist Garrett Hardin has studied and written about this issue at
length.  The basic problem is called a "common pasture" problem.  It is
explained at length in Hardin's book Managing the Commons.  A common pasture
incentive system always causes Adam Smith's invisibile hand to produce the
wrong result.  The particular example above is discussed in Hardin's book
Filters Against Folly, as the Private Profit/Commonized Cost situation.

What to do about it?  You tell me...

Cheers   -- Walt