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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: GraceZ who wrote (20049)1/1/2005 12:27:40 PM
From: gpowell  Read Replies (1) of 116555
 
If in the normal course of pursuing your self-interest you pollute your downstream neighbors water, the market would raise the value assigned to your land and lower theirs. Without a mechanism to redistribute the costs of your actions the opportunity for profits would encourage you to continue. In fact, you might seek out new opportunities to benefit from pollution. That is the nature of the market; it is an efficient mechanism for developing knowledge of opportunities.

Either through government or through the market.

A mechanism that the market uses to mitigate negative externalities (pollution for instance) is some form of coercive hierarchy, or in other words government. Therefore, if government did not exist, the market surely would create it, and thus some form of government is an endogenous part of any free market. However, governments have their own set of failures. In regards to environmental damage I believe court rulings in the US, sometime in the 1800’s, raised the standard for collecting punitive damages to only those actions that could be shown to be negligent. Some writers believe these rulings encouraged negative externalities.

I agree with your premise, if history shows anything it shows that the greater the power of the state, the greater the environmental damage.
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