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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: neolib who wrote (7946)	12/23/2005 3:41:22 PM
From: TimF	Read Replies (1) \| Respond to of 541982

your issue is a failure to accept negative numbers in assets And I think it is an appropriate "failure". People can be insolvent and owe more than their assets. However that insolvency isn't and should not be inheritable. You can have a negative in a financial sense but an asset should not directly have a negative value. It can effectively have a negative value if you have to get rid of it or clean it up and the cost to do so is greater then the value of the asset. I don't think calling it a hang-up or a failure is appropriate. It a different opinion, that I think is a lot more practical. An asset will not normally trade at a negative value. If it is assigned a negative value, it will just be disposed of if possible. If it is not possible than it will just be ignored. A paper gain on an asset isn't realized until you sell it. A paper loss on an item with a negative value won't be realized by anyone that has a choice. It simply won't trade, and won't effect anyone's cash flow. If it is not trading then there is no good market determined price on it. A negative value on paper could be inherited for ever without having a real effect. It would just pass down the line without impacting anyone's cash flow. If you force people to pay out the negative cost you are imposing a fine. Even if you just want to impose this cost on certain items or actions where the cost is large (more than enough to make the transactions cost unimportant by comparison) and relatively clear, your system could be very complex and difficult. If you want to impose this on all transactions, or worse yet all actions, then it is unworkable, and I don't see any way it could become workable. Take your example of tobacco. Would you apply part of the cost of future damage to tobacco growers, distributors, retailers, and users (who made the choice, and had official warning for decades)? If so you have at least billions of transactions to track and to assign costs to after the fact, and the cost would shift over time as well. It will not be a market cost because no one will be interested in realizing this cost. There will be no market. If you just apply the cost only to the big tobacco companies the system might be more workable but it still doesn't really resemble a market. Does the cost follow the "asset" of the tobacco or tobacco products? Well they get burnt up. Even if you could retroactively impose this cost, you would simply drive the tobacco industry in to the black market. No one would want to produce, or sell, or buy a produce with open ended theoretically unlimited liability if they can avoid doing so. Sure you can buy insurance but and insurance company probably wouldn't be interested in this type of liability either, or if it did sell insurance for it, it would be very expensive. And you can't buy a million different forms of insurance against all the different actions you take. If the insurance (at least for individuals) is a blanket coverage for all your actions, then you are just imposing a cost, and one that provides little in the way of market incentives. Tobacco is a great example of this. People used to think it was harmless, maybe even healthy. Suppose you are starting a new industry, or producing a new product. Its very risky. You could lose your entire investment and have nothing as the result of all your work, but people take the risk anyway. If however they were exposed to rapidly shifting, open ended risk, that could exceed their initial investment and even all of their wealth, their incentive to take this risk is greatly reduced. Or take 2nd hand smoke. It is at least somewhat harmful. How do you assign this harm. You can hardly have a trial for each cigarette, and markets won't assign the cost, they can be used to deal with the cost and the risk but they will not create it. And how damaging 2nd hand smoke is depends on the actions and the environment of the smoker. If "Bob" smokes a cigarette alone in a cabin in the middle of a rural Canada, he will cost less harm to others (arguably no harm) than "Mary" smoking the cigarette while holding a kid and pregnant with another one, in the middle of a day care center. Do you assign a standard cost? Trillions of actions have real, possible, or imagined costs now or at some time in the future. There is no way to track them an assign some "market" based cost for the action. In my system, there are two main differences: 1) negative numbers are allowed, and 2) it is simple to buy and sell the risk. 1 - Sound like a bad idea, for both practical and philosophical reasons. I can entertain the idea of an asset directly having a negative value. But I see no benefit from it. I find your system both unjust and unworkable. 2 - Isn't true. Assigning, tracking, adjusting, and imposing trillions of costs or bonuses is not simple, it probably isn't even possible. Even if you want to impose the system only on a very small subset of all transactions it would be anything but simple. Imposing a direct negative value on most types of assets is simply not something that any type of market will do. Someone has to articially create that negative value, or assign a certain risk of a decrease in or a negative value based on your criteria and impose it on the ojbect or action. There are too many assets and too many tranactions for this to ever be even close to workable, and even if it could work it would be hideously expensive and I don't think it is just or fair. I just had a thought for a good example. How does your system assign costs, or "negative asset value" to cocaine? Tim