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Austrian economists and environmental policy

December 8th, 2016

While working on my long-forthcoming book, Economics in Two Lessons, I came across an interesting article by Edwin Dolan published (with commendably openness to criticism) in the Quarterly Journal of Austrian Economics. The conclusion

On a theoretical level, Austrian writers delight in claiming the moral high ground, condemning polluters as aggressors against property rights. On a practical level, however, they leave pollution victims in the lurch. They invite them to sue, but propose a set of legal standards that would guarantee that polluters would always win. They oppose all government measures to reduce pollution, whether through regulation or through measures to make polluters pay. As a result, at least in cases of environmental mass torts, the Austrian paradigm is a polluter’s dream and a victim’s nightmare. It offers far too little of any practical value toward securing property rights, too little toward facilitating environmental coordination, and too little toward promoting libertarian justice. Much work remains to be done.

  1. hc
    December 8th, 2016 at 18:30 | #1

    Without knowing the background, is the issue here the relevance of the Coase theorem? Viz: Ruling out Pigovian taxes (I don’t like the term “polluter pays) or regulation and instead insisting that property rights be defined and defended by courts of law. Then the standard pro-Pigou/regulation argument is that there are strategic and “free rider” issues that limit the role of the Coase theorem. I am not keen on Coase but like the fact that it justifies some politically sensible alternatives to attacking the “bad guy” polluter by getting those subject to pollution to offer bribes. For example, country residents might not be taxed on their water pollution but downstream city residents can achieve efficiency by paying for pollution controls. The reverse property rights assignment may not get past the National Party. But this is a pragmatic political realist argument not a general defence of the Coase Theorem.

  2. Jade
    December 8th, 2016 at 22:41 | #2

    Hope this gem form a few years back by a breathless Jo Nova gives you a chuckle, John:

    “The meme is spreading. Rapidly, day after day, I’m meeting more Skeptical-Austrians, and Austrian-Skeptics. I don’t mean the country, but the economics.

    James Delingpole-the-brilliant enjoyed my post: The Ground Zero of Global Corruption: it starts with The Currency. He’s had his awakening a few months back. Just yesterday I was talking to Redmond, a skeptic in Canada who turned out to be founder and director on Mises.ca (you can’t get much more Austrian than that). Martin Durkin (the infamous director of Great Global Warming Swindle) is an Austrian too. Back in Bali 07, even then, that Monckton, Archibald, and Balle were discussing gold and currencies (nearly half of all the skeptics there). I’m guessing Chiefio might be. I hear Ray Evans of the Lavoisier Group is too.”

    http://joannenova.com.au/2012/03/we-are-all-austrians-now/

    A few years ago Jo also warned us of QE and stimulus induced hyperinflation. I guess it will arrive any minute now …

  3. December 8th, 2016 at 23:12 | #3

    @Jade
    I used to hang around Ms Nova’s blog and remember that post. It was around that time I decided it was time to stop playing the fool in their court.

  4. Ikonoclast
    December 9th, 2016 at 07:17 | #4

    @John Brookes

    “Confusion now hath made his masterpiece.” – Shakespeare.

    Denialists and neoliberals are now in complete charge in the USA and Australia. Eristic, antilogic and “post-truth” have triumphed.

    “In philosophy and rhetoric, eristic (from Eris, the ancient Greek goddess of chaos, strife, and discord) refers to argument that aims to successfully dispute another’s argument, rather than searching for truth… Eristic is arguing for the sake of conflict, as opposed to resolving conflict.” – Wikipedia.

    I would expand that. In the modern context, eristic is the art of arguing for the special and privileged advantage of the few over the many. By eristic, antilogic and “post-truth”, which of course simply means “lies”, the many are confused and then easily oppressed and exploited.

    The masses know not where to turn and choose Trump. Trump of course will accelerate the impending disasters; social, economic and ecological. Perhaps it almost better that late stage capitalism will be brought to crisis sooner rather than later. Each delay now will only make the inevitable crisis and collapse more catastrophic.

    “Lack of memory, antilogic, paradox, fantasy in mental action, correspond to capriciousness, levity, irresponsibility, and the rule of emotions and passions in practical action.” – Chuck Klosterman IV (attribution uncertain due to a paywall).

    This quote above makes me think directly of Trump in speech and action.

  5. BilB
    December 9th, 2016 at 08:46 | #5

    That is a very good comment there Ikonoclast. I particularly appreciate the timeless mythological connection, and agree on the rushing to failure aspect (this being a common property of greed). No doubt you did a lot of nodding to this article

    http://thenewdaily.com.au/money/finance-news/2016/12/07/gdp-december-quarter/?utm_source=Responsys&utm_medium=email&utm_campaign=20161208_TND

    But there is an aspect of this that suggests that the people get what they deserve, we did, after all, vote for the right wing stupididity that governs us. This morning I was musing over an aging cat my family preserves (I have no part in this) which meows incessantly, and this led me to think of pets and unnatural selection. I imagine in communities past, the dog that bit its masters hand became the next evening’s stew. Then carrying that forward to political parties and the selection of candidates, I now wonder about just how representative political parties are, and subsequently how political outcomes truly reflect the desires and the needs of the population at large. The problem may very well not be in the parliament where it appears to be, but in the preparliament selction process. Now the issue of fairness with candidate selection is not a new topic, but it perhaps should be a current and predominant one.

  6. GrueBleen
    December 9th, 2016 at 14:29 | #6

    @Ikonoclast
    Your #4

    Well of course it would – make you think directly of Trump. It actually sounds like something that whoever writes the next “Trump book” might have said (the one that shows Trump as a deep thinking master philosopher, of course). But strangely, Ikono, nobody wants to hear (or see) the word “lies”.

    For instance, John Winston Howard showed us that, as long as you believe it, it may be an “untruth” but it isn’t a “lie”. Of course there are those who dispute that idea, eg Paul Frijters, who, in a conversation quite a while ago, opined that “if you state it as though it’s true, but you haven’t performed due diligence fact-checking, then it is equivalent to, and should be called out as, a lie”.

    It really started to balloon back in G W Bush’s presidency, when one of his aides explained that we don’t live in the world of “reality. What he (the aide) said was:

    “That’s not the way the world really works anymore,’’ he continued. ‘’We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality — judiciously, as you will — we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors . . . and you, all of you, will be left to just study what we do.”

    And he’s spot on, don’t you think ?

    So we move on to the later version from Trump’s “surrogate” Scottie Nell Hughes which, as reported by Shehab Khan, is:

    “It is an idea of an opinion. On one hand I hear half the media saying that these are lies but on the other half there are many people who say, no, it’s true,” Ms Hughes said.

    “One thing that has been interesting this entire campaign season to watch, is that people that say facts are facts – they’re not really facts.

    “Everybody has a way of interpreting them to be the truth or not true. There are no such things, unfortunately, as facts.

    “So Mr Trump’s tweets, amongst a certain crowd, a large part of the population, are truth,” she added.”

    So, now we all grasp the unreality of things, yes? No more questions, no more doubts, just believe whatever it is that “feels true”.

    BTW, I haven’t thought to ask you this ere now: do you believe/accept Georges Sorel’s definitions and distinctions between ‘myth’ and ‘utopia’ and where do you stand on this issue ?

  7. GrueBleen
    December 9th, 2016 at 14:40 | #7

    @BilB
    Your #5

    You say:

    “I now wonder about just how representative political parties are, and subsequently how political outcomes truly reflect the desires and the needs of the population at large.”

    Well wonder no more – go read the right’s favourite guru, Edmund Burke and he will persuade you that the very worst thing an elected representative can do is pay any attention at all to the desires of his constituents. And every single right wing ruling block, from federal parliament down to Trades Unions, follow Burke’s prescription religiously.

    You also say:

    “The problem may very well not be in the parliament where it appears to be, but in the preparliament selection …”

    Right, well I’m prepared to give sortition a go if you are.

  8. Ikonoclast
    December 9th, 2016 at 15:19 | #8

    @GrueBleen

    The aide’s statement is sheer hubris. It is true… in a sense… for a while. And then… Empires fall. And nature bats last and has 5 billion wickets before its innings is over. To believe one (as a person or a nation) can create one’s own reality completely and live in it without outside, larger, objective reality (social, economic, political, geopolitical and biospheric) breaking in, sooner or later, is entirely delusional.

    As for Georges Sorel, I would have to read up on him.

  9. GrueBleen
    December 9th, 2016 at 16:18 | #9

    @Ikonoclast
    Your #8

    “The aide’s statement is sheer hubris.”

    I’m well aware of that Ikono, I was merely trying to point out the recent historical track that has brought us to full on “post-truth”. Or, as it might have once been said, if anybody had thought it relevant: “Seek not to know where the truth ends, it ends here.” (with apologies to Harry Truman).

    Nonetheless, the fact is that their “own reality” lasted long enough to create much needless, pointless and most probably banal (with apologies to Hannah Arendt), suffering. How long would it take for someone with an “own reality” and the nuclear codes to do even more.

    Please do read up on Sorel when you have time, I’d be interested to get your take on him.

  10. Ernestine Gross
    December 10th, 2016 at 21:25 | #10

    @hc

    The term ‘the polluter pays’ doesn’t convey the connotation of ‘bad guy (or girl?)’ in the axiomatic economic theory literature. It is merely a label to reference the case where an economic activity (primarily production but also some consumption) creates a non-marketable by-product, which is unwanted by the members of a society. We call it a negative externality. Blad and Keiding characterised a

  11. Ernestine Gross
    December 10th, 2016 at 21:27 | #11

    oops, I’ll start again.

  12. Ikonoclast
    December 11th, 2016 at 07:43 | #12

    @Ernestine Gross

    Still waiting. 😉

  13. GrueBleen
    December 11th, 2016 at 07:58 | #13

    @Ernestine Gross

    Seconding Ikono … waiting is …

  14. December 11th, 2016 at 13:27 | #14

    As in any other countries there will be some dishonesty in views on pollution as there is in Austria.
    I have been looking for an article about the Australian super system, as it had been much in the news recently, and there have been some very small changes made, yet the elephant of the “Great Australian Super Fraud” has not been mentioned.
    The elite 20% as far as income and assets are concerned will march on accumulating more wealth, helped by the huge tax concessions for super during accumulation period and the tax-free super in retirement.

  15. GrueBleen
    December 11th, 2016 at 14:37 | #15

    @Bill Hawil

    “Great Australian Super Fraud”

    Oh, I thought for a moment that you meant the one where employers pocket the mandated super payments for lower paid workers instead of forwarding payments on. And since it isn’t actually the workers’ money they can’t complain to the law (actually to the ATO, I believe) so they just have to suck it up.

    But you just meant the old one where the higher paid workers get all their due super and then some.

    I did find it kinda amusing though that back a few years ago when I retired and cashed out my super that the combined effect of tax on salary and tax on super deposits and super scheme earnings – though by that time not much tax on cashed out super – meant that I was paid an amount somewhat less than the total of my nominal contributions. I thought that was a pretty good “Great Australian Super Fraud” too.

  16. Ernestine Gross
    December 12th, 2016 at 09:12 | #16

    hc, sorry about the delay – the keyboard on my new laptop drives me crazy because there is a page up key in the place where my fingers expect a shift key. I need to buy a external keyboard.

    Perhaps I missed something in your post. As it stands I feel obliged to write:

    The term ‘the polluter pays’ doesn’t convey the connotation of ‘bad guy (or girl?)’ in the axiomatic economic theory literature. It is merely a label to reference the case where an economic activity (primarily production but also some consumption) creates a non-marketable by-product, which is unwanted by the members of a society. It is the by-product, which is ‘the bad’, not the person who produces or consumes something, which is wanted (positive price) but which happens to involve an unwanted by-product. We call the latter a negative externality. There is no ‘natural market’ (positive price) for something that is unwanted. That is, there is no negative price. There is no invoice, which conveys the cost of the negative externality to enter the cost accounts of the ‘polluter’. Some other mechanism than a ‘natural market’ is required to ‘cost’ the negative externality (to internalise it) for it is known that equilibria in cases of incomplete markets are generically Pareto inefficient.

    However, if an agent, who happens to produce a valuable something with a non-trivial negative externality demands ‘a bribe’, then one may call this agent a ‘bad guy’ (or girl).

    hc, how would your pragmatic approach work out in the case of cigarette smoking? Should smokers be ‘bribed’ (side-payment in the language of game theory) by smoke sensitive people to reduce side-smoke?

    How can you be sure that the ‘country vs city’ case you give isn’t a problem of unequal market power (relative prices of marketable commodities are out of kilter)?

    Some time ago, JQ wrote words to the effect that the Austrians might have made more progress had they adopted an axiomatic approach. Edwin Dolan (whom I presume is knowledgeable about Austrian economics), reached a conclusion in the paper referenced, which is consistent with that reached in the environmental economics that is based in the axiomatic approach (eg carbon permit trading).

  17. GrueBleen
    December 12th, 2016 at 10:20 | #17

    @Ernestine Gross

    I read the other day that Sweden’s recycling capability is so good that the Swedes actually import garbage from other countries because they haven’t got enough of their own.

  18. derrida derider
    December 12th, 2016 at 12:36 | #18

    Bluegreen, on the definition of lying St Augustine had it right.

    A lie is something intended to make someone else believe something that you know to be untrue. The Trumps of this world are perfectly capable of sincerely believing absolutely anything to be true, so they rarely lie. They’re Frankfurtian bullshitters, not liars – and all the worse for that.

    But hey, what are the Austrians gonna say when the US economy now takes off with a massive Keynesian stimulus? It’ll be about 8 years late, BTW. Not least of Hillary’s failings was that she failed to more than match Trump’s Keynesianism with a tax/spending program better suited to help those blue collar workers in Michigan et al.

  19. Troy Prideaux
    December 12th, 2016 at 13:39 | #19

    @derrida derider
    Does anyone (other than the Austrian thinkers) actually take the Austrian school of economics seriously? It’s obviously worth a mention in a general economics text, but is it really worth dedicating a significant portion of a book to argue the virtues or shortcomings of what appears (to me at least) to be a pretty universally rejected fringe element of economics?

  20. GrueBleen
    December 12th, 2016 at 16:02 | #20

    @derrida derider
    Your #18

    I couldn’t agree with you more, DD, and I know that the now sadly departed Paul Fritjers (with whom I basically had this conversation a year or more ago in Club Troppo before I got banned there) would agree with both of us. But then, so would John Winston Howard who “immortalised” the distinction with his “it isn’t a lie if you actually believe it” stance on the ‘children overboard’ nonsense.

    But as for Trump … well, at heart he’s a salesman, and any good salesman can believe pretty much anything – at least for just about as long as it takes to say it. But salesman frequently have a serious weakness: they just don’t know when to stop selling and just accept the customer’s buy order. Does Trump have this kind of weakness ? It seems distinctly possible to me. So will he eventually turn off the Trumpkins by repeating the sales pitch once or twice (or more) times too often and somehow never actually delivering the goods ?

    But I can’t quite agree that lack of WWC oriented Keynesianism was a Hillary “failing” – I reckon basically the HRC camp just didn’t think that was a set of votes they were ever going to win, no matter what they said (“lying Hillary” after all). No, Trump won because he was able to “believe it” just long enough for the yokels to believe he really is one of them – after all, he won a huge number of counties (about 2600 or so, I think) by small enough margins to lose the ‘popular vote’ by a huge margin.

  21. Ernestine Gross
    December 12th, 2016 at 16:46 | #21

    @GrueBleen

    And who pays, the ‘exporter’ or the ‘importer’? Does the answer depend on the content of the ‘garbage’?

  22. Collin Street
    December 12th, 2016 at 18:21 | #22

    Does anyone (other than the Austrian thinkers) actually take the Austrian school of economics seriously?

    Honestly I don’t think even austrian thinkers take it seriously; it’s just a framework to express their “contrariness” in, where “contrariness” just means “arsehole”.

  23. hc
    December 12th, 2016 at 19:02 | #23

    @Ernestine Gross

    You wrongly assume I see much relevance in the Coase Theorem. I don’t for very standard reasons – costs of organising class actions (R1), strategic issues (R2). My only defense of it is that it sometimes accommodates solutions that the Pigouvian tax/regulatory literature overlooks. namely wjhere the “victim” bribes the polluter. Sometimes this is politically more feasiblre than the standard attribution of property rights. Certainly not for cigarette smoking for R1. Nor do I think that subsidising greenhouse gas emitters to cut their emissions works nearly as well as an ETS or a straight carbon tax for R2.

  24. GrueBleen
    December 12th, 2016 at 19:13 | #24

    @Ernestine Gross

    Yes, you always ask the hard questions, don’t you 🙂

    Anyway, the web post wasn’t clear about that. Apparently it isn’t Swedish governmental agencies doing the “recycling” it’s a bunch of private firms. The most relevant quote I could find is:

    “She describes Sweden’s policy of importing waste to recycle from other countries as a temporary situation. “There’s a ban on landfill in EU countries, so instead of paying the fine they send it to us as a service. They should and will build their own plants, to reduce their own waste, as we are working hard to do in Sweden,” Ms Gripwall says.”

    To me it seems like the garbage isn’t actually bought or sold, just ‘donated’ (but who pays for transport ?)

    Anyway, for what it’s worth, the post I read is on: www independent co uk and the post pointer is: /environment/sweden-s-recycling-is-so-revolutionary-the-country-has-run-out-of-rubbish-a7462976.html

  25. may
    December 12th, 2016 at 19:17 | #25

    just because something is believed doesn’t mean it is true.

    if some one believes something that is not true and their reality doesn’t gel with hard truth they are not a liar, they are not reliable.

    post truth, truthiness,euphemisms etc are lies.

    any one using these terms to disguise lies is a liar.

    habitual users of these techniques lose the benefit of the doubt.

    one doesn’t have to be impolite or discriminatory in not going along with it.

    it’s not a bad idea to watch your back when doing so, true believers can get more than a little bit out of hand.

  26. may
    December 12th, 2016 at 19:39 | #26

    how come the costs (destruction of ecosystems,waste of non renewable resources, waste of usable by-products and so on) incurred by industrialisation never make it onto the “for profit” balance sheet?

  27. Ernestine Gross
    December 12th, 2016 at 19:45 | #27

    @hc

    No, I did not assume you see much relevance in the Coase theorem. IMHO, Coase’s work should be appreciated in its historical context only (eg history of economic thought).

    References for what I wrote are Lindahl and Blad and Keiding – all post 1950.

  28. Ernestine Gross
    December 12th, 2016 at 19:49 | #28

    @may

    Your #26.

    See my post at #16.

  29. Ernestine Gross
    December 12th, 2016 at 19:54 | #29

    @GrueBleen
    Your #24.

    Regarding trade in ‘garbage’:
    West Germany used to pay East Germany to take some of its ‘garbage’. After unification, they got it all back, possibly in a slightly modified form.

  30. Jordan from Croatia
    December 13th, 2016 at 01:39 | #30

    Does anyone (other than the Austrian thinkers) actually take the Austrian school of economics seriously?

    woooww
    About 99% of world and aout 99.5% of economists believe in austrian economic dogmas. Gold standard, “printing causes only inflaion”, “get the government out of free market”, “our kids and grandkids will be paying off public debts” are championed by Austrians. And those dogmas are still persitent within populace and it rules their thinking. Neoliberalizm is based primarily on Austrian economics.

    Only MMT and Austrians did investigate money, debt and banking (state and private), no mainstream econ0mist is allowed that.
    Austrians looked at money and banking and saw something really bad and destructive while MMT see benefits of fiat money and look for opportunity to manipulate it for greater good. Given that still about 95% of countries are under some form of Gold Standard(fixed fx), i would say that Austrian economic theories are the most influential theories on the planet.

    You can pretend that Austrians are not taken seriously while their dogmas rule the world.
    Austrians sound so far from reality since they considered money and banking and explained it somewhat, just as MMT sound so crazy because MMT also considers money and banking. So it sounds strange to those that never studied any official papers about money and banking but believed only in mythology about it.

  31. Jordan from Croatia
    December 13th, 2016 at 01:41 | #31

    That “Does anyone (other than the Austrian thinkers) actually take the Austrian school of economics seriously?” should have been marked

  32. GrueBleen
    December 13th, 2016 at 09:54 | #32

    @Ernestine Gross

    Ah, so one State’s trash is another State’s treasure.

    It can be a funny business at times. I remember very well maybe 40(ish) years ago when there was the old ‘Fairfield Mill’ – a paper factory – on the Yarra near the Chandler Highway Bridge. Anyway, being a paper manufacturer, it used lots of water which, post processing, it emptied into the Yarra to float down to the CBD and into the bay.

    Then we had one of those ‘El Nino’ periods (only we didn’t know what they were back then) and Melbourne experienced protracted drought (oh, if only we’d had a desalination plant in those days) and the water being dumped into the Yarra was causing serious down-river pollution. So the government ordered that the plant had to empty its waste water into the Yarra upstream of its water intakes. Oh said the mill owners, this is totally counter-capitalist and will cause the bankruptcy of the mill !

    Anyway, some years later (about a decade IIRC), Melbourne was experiencing another drought season. Ah, said some wide awake journalist to himself, I wonder how the Fairfield Mill is surviving this time. So he went and interviewed the management, only to be told that “years ago we installed a water recycling facility so we didn’t have to pay a lot of money to extract Yarra water. It pays for itself.”

    So it goes. What was that about Pigou taxes again ?

  33. ZM
    December 14th, 2016 at 20:58 | #33

    In English Common Law countries like Australia and the USA, the government has a duty to protect common pool resources like air and water for the community.

    Does Austrian economics take into consideration the existing legal frameworks? Or does it suppose a legal blank slate? The use of the Public Trust Doctrine in English jurisprudence which is received law in Australia dates back to 1299:

    “Juliana the Washerwoman

    One of the earliest historical sources relating to the use of Winchester’s watercourses dates to 1299 and involved a legal case involving two Wintonians who lived on Upper Brook Street. One was a washerwoman called Juliana, and the other was the merchant John de Tytyng, who also served as the city’s mayor and MP.

    In 1299, Juliana obtained a writ from King Edward I, ordering the mayor and bailiffs to compel John de Tytyng and others from preventing her from scouring her clothes, thread and yarn in the Upper Brook. The case was settled in court by Edward I who relied on the advice of a jury made up from inhabitants of Upper, Middle and Lower Brook Streets.

    Edward I was a firm believer in Common Law so it is not surprising that his ruling made in the Great Hall on September 1299 stated:

    “water has always been common.”

    If the ruling was left at this we probably would never have heard of this court case, but the King attached a number of regulations at the end changing it from Common Law into Statute Law. These regulations were addressed to general households and industries in the area. The regulations stated that people should not put in the water:

    woad-waste/dyestuffs (Dyers);
    hides in the course of being tanned (Tanners);
    sheepskins (Tanners);
    entrails (Butchers);
    animal blood (Butchers);
    human blood (Barbers);
    panni puerorum cum horidibus (soiled nappies) (Washerwomen);
    nor should they have garderobes or gutters discharging into the water (Households).

    The importance of the ruling was recognised by Juliana’s contemporaries and she received the by-name of Juliana de la Floude or Juliana of the Water.

    In time, the ruling became known as the Concordance de Julian. It is likely to be the earliest piece of environmental legislation relating to the use of water in Europe. As a principle, it has developed into an internationally recognised Human Right. It provides the legal basis for the access to fresh flowing water for billions of people round the world today, all this as a result of a neighbourly tiff between an MP and a washerwoman on a back street of medieval Winchester.”

    Bradley Freedman & Emily Shirley 2014 “England and the public trust doctrine” Journal of Planning & Environment Law

  34. Ernestine Gross
    December 15th, 2016 at 12:31 | #34

    @ZM

    “Does Austrian economics take into consideration the existing legal frameworks? Or does it suppose a legal blank slate?”

    I can offer the following comments:

    1. To the best of my knowledge, ‘the Austrians’ became known as ‘the Austrians’ (as a school of economic thought) after several people from the Austrian-Hungarian empire, who now are considered important founding members of this ‘school of thought’, had emigrated or relocated to Anglo-Saxon countries (the UK and the USA).

    2. Several so-called founding members, most notably , Carl Menger, E. Boehm von Barwerk, F. A. von Hayek, F. von Wieser, L. von Mises, became interested in economics after they had obtained degrees in Law or Law and Politics or Law and sociology.

    3. I believe it is safe to say that these so-called founding members did not assume a legal blank page. On the contrary, at the time of their writings, they distinguished themselves from some Anglo-Saxon economists by explicitly taking the institutional environment (legal system) into account. Furthermore, as the ‘von’ in the names indicate, most belonged to the lower aristocracy – either by birth or be award of some kind (well connected to the institutional power structure at the time).

    4. As is evidenced by Edwin Dolan’s paper, referenced in JQ’s post, there are contemporary members of the Austrian economic school of thought, who want the judiciary (rather than elected governments) to develop common law to deal with contemporary environmental issues.

    5. I can’t claim to be well-read in Austrian economic literature. However, judging from the original articles I did read, their methodology is still more akin to legal thought than to analytical economics of which the axiomatic approach is perhaps the most clearly identifiable example. IMO, in contrast to the legal thought based economics, the analytical approach is not closed to scientific (natural science) methodology and the implications of scientific knowledge for economics. Edwin Dolan, who I presume is very knowledgeable about Austrian economics, made a related and more specific point.

    6. I don’t know for sure why Austrian economics has such a strong following in the US. (Some universities in Austria – the empire has long gone – are now very strong in analytical economics.) My best guess is that some of the earlier members of this school of thought wrote in erudite and subtle language, as can be expected from legally trained authors, on pressing issues at the time – eg ‘liberalism’ vs ‘communism’ just before the cold war. It seems to me, much of the discussion is stuck at issues of general concern around the mid-1940s. Unfortunately, the progress in analytical economics is not acknowledged in these discussions which, in a sense, results in back to the future of the 19th century as far as economic theory is concerned.

  35. Ernestine Gross
    December 15th, 2016 at 12:50 | #35

    @GrueBleen

    It seems to me your historical case contains an aspect of the topic of ‘negative externalities’, which is sometimes ignored, namely when does something become an ‘externalised cost’ (ie paid for, in one way or another, by others)?

    There is or has been hardly an activity, which doesn’t generate a ‘by-product’. IMHO, it is only when a ‘by-product’ is experienced or recognised as unwanted (personal preferences, health effects, implications of scientific knowledge) that ‘negative externalities’ become the subject matter of interest in contemporary economics.

    Assuming MHO is not way off track, it stands to reason that the subject of ‘negative externalities’ has grown in importance with the growth in the global human population as well as so-called technological progress. It is difficult to imagine a single individual would be capable of causing environmental devastation to a river system or the atmosphere. On a smaller scale, there is no obvious reason to expect noise control measures being called for if the distance between individual houses is about 1 km. Things change when 10, 20, 40, 60 parties live on top of each other, separated by a series of concrete slabs. And so forth.

    Why did the mill construct the recycling plant only after the government placed an environmental mitigation requirement on it?

  36. GrueBleen
    December 15th, 2016 at 19:39 | #36

    @Ernestine Gross
    Your #35

    Quite. In fact it takes on something of the properties of an arms race: technology evolves and changes and careless manufacturing processes produce waste which is increasingly exotic and/or toxic and ‘reprocessing/recycling’ technology struggles to keep up. If we had, for instance, the plastic recycling technology and regular disposal collections “back then” that we have now, maybe we wouldn’t have the ‘Great Trash Vortices’ (aka Gyres) that we have all over the world’s oceans now.

    But to whom – other than seabirds and other sea life – are the Gyres a “cost” ? They don’t interfere with trade and they’re too far offshore to interfere with surfboarding. So, who will pay to remove them … if anybody ?

    You ask: “Why did the mill construct the recycling plant only after the government placed an environmental mitigation requirement on it?”

    Ah well that wasn’t specifically addressed at the time – at least I can’t remember it being so. But my explanation is twofold:

    1. Mill management were totally indifferent to any ‘negative externalities’ because nobody ever complained – least of all the authorities which I presume would have been the Melbourne and Metropolitan Board of Works – MMBW – which owned and managed all of Victoria’s water back in those days – until the drought raised the pollution to un-ignorable levels.

    2. When the Mill operators were required to position the outlet up river from the intake, the management finally got the message that they would have to install filters to purify the intake water enough to use in the paper manufacturing process. And I think that then the penny dropped: if they were going to have to put filters in anyway, why not just recycle the water, filter out the crap and reuse it, thus avoiding having to pay the MMBW a significant fee for the daily intake of large volumes of Yarra River water. So the water recycling plant was installed and more than paid for itself. A triumph of capitalist ingenuity and management acumen … or something.

    I never did find out what they did with all the crap they filtered out in the recycling process – maybe they just bagged it and put it into landfill … maybe.

  37. GrueBleen
    December 15th, 2016 at 19:46 | #37

    @Ernestine Gross
    Your #34

    Which just goes to show that the human race has always lived in a post-truth world.

    How we ever managed to invent ‘scientific epistemology’ even to the fairy primitive state of today utterly escapes me.

  38. ZM
    December 16th, 2016 at 11:35 | #38

    @Ernestine Gross

    Thanks for that explanation 🙂 I haven’t studied enough economics to know that the Austrian school took into conservation the legal and institutional context economics occurs in.

    “4. As is evidenced by Edwin Dolan’s paper, referenced in JQ’s post, there are contemporary members of the Austrian economic school of thought, who want the judiciary (rather than elected governments) to develop common law to deal with contemporary environmental issues.”

    There is a federal court case in the USA at the moment about climate change, that is asking the Judiciary to rule the government has to act to preserve a safe climate for young people and future generations, using the Public Trust Doctrine I mentioned above. The group Our Children’s Trust has so far won the right to be heard in court, despite the arguments of the oil industry groups in the early hearings.

    The Public Trust Doctrine has a particularly interesting history in America, since it was used in its broadest form by both sides of the American Revolution, and also is part of the Takings Clause in the USA Constitution, being called the Public Use (the Use was the early word for Trust in English law in the Middle Ages).

    I think the idea is that the Judiciary should enforce the rule of law, rather than that they are meant to create environmental laws by Case Law.

    My understanding is that the youth plaintiffs simply want the court to uphold that the Federal and State governments have a legal duty to preserve a safe climate, and then it is up to the governments and other stakeholders to actually work out the policies that will do this. If the government fails to do this, it would be possible to go back to court and get another order.

  39. ZM
    December 16th, 2016 at 11:36 | #39

    I meant “took into consideration” rather than “took into conservation”

  40. Ernestine Gross
    December 16th, 2016 at 12:06 | #40

    @ZM

    Thanks for a) translating age old words into contemporary language and b) for the information on the Public Trust Doctrine in the USA.

    “I think the idea is that the Judiciary should enforce the rule of law, rather than that they are meant to create environmental laws by Case Law.” I would agree with this idea.

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