Wednesday, January 26, 2005

I like to read Dr. Henochowicz's site, Medviews. I find his views interesting but his post on externality I found incredulous.

I have to fight against only reading sites that say the same things that I already think. When I read something that I don't agree with, I hope that I am open to persuasion. However, I can't agree to some of Dr. Henochowicz's comments on this post.

Externalities are flaws in the market; they need to be corrected by government through regulation, taxation, or incentive programs.
Why do you assume that they "need to be corrected by government?" If the people are concerned about externalities, why don't you think that market forces, especially in your example of pollution from industry, have a role in the solution?

How is this a "flaw in the market?" People are aware, or can be made aware, of a company/industry's behavior and "externalities." Then the people make a decision. Do I interact commercially with this organization, thereby supporting these externalities, or do I withhold such support, by refusing to buy those products?

This is the market in action. Not a flaw in the market. It is an area of a free market society with which you disagree, so you want the government, at gunpoint, if necessary, to make the market actions conform to your version of what is fair. "Externalities are unfair."

I can agree with this statement: "We as a society need to do more to fix them [externalities]." I don't agree that "we need to force everyone to contribute" or that the government is the answer. I think publicizing the externalities to which we object and education in the hope that enough people will agree with us that market forces will force a change in the objectional behavior is the answer. If this doesn't work, perhaps your evaluation of what is "unfair" is not what society agrees with as a priority.

People make choices everyday. "I know that industry pollutes, but I think the products are worth it." "I know that product is bad for me eventually, but I will trade that for the immediate benefit I get today." This is similar to my earlier posts regarding paternalism in the FDA.

I don't disagree with your comments or even your priorites regarding the externalities you mentioned. I just disagree with your opinion that the government is the answer or that people should be "forced" to correct what you and I disagree with. We should attempt to persuade them to agree with us and encourage proper corrective action through the marketplace. The reason that this often doesn't work is the government, not vice-versa.

For example, I face a high risk when I try to educate someone regarding inappropriate use of the emergency room. If I screen them and send them out, I face potential EMTALA complaints and malpractice lawsuits. If I was allowed to refuse treatment to someone for a cold at 10 pm on Saturday because I know I am not going to be paid, that person would be encouraged, by the marketplace, to get insurance. But the government, by passing laws that increase my risk, discourages proper use of market forces.