Monday, February 26, 2007

The lights are on, but only Gittins is home

On Turnball's plan to phase out incandescent light bulbs:
Talk about high-handed intervention in a free market by the nanny state... Why the direct resort to command-and-control? ...why not apply the polluter-pays principle?
I was with you Ross, right up until you said:
Yes, I am kidding. ...Once you understand how far we mere mortals depart from the assumption of rationality, it's easier to see the justification for government interventions intended to counter this whole new form of "market failure" and save us from ourselves.
(I think this is also the first time I think I've heard Ross admit to being one of us mere mortals).

1 comment:

Matt Canavan said...

Gittens arguments are ideological and lazy. They are ideological because he paints all economists as beholden to the shrine of rationality, when in fact economists since Smith have been reporting defective behaviour.
They are lazy because nowhere does he try and spell out the benefits of this policy (he just excepts that reducing emissions, implicitly at any cost, is a good thing).

Similarly, Gittins is simply wrong by arguing that Pigouvian taxes don't work in the face of inelastic demand. Coase recognised that externalities involve two parties and neither is necessarily in the 'wrong'. The point is that the party that does not change behaviour (say water users) should compensate for the potentially smaller foregone benefits missed out on by others (say greenies who's rivers have less waters).

Finally, quoting behavioural economics, which I have a lot of time for, is not a substitute for properly weighing up costs and benefits (which Gittens does not do). Given that the benefits of this policy will probably be extremely low (given that any reduction Oz makes has little effect on global warming), I find it hard to believe that the costs of providing exemptions and enforcing the scheme are worth it.