I ran across this paper: Using Market Incentives to Protect Water Quality in America from the Environmental Defense Fund. Not surprisingly, it contains a number of concepts I consider quite unworkable.
For example, fee schedule government price controls. This device, which presumes a governing market price intelligence can exist that is superior to supply and demand in fitting a market to consumers, has done a great deal of damage to American healthcare — made it far more expensive that it would be without government price controls. As a market device I think it fails miserably and I wouldn’t recommend government price controls for any market.
Similarly, this notion that a water pollution credit market of trading fiat rights, much like the failed carbon credit concept, can accomplish anything beneficial to society, is another fail point in my assessment.
But the last section of the paper, “Require Assurance Bonding and Damage Liability,” looks like it might hold some promise.
The Elbert County Left [ECL] march around the county, in and out of various meeting halls, issuing the words “frack” and “fracker” as if they were f-bombs — ultimate mudballs. To be so labelled means you’re a neanderthal environmental idiot worthy of public scorn. In their lexicon, the words are so defamatory that quite often the ECL use fake names on the internet and in local papers when issuing them.
Unfortunately this is about as far their economic analysis usually gets. Issue the ad hominem and then leave the room. I always consider the source before assessing the content of their remarks because nothing they do is off tangent from their (using a whispered reverential tone here as if speaking in church) agenda.
Back on point though, markets find real value, voluntary transaction price points where two people agree that what they each hold is of an equivalent value and worth trading with each other. The system requires property ownership and freedom to function. The rest of it occurs quite naturally, until you inject government into the transaction. A government price control interferes with valuation and voluntary decisions of the traders. It spoils a market at the onset and creates an endless downstream of negative market dislocations for every subordinate transaction to follow.
The ECL is correct that clean water has a value to us all. But the ECL don’t understand how markets work. Anything that has a value also has a price and can be traded.
I’d like to see a discussion of using surety bonds between parties for water quality protection proximate to drilling operations. Such devices would;
- flesh out the measurable triggering mechanisms,
- they would provide for remedies,
- they would evaluate and price real risk to the operations,
- they would be voluntarily executed between concerned parties,
- they would resolve a political issue with a concrete market device,
- they would not require unworkable government intervention, and
- they would demonstrably step back from socialist thinking in vogue today.
And let’s not forget the bonus point of leaving ECL zealots with one less unresolvable issue to bay about at public meetings.
B_Imperial