Question Earthority!

Over on the Market Liberalism Yahoo! Group, I’ve been privileged to discuss a number of issues with libertarian luminaries including (but not limited to) Brian Holtz and Professor Fred E. Foldvary. One recent discussion (the relevant section starts right about here) has centered around the desirability of “externality taxes” versus other ways of addressing pollution, climate change and other environmental ills.

Three concise summaries of opinion (extracted from various messages in the thread):

Brian Holtz — “I consider it obvious that micro-torts cannot handle negative externalities. No matter how well you tailor the negative externality tax, there will always be someone who can accurately claim that he’s being unjustly coerced by the tax. My response to him is that there will exist more coercion (via negative externalities) without the tax. … Like an externality tax, a class action ruling either 1) magically balances state force against each polluter in the same way that a huge set of micro-tort rulings would, or 2) leaves some polluters unjustly over-penalized and others unjustly under-penalized. Magic is not an option, and if you can tolerate (2), then you haven’t much argument against the externality tax.”

Thomas L. Knapp — “Saying that ‘micro-torts’ aren’t the answer to negative externalities is like saying that meter maids aren’t the answer to interstate highway speeding. Of course they aren’t — but their cousins, class action suits, could be. … While any disposition of power carries certain dangers with it, my gut feeling … is that disposing this particular power into the tort system via the courts carries less danger with respect to human freedom that disposing it into the tax and regulatory system via the legislature and executive departments.”

Professor Foldvary — “Maybe, but not necessarily. On-going pollution would result in continous torts for the same activity. Why not regularize it with periodic payments? Individual tort cases would be subject to variable penalties on the judgment of juries and judges who could impose arbitrary charges. … several countries such as Germany do have effluent charges that indeed keep pollution at a low level.”

It should be fairly obvious that my opponents in this debate are not intellectual lightweights. They make good arguments. Still, I’m not convinced.

I believe that one thing missing from this debate is consideration of state power itself as an externality — the severity of which, and the damage caused by, is inevitably exacerbated in any extension of the power to tax.

What I’ve proposed is the classification of various polluting activities as legally actionable torts, and the removal of state protection (via regulation) from those activities. In this way, class action litigation would provide a disincentive to pollute and an incentive to offset pollution which can’t be avoided.

An interesting analogy exists at this very moment: The government of California recently filed suit against a number of auto manufacturers for contributing to global warming. If we ignore for a moment that it’s a government doing the suing (and assume that non-government entities such as the Sierra Club would have the money to pursue such litigation on behalf of identified classes of individuals — if they weren’t putting all their money into buying more government), we can see how this might work.

Let’s assume, for the moment, that the suit has merit — that the defendants are indeed engaged in an activity which should be construed as a tort. Let’s further assume that litigation versus such defendants could be counted upon to become regular if environmental activists chose to pursue it, rather than state regulation, as a way of combating environmental offenses (more to the point, if the latter option was removed from the table).

In such circumstances, it’s reasonable to assume that the defendants would take action to protect themselves from such litigation in the future. As a matter of fact, I’ll go out on a limb here and predict that after the first such successful (and costly) suit, those automakers mentioned above would start rolling each new car off the line with a sticker announcing that carbon storage had been purchased by the manufacturer, for the average amount of carbon emissions produced by that model over its average lifespan. Naturally, that cost would be passed on to the consumer … but so would the cost of any “externality tax,” or the cost of the externality itself, although less precisely.

The difference between the tort approach and the legislative/regulatory/taxation approach is that aside from a few administrative costs, the tort approach does not feed government per se — but the legislative/regulatory/taxation approach has historically always produced its own parallel externalities in the form of large, expensive bureaucracies and overweening state power.

I’m by no means a fan of the courts (hey, I’m an anarchist). However, the courts usually produce verdicts and then go on to produce other verdicts. The judgments awarded in class action tort litigation are widely distributed to various parties, not into trust funds created for the purpose of expanding the power of the courts. Taxes collected by government are narrowly distributed to power-seeking individuals and organizations — with no particular direct link between the putative reason for which the tax was assessed and the uses to which the money will be put.