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Yes you are. Regulating at the state level does not necessarily internalize pollution on the balance sheet of polluting firms. It merely motivates firms to move

Yes you are. Regulating at the state level does not necessarily internalize pollution on the balance sheet of polluting firms. It merely motivates firms to move to states with weaker regulations. The very process you champion as "competition" specifically undermines the internalization mechanism. This is true for positive externalities as well, such as education and public health. Firms can simply move to the states that invest the least in public services and have healthy, educated adult workers provided by other states move there. Tax competition undermines the mechanism of internalizing the taxpayer-funded cost of their education and health.

AnthonyMouse 9y ago
> Regulating at the state level does not necessarily internalize pollution on the balance sheet of polluting firms. It merely motivates firms to move to states with weaker regulations. But how does it motivate states to have weaker environmental regulations? Suppose it saves a company $10M to not have to comply with environmental regulations, but as a result $25M in damage is done to the state. A state has no rational incentive to do that. They are paying $25M in costs to give the company a $10M incentive. They could give them $10M in tax credits instead and be ahead by $15M. Irrational or corrupt states may do it anyway, but in that case the problem isn't competitive pressure, it's stupidity or corruption. And then the next state over can out-compete them by offering environmental regulations with a $12M tax credit which the dumb state can't afford because it lost those resources to pollution. > This is true for positive externalities as well, such as education and public health. Firms can simply move to the states that invest the least in public services and have healthy, educated adult workers provided by other states move there. Tax competition undermines the mechanism of internalizing the taxpayer-funded cost of their education and health. No it doesn't. A state doesn't provide good schools because it's trying to please school children, it does it to satisfy the parents. You can't stock up on healthcare and once you've accumulated 20 years of it, go move somewhere without it and not need it anymore. Workers are not going to leave a place with good schools and government subsidized healthcare for a place without them unless the company pays them enough to afford private schools for their children and private healthcare. Which, if the government was providing efficient schools and heathcare, will cost as much as the difference in taxes. Even things with positive externalities are not inherently problematic. If Massachusetts spends $10M on scientific research and the result is $25M in benefits for Massachusetts and $500M in benefits for the rest of the world, they have no incentive to stop doing it because they're still coming out ahead by $15M. There may be other programs that yield the same benefits and cost $50M instead of $10M, but a state that yields the $25M partial benefit will never have the incentive to fund those. For that you need federal grants in the same way you need federal environmental regulations for interstate pollution.
- abalone 9y ago
  > Irrational or corrupt states may do it anyway, but in that case the problem isn't competitive pressure, it's stupidity or corruption. Well it's both, isn't it? Corporations seek out the most "stupid and corrupt" state with weak environmental regulations that will drive them to ruin, but maximize short-term private profit. Also, not that hard to do when the corporate elite fund elections. > And then the next state over can out-compete them by offering environmental regulations with a $12M tax credit which the dumb state can't afford because it lost those resources to pollution. Great. So your corrective mechanism for corruption is, states first have to fail due to extreme environmental pollution. Which happens over multiple generations, long after the corporations that drove the process have distributed profits and moved on. Not a really primo solution there. That is exactly why we have global warming. I guess our next planet can learn from Earth's "stupid and corrupt" mistakes, as part of a natural market correction, right?

AnthonyMouse 9y ago

> Regulating at the state level does not necessarily internalize pollution on the balance sheet of polluting firms. It merely motivates firms to move to states with weaker regulations. But how does it motivate states to have weaker environmental regulations? Suppose it saves a company $10M to not have to comply with environmental regulations, but as a result $25M in damage is done to the state. A state has no rational incentive to do that. They are paying $25M in costs to give the company a $10M incentive. They could give them $10M in tax credits instead and be ahead by $15M. Irrational or corrupt states may do it anyway, but in that case the problem isn't competitive pressure, it's stupidity or corruption. And then the next state over can out-compete them by offering environmental regulations with a $12M tax credit which the dumb state can't afford because it lost those resources to pollution. > This is true for positive externalities as well, such as education and public health. Firms can simply move to the states that invest the least in public services and have healthy, educated adult workers provided by other states move there. Tax competition undermines the mechanism of internalizing the taxpayer-funded cost of their education and health. No it doesn't. A state doesn't provide good schools because it's trying to please school children, it does it to satisfy the parents. You can't stock up on healthcare and once you've accumulated 20 years of it, go move somewhere without it and not need it anymore. Workers are not going to leave a place with good schools and government subsidized healthcare for a place without them unless the company pays them enough to afford private schools for their children and private healthcare. Which, if the government was providing efficient schools and heathcare, will cost as much as the difference in taxes. Even things with positive externalities are not inherently problematic. If Massachusetts spends $10M on scientific research and the result is $25M in benefits for Massachusetts and $500M in benefits for the rest of the world, they have no incentive to stop doing it because they're still coming out ahead by $15M. There may be other programs that yield the same benefits and cost $50M instead of $10M, but a state that yields the $25M partial benefit will never have the incentive to fund those. For that you need federal grants in the same way you need federal environmental regulations for interstate pollution.

abalone 9y ago
> Irrational or corrupt states may do it anyway, but in that case the problem isn't competitive pressure, it's stupidity or corruption. Well it's both, isn't it? Corporations seek out the most "stupid and corrupt" state with weak environmental regulations that will drive them to ruin, but maximize short-term private profit. Also, not that hard to do when the corporate elite fund elections. > And then the next state over can out-compete them by offering environmental regulations with a $12M tax credit which the dumb state can't afford because it lost those resources to pollution. Great. So your corrective mechanism for corruption is, states first have to fail due to extreme environmental pollution. Which happens over multiple generations, long after the corporations that drove the process have distributed profits and moved on. Not a really primo solution there. That is exactly why we have global warming. I guess our next planet can learn from Earth's "stupid and corrupt" mistakes, as part of a natural market correction, right?