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Markets cannot incentivize conservation. They are designed to maximally use all available resources. In most cases it's a good thing, but in few cases it is cat

by js8 8y ago

Markets cannot incentivize conservation. They are designed to maximally use all available resources. In most cases it's a good thing, but in few cases it is catastrophic. (Think about it - the more is the resource being conserved, the more relatively abundant it becomes, and the cheaper it becomes in the market. The conservation of resource can only be done if it's use and extraction is punished, and free market only gives positive incentives.) (That's why the markets cannot solve global warming for example, and that's why free market fundamentalists are often unable to believe that global warming is happening.)

adrianN 8y ago
Taxes are usually used in markets to act as "punishments". A carbon tax or a cap-and-trade system would effectively use markets to stop global warming.
- js8 8y ago
  Yes, the taxes are used in that way but they must be instituted by the government. However, even a tax doesn't necessarily helps with the conservation of non-renewable resource. Since the tax is typically a percentage of the price, price going to 0 will still incentivize use of the resource despite tax being arbitrarily high. The same goes for cap-and-trade - which is how they actually failed - the emission quotas got very cheap and so everybody bought what they needed for business as usual. The only way the carbon tax can work in case of carbon is that it becomes high enough that it's no longer efficient to produce energy from carbon sources compared to energy from renewable sources. So the tax isn't really a punishment that would encourage conservation, it can just encourage substitute of different resource. If there isn't different resource.. you still won't conserve it even if you tax it a lot.
  - smallnamespace 8y ago
    > If there isn't different resource.. There's always a different resource that you can substitute if you look widely enough at the big picture. E.g. for party balloons, sure, maybe only helium works, but it's only there as an entertainment option, of which there are many substitutes. Same for say, helium for scuba diving—sure, there might not be an alternative, but the purpose of most forms of scuba diving may be fulfilled by alternatives (submersibles / robots / snorkeling depending on whether for practical or enjoyment purposes). A tax would drive people to fulfilling the wider economic and societal need without using a product that requires helium. > which is how they actually failed Cap and trade did not 'fail', it succeeded in capping emissions at the number of credits + allowances. If you want to reduce emissions more, then reduce the total quantity. Price targeting and quantity targeting are just different ways of stating what your goal is.
    - mcherm 8y ago
      > There's always a different resource that you can substitute if you look widely enough at the big picture. What is the different resource that can be used for studying low temperature physics?
  - da_chicken 8y ago
    > Since the tax is typically a percentage of the price For a duty tax, sure, but not not an excise tax. Those are often fixed rates. An NFA stamp for the transfer of banned weapons is a fixed rate ($200). Cigarette taxes [0] are also fixed values. Gasoline taxes have a similar fixed value [1]. [0]: https://taxfoundation.org/state-cigarette-tax-rates-2018/ https://taxfoundation.org/state-cigarette-tax-rates-2018/ [1]: https://taxfoundation.org/state-gasoline-tax-rates-2017/ https://taxfoundation.org/state-gasoline-tax-rates-2017/
whatshisface 8y ago
>Markets cannot incentivize conservation. This is not true. If you and I believe that the scarcity of a resource will rise tomorrow, we will try to buy it today so that we can sell it for a higher price after it becomes harder to get. All resource speculation (and boy, there is a lot,) is market-incentivised conservation.
- da_chicken 8y ago
  Except you're requiring someone to choose to not make money today in order to maybe make more money tomorrow. If the seller thinks scarcity will rise tomorrow, they'll just raise prices today. Capitalist markets are traditionally both selfish and short-sighted. Market limits are how black markets are created. Eventually the market demands will raise prices high enough to incentivize illegal activity. See: elephants, rhinos, whales, etc.
  - stale2002 8y ago
    > If the seller thinks scarcity will rise tomorrow, they'll just raise prices today Yes they will. And this increase in price will cause people to use less of it, because people don't like wasting money. Nothing is being made illegal, so there are no black markets.
- js8 8y ago
  > If you and I believe that the scarcity of a resource will rise tomorrow But I don't! If the resource is not to be used tomorrow, or any other day (that is, being conserved), then why should I believe it will be scarce? The problem is that you simply cannot assign a finite price on something that you're never going to use.
- shadofx 8y ago
  Some of our medical machines were invented under the assumption that Helium would be dirt cheap. Once the price of helium rises those machines will become absurdly expensive to operate, and people will start dying of treatable diseases. Not your stated problem, but still a thing to keep in mind.
antidesitter 8y ago
> Markets cannot incentivize conservation. This is absolutely false. Even a basic understanding of supply and demand shows that a decrease in supply causes the equilibrium price to increase and the equilibrium quantity to decrease.
- js8 8y ago
  Except in case of conservation, supply is not decreasing (more precisely, since the word supply is overloaded, supply curve doesn't change). That's the flaw in the argument. And you can't model the situation (of conserving a resource) in supply-demand model.. precisely because markets cannot do it.
  - antidesitter 8y ago
    If supply isn’t decreasing, what’s the point of conservation?
  - stale2002 8y ago
    The literal definition of Economics is the distribution of scarce resources. The entire point of supply and demand models is for the exact purpose of deciding whether we should use resources now, or use them later (ie conservation), and decide how and who we should spend those resources on. If you were to ask be to give a definition of economics or supply and demand, a situation exactly like this is what I would use to define those words.
bumholio 8y ago
Markets can predict future shortages and rise prices in anticipation. Nobody wants to sell cheaply today if they can get more than the prevailing interest rate by sitting on the resource. And if we are talking about really long time frames where the risk/reward ratio is not clear, why should we assume the governmental decision is better than someone who has financial skin in the game? Maybe the conservation decision will actually be a bad outcome, conserving at a great present cost something that will be worthless in the future. Global warming and other environmental problems have nothing to do with this. The environment is a shared resource so market participants have no incentive to preserve it, on the contrary, they rush to "use" as much of the common resource as possible and maximize present gain, before someone else kills the planet and there are no more money to be made. The solution there is to tax the externalities and transform the public resource into a private cost that must be minimized, thus preserving the resource. Helium is not such a public resource, it's private to those who have it, produce it and store it.
- nradov 8y ago
  Helium isn't really a resource that speculators can sit on. We get it as a byproduct of natural gas production and no one is going to stop extracting natural gas just to save helium for the future. And once you have helium it's expensive to store.
  - bumholio 8y ago
    Then... how do you propose to conserve it? If you can't speculate it, then by definition you can't ration it. (By the way, if you read the article, it nicely explains how the US Helium reserve works and how it has been dismantled in recent years; so you can in fact store huge amounts of helium, should it ever make economic sense to do so).
    - nradov 8y ago
      I am aware of how the US helium reserve works. Something like that can only practically be done by a government which doesn't care much about costs. And it has a significant leakage rate, so helium is more like a perishable commodity than something that can be stored indefinitely. Ultimately we can't really conserve helium, but we can avoid wasting it on frivolous things.

by js8 8y ago

adrianN 8y ago

Taxes are usually used in markets to act as "punishments". A carbon tax or a cap-and-trade system would effectively use markets to stop global warming.

js8 8y ago
Yes, the taxes are used in that way but they must be instituted by the government. However, even a tax doesn't necessarily helps with the conservation of non-renewable resource. Since the tax is typically a percentage of the price, price going to 0 will still incentivize use of the resource despite tax being arbitrarily high. The same goes for cap-and-trade - which is how they actually failed - the emission quotas got very cheap and so everybody bought what they needed for business as usual. The only way the carbon tax can work in case of carbon is that it becomes high enough that it's no longer efficient to produce energy from carbon sources compared to energy from renewable sources. So the tax isn't really a punishment that would encourage conservation, it can just encourage substitute of different resource. If there isn't different resource.. you still won't conserve it even if you tax it a lot.
- smallnamespace 8y ago
  > If there isn't different resource.. There's always a different resource that you can substitute if you look widely enough at the big picture. E.g. for party balloons, sure, maybe only helium works, but it's only there as an entertainment option, of which there are many substitutes. Same for say, helium for scuba diving—sure, there might not be an alternative, but the purpose of most forms of scuba diving may be fulfilled by alternatives (submersibles / robots / snorkeling depending on whether for practical or enjoyment purposes). A tax would drive people to fulfilling the wider economic and societal need without using a product that requires helium. > which is how they actually failed Cap and trade did not 'fail', it succeeded in capping emissions at the number of credits + allowances. If you want to reduce emissions more, then reduce the total quantity. Price targeting and quantity targeting are just different ways of stating what your goal is.
  - mcherm 8y ago
    > There's always a different resource that you can substitute if you look widely enough at the big picture. What is the different resource that can be used for studying low temperature physics?
- da_chicken 8y ago
  > Since the tax is typically a percentage of the price For a duty tax, sure, but not not an excise tax. Those are often fixed rates. An NFA stamp for the transfer of banned weapons is a fixed rate ($200). Cigarette taxes [0] are also fixed values. Gasoline taxes have a similar fixed value [1]. [0]: https://taxfoundation.org/state-cigarette-tax-rates-2018/ https://taxfoundation.org/state-cigarette-tax-rates-2018/ [1]: https://taxfoundation.org/state-gasoline-tax-rates-2017/ https://taxfoundation.org/state-gasoline-tax-rates-2017/

whatshisface 8y ago

>Markets cannot incentivize conservation. This is not true. If you and I believe that the scarcity of a resource will rise tomorrow, we will try to buy it today so that we can sell it for a higher price after it becomes harder to get. All resource speculation (and boy, there is a lot,) is market-incentivised conservation.

da_chicken 8y ago
Except you're requiring someone to choose to not make money today in order to maybe make more money tomorrow. If the seller thinks scarcity will rise tomorrow, they'll just raise prices today. Capitalist markets are traditionally both selfish and short-sighted. Market limits are how black markets are created. Eventually the market demands will raise prices high enough to incentivize illegal activity. See: elephants, rhinos, whales, etc.
- stale2002 8y ago
  > If the seller thinks scarcity will rise tomorrow, they'll just raise prices today Yes they will. And this increase in price will cause people to use less of it, because people don't like wasting money. Nothing is being made illegal, so there are no black markets.
js8 8y ago
> If you and I believe that the scarcity of a resource will rise tomorrow But I don't! If the resource is not to be used tomorrow, or any other day (that is, being conserved), then why should I believe it will be scarce? The problem is that you simply cannot assign a finite price on something that you're never going to use.
shadofx 8y ago
Some of our medical machines were invented under the assumption that Helium would be dirt cheap. Once the price of helium rises those machines will become absurdly expensive to operate, and people will start dying of treatable diseases. Not your stated problem, but still a thing to keep in mind.

antidesitter 8y ago

> Markets cannot incentivize conservation. This is absolutely false. Even a basic understanding of supply and demand shows that a decrease in supply causes the equilibrium price to increase and the equilibrium quantity to decrease.

js8 8y ago
Except in case of conservation, supply is not decreasing (more precisely, since the word supply is overloaded, supply curve doesn't change). That's the flaw in the argument. And you can't model the situation (of conserving a resource) in supply-demand model.. precisely because markets cannot do it.
- antidesitter 8y ago
  If supply isn’t decreasing, what’s the point of conservation?
- stale2002 8y ago
  The literal definition of Economics is the distribution of scarce resources. The entire point of supply and demand models is for the exact purpose of deciding whether we should use resources now, or use them later (ie conservation), and decide how and who we should spend those resources on. If you were to ask be to give a definition of economics or supply and demand, a situation exactly like this is what I would use to define those words.

bumholio 8y ago

Markets can predict future shortages and rise prices in anticipation. Nobody wants to sell cheaply today if they can get more than the prevailing interest rate by sitting on the resource. And if we are talking about really long time frames where the risk/reward ratio is not clear, why should we assume the governmental decision is better than someone who has financial skin in the game? Maybe the conservation decision will actually be a bad outcome, conserving at a great present cost something that will be worthless in the future. Global warming and other environmental problems have nothing to do with this. The environment is a shared resource so market participants have no incentive to preserve it, on the contrary, they rush to "use" as much of the common resource as possible and maximize present gain, before someone else kills the planet and there are no more money to be made. The solution there is to tax the externalities and transform the public resource into a private cost that must be minimized, thus preserving the resource. Helium is not such a public resource, it's private to those who have it, produce it and store it.

nradov 8y ago
Helium isn't really a resource that speculators can sit on. We get it as a byproduct of natural gas production and no one is going to stop extracting natural gas just to save helium for the future. And once you have helium it's expensive to store.
- bumholio 8y ago
  Then... how do you propose to conserve it? If you can't speculate it, then by definition you can't ration it. (By the way, if you read the article, it nicely explains how the US Helium reserve works and how it has been dismantled in recent years; so you can in fact store huge amounts of helium, should it ever make economic sense to do so).
  - nradov 8y ago
    I am aware of how the US helium reserve works. Something like that can only practically be done by a government which doesn't care much about costs. And it has a significant leakage rate, so helium is more like a perishable commodity than something that can be stored indefinitely. Ultimately we can't really conserve helium, but we can avoid wasting it on frivolous things.