4 ms·

So you are correct that externalities is something that is really ill-defined, which is why all claims to impose externality-based taxes should meet a high bar

by rsj_hn 5y ago

So you are correct that externalities is something that is really ill-defined, which is why all claims to impose externality-based taxes should meet a high bar of rigor. In most cases, that's just impossible and the taxes end up being applied for political or emotional reasons rather than objectively taking all costs and benefits into account. But when it comes to a few areas, we know that there are massive positive externalities in anything involving transportation or communication. Anything that makes the world smaller generally has big positive effects. Even if you never buy a foreign good, the fact that a good was brought in will lower the price and raise the quality of the domestic good you do buy. That generates employment and income. Anything that lowers the price of bringing in that good will have a huge positive effect on the economy. With planes, the fact that they make transportation easy and affordable generates massive revenue for tourism, trade, employment. European Airports alone generate about 675 Billion in GDP -- 4% of the EU's GDP when both passenger and freight is taken into account[1]. And that's just airports. An older FAA study concludes that civil aviation generates 5.4% of US GDP[2] and that's a fairly conservative study not even trying to measure too many spillovers. Then there is a third effect, which is the superiority of point to point designs. Miami Beach was developed in the 30s and 40s because some developers saw its potential as a great beach destination. But it was only with plane flight that the rest of the nation had a chance to enjoy it. Or Las Vegas, another center that sprang out of nowhere. The fact that I can fly from pretty much anywhere in the country to Miami for $100 massively increases the tourism trade to Miami Beach. To do that with rail, you'd have to overcome n^2 problem. That alone would require laying down ~50,000 miles of track, requiring God knows how many tons of steel, trainyards, and workers. And it would take days to travel there with connections, stopovers, etc. Those are all frictions. And once you laid it all down, suppose you didn't want to go to Miami, but to Corpus Christi. Thus air travel allows places to spring up in response to market demand, whereas in the old days, cities along the track became the important centers -- e.g. development was infrastructure constrained rather than allowing the infrastructure to meet the needs of development flexibly and quickly. That increased flexibility and convenience, together with the reduced frictions of point to point travel provides trillions of dollars in positive externalities. [1] https://medium.com/geophy-hq/airports-as-a-positive-externality-82325130d41f https://medium.com/geophy-hq/airports-as-a-positive-external... [2] https://www.faa.gov/air_traffic/publications/media/2014-economic-impact-report.pdf https://www.faa.gov/air_traffic/publications/media/2014-econ...

PaulDavisThe1st 5y ago
> Then there is a third effect, which is the superiority of point to point designs. Miami Beach was developed in the 30s and 40s because some developers saw its potential as a great beach destination. But it was only with plane flight that the rest of the nation had a chance to enjoy it. Or Las Vegas, another center that sprang out of nowhere. I don't think that these are particularly good examples for you to cite. Neither Vegas nor MB developed under the wing (so to speak) of air travel, but rather the interstate system. Air travel made them more accessible and accelerated their growth, but it was not responsible for their development, and the many folks who visited either of them in the 40s, 50s, 60s and 70s without flying would likely not say that they could not enjoy them without planes. In addition, although it's clear that Miami Beach and Vegas have benefitted from cheap flights, that doesn't mean that the net result for the country (let alone world) as a whole is positive. > Even if you never buy a foreign good, the fact that a good was brought in will lower the price and raise the quality of the domestic good you do buy. This sounds like an incredibly hand-wavy claim, and also easily refuted as a general rule. The easy (flight-based) import of foreign goods has, in many cases, led the complete decimation of various US manufacturing sectors. If you hadn't noticed there are essentially no mass-market US electronics companies any more, very few clothes manufacturing companies, and in many manufacturing sectors that do still nominally exist as US companies, their factories are no longer US based. It's false to lay this all at the feet of relatively cheap air freight, but it certainly plays a role, and refutes your overly broad claim that "Anything that lowers the price of bringing in that good will have a huge positive effect on the economy." > Anything that makes the world smaller generally has big positive effects. Yes, the positive effects are well known and oft-discussed. The negative effects are less well known, less researched and rarely discussed. This means that it's hard to have a well-informed discussion about the balance between the two.
- rsj_hn 5y ago
  > In addition, although it's clear that Miami Beach and Vegas have benefitted from cheap flights, Yes, I am not saying that air travel created Miami Beach, but that Miami Beach benefits from it. This is the definition of an economic externality. We are counting the financial benefit or spillover of some technology, meaning the extra value-add created beyond the purchase of the plane ticket itself. For flight, it's huge. Then there is a switch to a different argument: > that doesn't mean that the net result for the country (let alone world) as a whole is positive. This is not an economic argument. Perhaps a moral argument - it's not clear, as no details were provided. But speculating as to whether some value-add spillovers should or should not be present is not how we count externalities in a pigovian tax. It seems what you want is a sin tax for flight, which is not a pigovian tax. In fact most people, when they use words like "externalities", actually want sin taxes. They are not trying to come up with some objective measure of economic value-add spillover effects. And that's fine -- we have lots of sin taxes in the world, but then advocacy for them should be honestly labelled as such. > This sounds like an incredibly hand-wavy claim, and also easily refuted as a general rule. The easy (flight-based) import of foreign goods has, in many cases, led the complete decimation of various US manufacturing sectors. Now is not the time to get into a debate about trade theory, but suffice it to say that I disagree. Trade is great. Deficits are not great. You can have lots of trade without trade deficits, and trade is welfare improving. If you want to stop trade deficits, then add a tax to net foreign capital flows, not cross border flows of goods and services. But on this point we just have to agree to disagree.

by rsj_hn 5y ago

PaulDavisThe1st 5y ago

> Then there is a third effect, which is the superiority of point to point designs. Miami Beach was developed in the 30s and 40s because some developers saw its potential as a great beach destination. But it was only with plane flight that the rest of the nation had a chance to enjoy it. Or Las Vegas, another center that sprang out of nowhere. I don't think that these are particularly good examples for you to cite. Neither Vegas nor MB developed under the wing (so to speak) of air travel, but rather the interstate system. Air travel made them more accessible and accelerated their growth, but it was not responsible for their development, and the many folks who visited either of them in the 40s, 50s, 60s and 70s without flying would likely not say that they could not enjoy them without planes. In addition, although it's clear that Miami Beach and Vegas have benefitted from cheap flights, that doesn't mean that the net result for the country (let alone world) as a whole is positive. > Even if you never buy a foreign good, the fact that a good was brought in will lower the price and raise the quality of the domestic good you do buy. This sounds like an incredibly hand-wavy claim, and also easily refuted as a general rule. The easy (flight-based) import of foreign goods has, in many cases, led the complete decimation of various US manufacturing sectors. If you hadn't noticed there are essentially no mass-market US electronics companies any more, very few clothes manufacturing companies, and in many manufacturing sectors that do still nominally exist as US companies, their factories are no longer US based. It's false to lay this all at the feet of relatively cheap air freight, but it certainly plays a role, and refutes your overly broad claim that "Anything that lowers the price of bringing in that good will have a huge positive effect on the economy." > Anything that makes the world smaller generally has big positive effects. Yes, the positive effects are well known and oft-discussed. The negative effects are less well known, less researched and rarely discussed. This means that it's hard to have a well-informed discussion about the balance between the two.

rsj_hn 5y ago
> In addition, although it's clear that Miami Beach and Vegas have benefitted from cheap flights, Yes, I am not saying that air travel created Miami Beach, but that Miami Beach benefits from it. This is the definition of an economic externality. We are counting the financial benefit or spillover of some technology, meaning the extra value-add created beyond the purchase of the plane ticket itself. For flight, it's huge. Then there is a switch to a different argument: > that doesn't mean that the net result for the country (let alone world) as a whole is positive. This is not an economic argument. Perhaps a moral argument - it's not clear, as no details were provided. But speculating as to whether some value-add spillovers should or should not be present is not how we count externalities in a pigovian tax. It seems what you want is a sin tax for flight, which is not a pigovian tax. In fact most people, when they use words like "externalities", actually want sin taxes. They are not trying to come up with some objective measure of economic value-add spillover effects. And that's fine -- we have lots of sin taxes in the world, but then advocacy for them should be honestly labelled as such. > This sounds like an incredibly hand-wavy claim, and also easily refuted as a general rule. The easy (flight-based) import of foreign goods has, in many cases, led the complete decimation of various US manufacturing sectors. Now is not the time to get into a debate about trade theory, but suffice it to say that I disagree. Trade is great. Deficits are not great. You can have lots of trade without trade deficits, and trade is welfare improving. If you want to stop trade deficits, then add a tax to net foreign capital flows, not cross border flows of goods and services. But on this point we just have to agree to disagree.