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Friday, June 30, 2006

Speaking of Pollinization Services...

that was a famous example of an externality in economics textbooks for many years. Bees, it was said, provide pollinization, a good, but since the beekeeper can't charge for it, there will be an "insufficient" number of bees kept. The people who kept repeating this apparently had never looked in the yellow pages and seen that the beekeepers do charge for the service, all the time.
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13 comments:

  1. Normally I "criticize" Gene's posts but it is usually in good fun, whereas this one I think actually deserves some comment. Going back at least to Coase and his mentioning of the lighthouses, free marketeers like to "refute" positive externality arguments by pointing to market provision of things.

    However, strictly speaking the mainstream economist isn't saying that the market provision is zero, just that it is below the optimal level. E.g. take military defense. If NATO invades Somalia, Robert Lucas isn't going to be stunned if some guys have AK-47s. But he will still say, "If they had had a government to tax and spend on military equipment, they would have had tanks and so on."

    (Yeah yeah I know, Somalia might not be in anarchy anymore. Too bad for them.)

    ReplyDelete

  2. Yes, of course there might be less beekeeping than is "optimum" -- the point here is that the externality example said "Beekeepers can't make money off it" -- and they clearly can. (And it's the same with Coase -- he was refuting the case that you can't have private lighthouses, not saying that the optimal amount was provided.)

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  3. Oh I grant you that certain people carelessly use the externality argument, but by the same token free marketeers carelessly "refute" it. (I.e. if you say, "Mainstream economics says there should be zero beekeepers..." then someone who is sharp will think you don't understand marginality.)

    ReplyDelete
  4. Anonymous12:23 PM

    Why would the beekeeper want to charge the bees for this?

    :D

    ReplyDelete

  5. Hey, I logged in. I'm not an anonymous! I want credit for my lousy comedy.

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