28 February 2012

Zetland's Axiom?

Your thoughts?

"Solutions" that conflict with price signals are unlikely to work.

8 comments:

pat said...

Wonky, but I assume that's your goal.

Adam said...

Might not hold when non-market goods or market goods with additional non-market benefits or costs are considered.

David Zetland said...

@Adam -- such as?

Kristoffer said...

How about instead: Solutions that conflict with price signals lead down the path of unintended consequences

Adam said...

GHGs. Price higher than private marginal costs of production signals producers to produce more. Externalities not being accounted for leads to higher than socially optimal production. Solution is to produce less but price signals to produce more.

David Zetland said...

@Kristoffer -- that's longer!
@Adam -- No, the goal is to produce less. What's your SOLUTION to that?

Adam said...

I would definitely call producing less "the solution". I think that I think that "mechanisms" is a better word to use, as in market mechanisms for example.

Ronin Geographer said...

...so the solution is often to change the price signals, e.g., through policy...