MARKET REASONING RENDERS MORAL CONSIDERATIONS IRRELEVANT---Episode 10

                SUBWAY CHEATS AND VIDEO RENTALS

   In practice, the distinction between a fine and a fee can be unstable,even contestable. If you ride the Paris Metro without paying the $2 fare, you can be fined up to $60. The fine is a penalty for cheating the system by evading the fare. Recently, however, a group of habitual dodgers came up with a clever way of converting the fine into a fee, and a modest one at that. They formed an insurance fund that will pay their fine if they get caught. Each member pays in about $8.50 a month to the fund (called a mutuelle des fraudeurs), far less than it costs to buy a legitimate monthly pass. 
   The members of the mutuelle movement say they are motivated not by the money but by an ideological commitment to free public transportation. "It's a way to resist together,"a leader of the group told the Los Angeles Times. "There are things in France which are supposed to be free --- schools, health. So why not transportation ?" Although the fraudeurs are unlikely to prevail, their novel scheme converts a penalty for cheating into a monthly insurance premium, a price they are willing to pay to resist the system. 
   To decide whether a fine or a fee is appropriate, we have to figure out the purpose of the social institution in question and the norms that should govern it. The answer will vary depending on whether we're talking about showing up late at the day-care center, jumping the turnstile in the Paris subway, or ... returning an overdue DVD to the local video store. 
  In the early days of video stores, they treated late fees as fines. If I returned a video late, the person behind the counter had a certain attitude. I was as if I had done something morally wrong, keeping the movie an extra three days.I thought this attitude was misplaced. A commercial video store is not a public library, after ll. Libraries impose fines for overdue books, not fees. That's because their purpose is to organize the free sharing of books within a community. So it's right that I feel guilty when I slink back with an overdue library book. 
   But a video store is a business. Its purpose is to make money by renting videos. So if I keep the movie longer and pay for the extra days, I should be regarded as a better customer, not a worse one. Or so I thought. Gradually, this norm has shifted. As a result of getting sued in a class action lawsuit, video stores now treat overdue charges as fees rather than fines. 

                    TRADABLE POLLUTION PERMITS 

    The distinction between a fine and a fee is also relevant to the debate over how to reduce greenhouse gases and carbon emissions. Should government set limits on emissions and fine companies that exceed them ? Or should government create tradable pollution permits ? The second approach says in effect that emitting pollution is not like littering but simply a cost of doing business. But is that right ? Or should some moral stigma attach to companies that spew excessive pollution into the air ? To decide this question, we need not only to calculate costs and benefits ; we have to decide what attitudes toward the environment we want to promote.
   At the Kyoto conference on global warming (1997), the United States insisted that any mandatory worldwide emissions standards would have to include a trading scheme, allowing countries to buy and sell the right to pollute. So, for example, the United States could fulfill its obligations under the Kyoto Protocol by either reducing its own greenhouse emissions or paying to reduce emissions somewhere else. Rather than tax gas-guzzling Hummers at home, it could pay to restore an Amazonian rain forest or modernize an old coal-burning factory in a developing country.
   I think valid arguments can be made against the trading scheme. I worry that letting countries buy the right to pollute would be like letting people pay to litter. We should try to strengthen, not weaken, the moral stigma attached to despoiling the environment. I also worry that, if rich countries can buy their way out of the duty to reduce their own emissions, we may undermine the sense of shared sacrifice necessary to future global cooperation on the environment. 
   But, those who disagree with my position on paying to pollute suggest that I fail to understand the virtue of markets, that I don't understand the efficiencies of trade, or the elementary principles of economic rationality. Some are nice enough to say they understand that I'm concerned about the welfare of the environment but I need to study more about economics. 
   There is a more moderate viewpoint I could adopt. Unlike tossing litter out of the car window onto the highway, emitting carbon dioxide is not in itself objectionable. We all do it every time we exhale. There's nothing intrinsically wrong with putting carbon dioxide into the air. What is objectionable is doing so in excess, as part of an energy-profligate way of life. That way of life, and the attitudes that support it, are what we should discourage, even stigmatize.
   One way of reducing pollution is by government regulation : require automakers to meet higher emissions standards ; ban chemical companies and paper mills from dumping toxic waste into waterways ; require factories to install scrubbers on their smokestacks. And if companies fail to abide by the standards, fine them. That's what the United States did during the first generation of environmental laws, in the early 1970s. { None other than Richard M. Nixon was POTUS.} The regulations, backed by fines, were a way of making companies pay for their pollution. They also carried a moral message : "Shame on us for spewing mercury and asbestos into lakes and streams, and for befouling the air with choking smog. It's not only hazardous to our health ; it's no way to treat the earth."
   Some people opposed these regulations because they dislike anything that imposes higher costs on industry. But others, sympathetic to environmental protection, sought more efficient ways of achieving it. As the prestige of markets grew in the Reagan years, and as economic ways of thinking deepened their hold, some environmental advocates began to favor market-based approaches to saving the planet. Don't impose emission standards on every factory, they reasoned ; instead, put a price on pollution and let the market do the rest. 
   The simplest way of putting a price on pollution is to tax it. A tax on emissions can be seen as a fee rather than a fine ; but if it's big enough, it has the virtue of making the polluters pay for the damage they inflict. Precisely for this reason, it is politically difficult to enact. So policy makers have embraced a more market-friendly solution to pollution --- emissions trading.
   In 1990, President George Herbert Walker Bush, of the Kennebunkport Bushes, signed into law a plan to reduce acid rain, which is caused by sulfur dioxide emissions from coal-burning power plants. Rather than set fixed limits for each power plant, the law gave each utility company a license to pollute a certain amount, and then let the companies buy and sell their licenses among themselves. So a company could either reduce its emissions or buy extra pollution permits from a company that had managed to pollute less than its allotted amount.
   Sulfur emissions declined, and the trading scheme was widely regarded as a success. Then, later in the 1990s, attention turned to global warming. The Kyoto Protocol on climate change gave countries a choice : they could reduce their own greenhouse gas emissions or pay another country to reduce theirs. The rationale of of this approach is that it reduces the cost of complying. If it's cheaper to replace kerosene lamps in Indian villages than to abate emissions in the United States, why not pay to replace the lamps ?
    Despite this inducement, the United States did not join the Kyoto agreement, and subsequent global climate talks have foundered. But the interest here is less in the agreements themselves than in how they illustrate the moral costs of a global market in the right to pollute. 
   With the proposed market in procreation permits, the moral problem is that the system prompts some couples to bribe others to relinquish their chance to have a child. This erodes the norm of parental love, by encouraging parents to regard children a alienable, as commodities for sale. The moral problem with a global market in pollution permits is different. Here, the issue is not bribery but the outsourcing of an obligation. It arises more acutely in a global setting than in a domestic one. 
   Where global cooperation is at stake, allowing rich countries to avoid meaningful reductions in their own energy use by buying the right to pollute from others ( or paying for programs that enable other countries to pollute less ) does damage to two norms : it entrenches an instrumental attitude toward nature, and it undermines the spirit of shared sacrifice that may be necessary to create a global environmental ethic. If wealthy nations can buy their way out of an obligation to reduce their own carbon emissions, then the image of the hiker in the Grand Canyon may be apt after all.  Only now, rather than pay a fine for littering, the wealthy hiker can toss his beer can with impunity, provided he hires someone to clean up litter in the Himalayas. 
   True, the two cases are not identical. Litter is less fungible than greenhouse gases. The beer can is the Grand Canyon is not an offset by a pristine landscape half a world away. Global warming, by contrast, is a cumulative harm. From the standpoint of the heavens, it doesn't matter which places on the planet send less carbon to the sky.
   But it does matter morally and politically. Letting rich countries buy their way out of meaningful changes in their own wasteful habits reinforces a bad attitude --- that nature is a dumping ground for those who can afford it. Economists often assume that solving global warming is simply a matter of designing the right incentive structure and getting countries to sign on. But this misses a crucial point : Norms matter. Global action on climate change may require that we find our way to a new environmental ethic, a new set of attitudes toward the natural world we share. Whatever its efficiency, a global market in the right to pollute may make it harder to cultivate the habits of restraint and shared sacrifice that a responsible environmental ethic requires.