Tuesday, July 29, 2008

The Optimal Polution in a Command Economy

attempt to clear the air for the athletes) faces in trying to undo in a few months what has This article discusses China's attempt to deal with air pollution in time for the Olympic games that will begin in early August. The article (and others that have been following Beijingidentifies the overwhelming difficulty that Beijingbuilt up over decades of poor regulation of emissions as well as recent surge in economic growth and industry.

Part of the Chinese difficulty comes from a command market economy in which the public serves the wishes of the government and has no power to force regulation of negative externalities on their own behalf. Private enterprise is similarly limited and so the regulation that comes from a market economy is also missing.

As the article points out, the same factors that got China into the pollution bind are those being used to try an emergency fix. The government ordered that factories be dissembled and moved in their entirety to the farmland far from the city. The cost was considerable both in lost production, manpower, and resources. However, the benefit to the country in terms of world perception and success in hosting the Olympics was viewed by the central government to outweigh the cost. As the article points out, the efforts may be too little too late to effectively control air quality.

The effect of the pollution in China, the level of which bypassed that considered optimal in the West, now will have global effects through the reactions of individual athletes. The negative externalities have increased dramatically because of the unique circumstances of the Olympic games. But they are not easily eliminated or controlled. The Chinese government has viewed pollution as an unavoidable consequence of economic growth and ignored pollution as a side effect. Now the interest has changed and decreasing pollution is an ultimate goal. In a command economy the optimal pollution is whatever the government decides at whatever cost it takes.

1 comment:

Greg Delemeester said...

Another nice example of a negative externality. Arguably, some of the worse cases of pollution have appeared in command controlled economies (think about East Germany and other countries that used to be behind the Iron Curtain). One reason for this is the lack of (respect for) private property. Why worry about polluted property if it's not yours?