Paul Krugman is much amused by the realization that the  origin of Pigouvian taxes(i.e. the idea that the temptation to dump your pollution into the community water supply  might be tempered by a tax on such behavior) never actually mentions pollution but rather only mentions the problem where in one landowner’s enthusiasm for hunting causes a surplus of rabbits to spill out damaging his neighbor’s gardens.

Here’s another fun example of an externality.  Apparently landscape designers have a preference for male plants over female.  The female plants drop more litter, i.e. seed pods and fruit.  Somebody has to sweep up the mess, the clients complain, the landscape designers respond.  While the male plants just pump out vast clouds of  pollen.  Which triggers more allergic reactions from the general public.  But the general public isn’t paying the landscape designers, now are they?

I guess there are alternative schemes to address this.

• Ignore it.
• Follow well worn path laid out by the tobacco industry, fast food, and anti-enviromental forces; and mount a disinformation campaign.  (Hint: Be sure to mention freedom, choice and unintended consequences.)
• Campaign to change the behavior of landscaping  profession.
• Regulation
• Tax Pollen
• Pollen cap and trade.

I’m totally in love with the idea of pollen cap and trade, and I look forward to the fraudulent pollen credit story.

hat tip: Heebie-Geebie, and see also Bee Hive.

“This Time is Different” is a  fascinating  book.  It’s full of provocative confusing details.  It does a wonderful job of helping to further the cause of making it clear economics has got a lot of work yet to do.  There are lots of different large economic scale failure modes.  Inflation, deflation, international debt default, intra-national debt default, etc. etc.  I’m actually convinced they haven’t enumerated a very complete list; for example economic displacement isn’t on their list.

I am reminded of the observation in “Control of Nature” about LA canyon  real estate.  The catastrophic floods are rare compared to how often the property turns over so that residents tend to have no memory of what’s in store.  People still remember the 70’s high inflation.  But here’s a chart showing the  incidence  of deflation.

Here are three things, picked somewhat at random, from the book (so far) I found interesting.

When nations default on their international debt creditors have few effective responses.  In passing them mention that American gun boat  diplomacy  visa vie South America arose out efforts to collect after Venezuela defaulted.  That’s not really what I was taught in school about the Monroe Doctrine.  There is an example of a nation losing it’s sovereignty  upon defaulting on their international debt.  I bet you didn’t know the Newfoundland  was forced to merge with Canada by the Brits during the depression.  But it’s so rare as to be the exception that proves the rule.

There is a nice turn of phrase “odious debt” used to loosely label debt that doesn’t deserve to be repaid.  A simple example of odious debt would be that your country is taken over by a vile dictator who then engages in all kinds of vile behavior; meanwhile lenders in other countries continue loaning him lots of money; which he uses to further torture the population.  Finally the citizens manage to eject him.  That debt is odious and the new government decides to default on it.  Of course there are other less colorful scenarios with less obvious outcomes familiar to anybody who’s observed bankers in the  absence  of consumer protections.

Finally they mention how in China and India the governments regulate things so that people have very limited choices when it comes to savings.  They call this financial oppression; a turn of phrase I see has having great potential in our polarized political discourse.  The governments also regulate what the banks can do with the deposits.  People love to spin fanciful ideas about  alternatives  to the banking system, and I suspect you could find an interesting set of examples in such countries.  For example they mention that savers turn to gold and  jewelry  as an  alternative.

Sometime ago I posted about a fun book on depression era “stamp scrip” a variant of local currency that, to hear tell, actually works. In that posting I quoted a story about the surprising amusing helpful role that a high velocity currency can play. Today I happened upon the same story again, but I was bemused that the story has been repurposed. I think it is fair to say that the original story’s purpose was to illustrate why we need more currency in circulation, while the new version appears to be arguing that you shouldn’t trust the currency system.  Apparently this story lacks much loyalty to either side in the debate.

Here are the two versions, first the older one:

Charles Zylstra, the enterprising man who first introduced Stamp Scrip to America (in a small western town) tells this story. A travelling salesman stopped at a hotel and handed the clerk a hundred dollar bill to be put in the safe, saying he would call for it in twenty-four hours. The clerk, whose name was A, owed $100 to B and clandestinely he used this bill for the liquidation of his debt, thinking that before the expiration of 24 hours he could collect $100 from his own debtor, whose name was Z. So this 100 dollar bill went to B, who, greatly surprised, used it to pay his own 100 dollar debt to one C, who (equally surprised) . . . and so on, and so on, all the way down to Z, who, with much pleasure, returned the bill to A, the clerk, who, in the morning, restored it to the salesman. And then did A, the clerk, stand petrified with horror to see the salesman light a cigar with it. “Counterfeit,” said the salesman, “a fake gift from a crazy friend, Abner; but he didn’t put it over, did he?”

Apparently they used to write in paragraphs, but the modernized version is done up in newspaper standard style; one sentence per paragraph.

It’s a slow day in a little east Texas town. The sun is beating  down, and the streets are deserted. Times are tough, everybody is in  debt, and everybody lives on credit.

On this particular day a rich tourist from back east is driving  through town. He stops at the motel and lays a $100 bill on the desk  saying he wants to inspect the rooms upstairs in order to pick one  to spend the night.

As soon as the man walks upstairs, the owner grabs the bill and runs  next door to pay his debt to the butcher.

The butcher takes the $100 and runs down the street to retire his  debt to the pig farmer.

The pig farmer takes the $100 and heads off to pay his bill at the  supplier of feed and fuel.

The guy at the Farmer’s Co-op takes the $100 and runs to pay his  debt to the local prostitute, who has also been facing hard times
and has had to offer her “services” on credit.

The hooker rushes to the hotel and pays off her room bill with the  hotel owner.

The hotel proprietor then places the $100 back on the counter so the  rich traveler will not suspect anything.

At that moment the traveler comes down the stairs, picks up the $100  bill, states that the rooms are not satisfactory, pockets the money,  and leaves town.

No one produced anything. No one earned anything. However, the whole town is now out of debt and now looks to the future with a lot more optimism.

And that, ladies and gentlemen, is how the United States of America Government is conducting business today.

It’s fun to think about all the little changes.  Things happen faster these days, for example.  I like the addition of weather. And a prostitute!  How liberated.