Naked Economics: Undressing the Dismal Science pdfdrive com

supporting the polluters. The Supreme Court held the city of Delhi in contempt
for failing to close some ninety thousand small factories that pollute the area.
Those factories employed roughly a million people who would be thrown out of
work. The headline on the story nicely encapsulated the tradeoff: “A Cruel
Choice in New Delhi: Jobs vs. a Safer Environment.”
How about DDT, one of the nastier chemicals mankind has unleashed on the
environment? DDT is a “persistent organic pollutant” that works its way into and
up the food chain, wreaking havoc along the way. Should this noxious pesticide
be banned from the planet? The Economist has made a convincing argument that
it should not.
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Much of the developing world is ravaged by malaria; some 300
million people suffer from the disease every year and more than a million die.
(Of course, malaria is not a disease that we are particularly sensitive to in the
developed world, since it was eradicated in North America and Europe fifty
years ago. Tanzanian researcher Wen Kilama once famously pointed out that if
seven Boeing 747s, mostly filled with children, crashed into Mt. Kilimanjaro
every day, then the world would take notice. That is the scale on which malaria
kills its victims.)
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Harvard economist Jeffrey Sachs has estimated that sub-Saharan Africa
would be almost a third richer today if malaria had been eradicated in 1965.
Now, back to DDT, which is the most cost-effective way of controlling the
mosquitoes that spread the disease. The next best alternative is not only less
effective but also four times as expensive. Do the health benefits of DDT justify
its environmental costs?
Yes, argue some groups—like the Sierra Club, the Endangered Wildlife
Trust, Environmental Defense Fund, and the World Health Organization. Yes,
you read those names correctly. They have all embraced DDT as a “useful
poison” for fighting malaria in poor countries. When the United Nations
convened representatives from 120 countries in South Africa in 2000 to ban
“persistent organic pollutants,” the delegates agreed to exempt DDT in situations
where it is being used to fight malaria.
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Meanwhile, not all regulations are created equal. The relevant question is not
always whether or not government should involve itself in the economy; the
more important issue may be how the subsequent regulation is structured.
University of Chicago economist and Nobel laureate Gary Becker spent his
summers on Cape Cod, where he was a fond consumer of striped bass.
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Because

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the stocks of this fish are dwindling, the government has imposed a limit on the
total commercial catch of striped bass allowed every season. Mr. Becker had no
problem with that; he wanted future consumers to be able to eat striped bass, too.
Instead, he raised the issue in a column for Business Week about how the
government chose to limit the total catch. At the time he was writing, the
government had imposed an aggregate quota on the quantity of striped bass that
could be harvested every season. Mr. Becker wrote, “Unfortunately, this is a
very poor way to control fishing because it encourages each fishing boat to catch
as much as it can early in the season, before other boats bring in enough fish to
reach the aggregate quota that applies to all of them.” Everybody loses: The
fishermen get low prices for their fish when they sell into a glut early in the
season; then, after the aggregate quota is reached early in the season, consumers
are unable to get any striped bass at all. Several years later, Massachusetts did
change its system so that the striped bass quota is divided among individual
fishermen; the total catch is still limited but individual fishermen can fulfill their
quota anytime during the season.
Individualized quotas can make fishing safer, too. Alaskan crabbing was
formerly governed by a collective quota, prompting “derbies” in which boats
would work at a frantic pace to capture up to half their annual catch in just a few
days. One crabber explained, “The gun went off and everyone scrambled. Some
boats loaded too many crab pots and capsized. Others pushed their crews to
work too long.” The profession was so dangerous that it spawned the reality
television show Deadliest Catch. In 2006, the quota system was changed so that
each boat received its own quota to fill over the course of the entire season.
Crabbers can now get enough sleep, work at a safe pace, and avoid treacherous
weather. Fatalities have plummeted, and the crab population receives the same
level of overall protection.
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The key to thinking like an economist is recognizing the tradeoffs inherent to
fiddling with markets. Regulation can disrupt the movement of capital and labor,
raise the cost of goods and services, inhibit innovation, and otherwise shackle
the economy (such as by letting mosquitoes escape alive). And that is just the