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.

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(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 spends his
summers on Cape Cod, where he is a fond consumer of striped bass.
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Because
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 has no
problem with that; he would like to be able to eat striped bass ten years from
now, 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

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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.
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