In The Righteous Mind, Jonathan Haidt says that some problems really can be solved by regulation. His example perfectly exemplifies negative externalities:
As automobile ownership skyrocketed in the 1950s and 1960s, so did the tonnage of lead being blown out of American tailpipes and into the atmosphere – 200,000 tons of lead a year by 1973. Gasoline refiners had been adding lead since the 1930s to increase the efficiency of the refining process. Despite evidence that the rising tonnage of lead was making its way into the lungs, bloodstreams, and brains of Americans and was retarding the neural development of millions of children, the chemical industry had been able to block all efforts to ban lead additives from gasoline for decades. It was a classic case of corporate superorganisms using all methods of leverage to preserve their ability to pass a deadly externality on the public.
The Carter administration began a partial phase-out of leaded gasoline, but it was nearly reversed when Ronald Reagan crippled the Environmental Protection Agency’s ability to draft new regulations or enforce old ones. A bipartisan group of congressmen stood up for children and against the chemical industry, and by the 1990s lead had been completely removed from gasoline. This simple public health intervention worked miracles: lead levels in children’s blood dropped in lockstep with declining levels of lead in gasoline and the decline has been credited with some of the rise in IQ that has been measured in recent decades.
But wait, it gets better:
Even more amazingly, several studies have demonstrated that the phase-out, which began in the late 1970s, may have been responsible for up to half of the extraordinary and otherwise unexplained drop in crime that occurred in the 1990s. Tens of millions of children, particularly poor children in big cities, had grown up with high levels of lead, which interfered with their neural development from the 1950s until the late 1970s. The boys in this group went on to cause the giant surge in criminality that terrified America – and drove it to the right – from the 1960s until the early 1990s. These young men were eventually replaced by a new generation of young men with unleaded brains (and therefore better impulse control), which seems to be part of the reason the crime rate plummeted.
This is a perfect example of a negative externality the economists call a market failure. It is also a perfect example of the kind of story leftists hear and accept without any kind of research. They hate oil and Reagan, love regulation and Carter, it caters to the care and fairness foundations (it’s for the children!) -- It fits their worldview so well that it must be true. I’m not so sure. There are just so many stories like this that I look into and turn out to be laughably bogus or largely disputed.
There are many claims to the story that may be true and may be false and may be uncertain to different degrees.
1. Gasoline lead really did get into the bodies of people and stayed there so it could effect them
2. The lead noticeably lowered IQs
3. The lead noticeably increased crime rates
4. Lead effected children in particular
5. Regulation is the primary driver of reduced lead rates in gasoline (as opposed to just new and better ways of doing things).
The reason I’m a bit more sympathetic to this story in particular though, is because Jonathan Haidt is generally very well researches what he says. As I look into it a bit, there is more evidence that lead genuinely got into people’s bodies and it effected IQ than that it effected crime rates. Also, Children are more at risk for lead poisoning because their smaller bodies are in a continuous state of growth and development.
I’m not going to say that it is for sure true, but I certainly lean that way. It truly is the best example I’ve ever seen of negative externalities. Libertarians and conservatives will no doubt look deeply for any piece of evidence that it is not true. They will also fail to confess that something like this is even possible in order to avoid giving up even the theoretical point for regulation. Meanwhile, liberals will fit this factual atrocity into their long list of bogus atrocities that environmental regulation needs to solve.
