Raw Materials - Prices
While charging people for the use of raw materials has problems, it is the best way to reduce demand for raw materials to the amount that is available while still giving everyone access to the raw material. The logic of using prices to reduce demand is simple. It is guaranteed to work. If the price is set high enough, demand could be driven to zero. This is because there is a finite amount of money in the economy at any given time. This means that prices can definitely be used to meet the primary goal of restricting demand for a raw material to the amount that can be safely extracted.
Is charging people for raw materials fair and equitable? It depends on who gets the money and if people’s incomes are roughly comparable. I don’t have any issues if the government gets the revenue from selling rights to extract resources. If individuals do, I am more leery. I’d want to know how they got the rights to the resource. If there are large disparities in incomes, I would also be concerned about ensuring that the poor have adequate access to the resource. I wouldn’t want to see rich people watering their lawns while poor people are reduced to drinking contaminated water.
If the government owns the rights to extract raw materials and income disparities are low, prices can work nicely. The revenue the government earns from selling rights to raw materials can be used to offset taxes that we would otherwise have to pay. Anybody who needs to use a particular raw material has access, albeit at a price. Bureaucrats and politicians don’t need to decide who gets access.
Setting the prices to limit demand to the available supplies can be done using markets. Creativity may be needed in some cases to figure out how to do this practically. I will discuss in my book how markets for raw materials could be set up.
Navigate
Comments
To add comments, use the form below.
While comments are posted immediately, they are reviewed periodically. If they are found to be offensive or inflammatory, they will be removed.
If you provide your email address, you will be informed if your comment is changed or deleted. Your email address will not be distributed to others. I will only use it if I make changes to your comments and for one notification message when my book is in bookstores.
Comments powered by the Website Comments System ® v1.0