Externalities

So the biggest problem with the neoclassical view espoused by so many conservatives is that it forgets about externalities. This is huge.

An externality is the effect you have on others that doesn't directly affect you. When you drive, every pedestrian has a little more trouble breathing. When you eat a hamburger, a cow had to be killed. When you wear a low-cut dress, the boys who pass you on the street feel a little bit better. [I swear, every econ class I've ever had used an example about cute girls.] That sort of thing.

From the economist side of things, there is no real solution to the externality problem, in the sense that it's supremely difficult to work out what the optimal behavior is, and how you should go about getting people to engage in that behavior. Basically, if an agent can do something that benefits it but causes a negative externality on others, then you're guaranteed that the agent will do too much (a suboptimal amount) of that activity.

Which is where government comes in. A good law curtails those activities which have negative externalities and thus makes the world a better place. Y'know: don't litter because it's easy for you but makes other people's lives worse; don't drive drunk because it's easy for you but makes other people's lives worse; don't infect Windows PCs with viruses because....

The problem comes in when working out how much curtailing to do. When people say that their lives are worse off because of somebody's actions, they have absolutely no incentive to tone down the whining. I think you've all been there---especially if you've ever had a roommate. Back when I was a bike messenger, my roommate borrowed my bike for a stroll along the lakeshore, and got a flat tire. He didn't quite patch it right, and it went flat a few more times over the course of the day. I lost work as a result, and by the time I got home, I had prepared an extensive bitchy commentary for him about how his actions had caused me such problems. Yet he started yelling first, about how I'd left a nubbin of pasta at the bottom of a pot, and now it was really stuck, and how I had thus totally ruined his life. He made it very clear that losing buisness, patching an expanding hole, and walking part of the way home was nothing compared to what he'd sufferred at the hands of that blob of pasta. It wasn't the best roommate situation.

But imagine the whining when the problem is bigger than pasta stuck to the pot, like an issue of education and property taxes, or pollution. It basically becomes guesswork as to what damage one person suffers from somebody else's actions. The conservatives of the world often latch on to this, and conclude that everybody is just lying all the time, and there really are no externalities, or if there are, they aren't nearly as bad as everybody makes them out to be, so we should ignore them. `Buck up and stop whining,' the conservative would politely explain.

Anyway, behind a huge number of government activity and restrictions upon behavior, there is an externality involved. It's a fun exercise to ask yourself, for any law that comes to mind, what harmful externalities that law is preventing; you'll find something for almost all of `em. For example, laws curtailing pollution exist because pollution damages property which is either in the public trust or is intimately the property of a non-polluter (like the air in my lungs). When people don't get an education, studies show, they're more likely to wind up poor, annoying, and a criminal, which are all things that affect the other people that interact with the uneducated. On a vaguely positive side: when you take public transportation instead of driving, other people have clearer roads and lungs. When people tell you that government should get out of these fields and the market will provide the optimal levels of pollution, education, and public transport, tell them that they're entirely wrong, because the market can not accommodate the effects of the externalities.

[Also, when the privatization people tell you that the bus system is losing money, and therefore needs to be severely cut and/or privatized, you should tell that that because of the externalities, the system isn't behaving optimally unless it is losing money.]

The choice of externalities Both sides of the political fence complain about externalities, but different ones. For example, social conservatives have lately taken to griping about how their marriages will be less sanctimonious or something if gay marriages are allowed.

Externality arguments are usually made by social conservatives and economic liberals. Conversely, social liberals and economic conservatives tend to ignore or belittle externalities. The asymmetry here is that economic externalities, which the liberals gripe about and the conservatives ignore, are about the things that actually affect people's lives; the social externalities, which the conservatives are up in arms about, are typically aesthetic. In an ideal world, you could call a conservative on the relative triviality of the externalities s/he chooses to care about. E.g., why are you bothered about how your kids are harmed by gays, but aren't bothered by how many kids are killed by guns every year? Why do you think the market should be free to decide on whether to drill for oil in Alaska, but don't think the market can work out the optimal exposure of boobies on TV without government oversight?

Another asymmetry to this is the exaggeration issue: when people suffer externalities such as job loss, crime, disease or death (or even environmental damage), there's something physical that can be measured and compared to any hypothetical benefits, albeit imperfectly. But when somebody says that they suffer because gays are getting married or because they were subjected to the sight of female nipples, there is simply no way to measure the aesthetic damage that the person is internally sufferring. I'm not exactly sure how you can use this for rebutting a fanatic conservative, but it gives some idea of how fanaticism can come about: there's nothing keeping anyone from the extreme position, because there are never facts that get in the way of the claims of endless damage.