For quite some time I was enamored with Coasian Bargaining. Coasian Bargaining is essentially the strategy of paying someone who causes externalities so that they’ll do less of it.
From a protocol perspective it’s about as elegant and simple as possible, and it seems to promise the ability to banish court systems in favor of personal relationships that then level up into desirable collective outcomes — addressing externalities, fixing climate change, no more war just pay ppl!
But my love of Coasian Bargaining in its vanilla form since soured and not long after I wrote a piece exploring the weaknesses of CB, as well as what feels like a hopeful new flavor for redressing those shortcomings.
I think the problem is you can’t just price-in externalities at a book-keeping level. You have to substantively address the underlying problem. If you pay Dutch farmers to not use fertilizer, you’re left with less efficient farming. Obviously the actual solution is better waste water treatment technology but paying directly to reduce pollution doesn’t do that. Generally I’d say it’s better to use the money to pay for research into win-win solutions.
But this is just an externality pricing argument under a different causal model.
It’s not obvious that the actual solution is better waste water treatment technology. whether that’s the case depends on the cost of the negative externality and the cost to acquire alternative policy options.
I understand you’re importing parameter and model assumptions to come to your conclusion, and I think they’re broadly accurate irl, but if it turned out that the efficiencies gained from fertilizer were quite small (e.g. on the order of 1%) but that the externality was quite negative (deaths) the calculus would be radically different.