Liberalism and Air Conditioners

(Clicking any of the underlined text in blue will take you to a reference on it.)

“Economic liberalism” is the ideological belief the society is best served by an economy where individuals are free to pursue their own self interests, with only minimum controls by government. It’s based on the judgment that goes back to Adam Smith’s “The Wealth of Nations” published in 1776 and beyond, that the common good is served by individuals acting selfishly, that the sum of self-centered actions turns out to be the best recipe for society as a whole. Most of us are proud that the United States’s economy is the world’s most powerful example of economic liberalism’s results.

Modern environmentalism, at its core, attacks economic liberalism because liberalism’s way of organizing economic activity mostly ignores “externalities.” The public health costs of millions of people breathing polluted air do not appear on the expense statements of coal-burning power plants. The power generators do not pay for the damaged lungs they cause; those costs are “external” to the plant’s activities and do not appear on the corporate financials. More generally, the prices we pay for coal, oil and gas omit the diffuse, but very large, costs that greenhouse gases inflict on climate.

The continuing saga of chlorofluorcarbons (CFCs), the refrigerant gases scientists noticed decades ago were depleting stratospheric ozone and increasing cancer risks, is instructive. Refrigerators don’t work without gases that compress and expand within specifications, but damage to the world’s high ozone layer from CFCs led to an international treaty, the Montreal Protocol, to phase out and prohibit use of refrigerant gases that caused unacceptable damages. The treaty went into effect in 1989 and has undergone revisions as new risks became more obvious. Another human-manufactured gas, chemical HCF2Cl commonly known as HCFC-22, replaced the older CFCs because HCFC-22 depleted the ozone shield more slowly than CFCs. The Protocol was later amended to phase out HCFC-22 when decision-makers decided it still killed too much of our ozone shield too quickly. It is illegal to sell new refrigerators in the U.S. which contain HCFC-22, though it can be legally used in older refrigerators.

Did I mention that HCFC-22 is 1810 times more powerful than carbon dioxide as a greenhouse gas? That fact was largely ignored in treaty negotiations because the available and cost-effective refrigerants were all heavy-duty climate warmers; under the amended Protocol HCFCs are being phased out and replaced with other powerful greenhouse gases, but which deplete less ozone. The EPA requires licenses for manufacture, sale or purchase of HCFC-22, with the total amounts allowed declining each year, which makes them progressively scarcer and more expensive. That’s been an invitation for entrepreneurs willing to evade inconvenient trade restrictions by importing the gas and selling it to Americans for less than regulated market prices.

Smuggling HCFC-22 is common and easy, but today’s New York Times has a story (“As a Coolant is Phased Out, Smugglers Reap Big Profits“) of an unlucky business executive who was caught. The man got high praise within his company for boosting profits so long as his schemes worked, with no weight given to atmospheric damages more, cheaper HCFC-22 would cause. I have no general answer for conflicts between individual advancement and group welfare, and fall back on traditional religious values like “Do onto others as you would have them do onto you.” I think Adam Smith would agree that America needs amendments to prevailing free market theories – amendments emphasizing community welfare and reflecting experience with natural systems’ huge losses from economic liberalism’s “externalities.”