My thanks to Eddie of Hidden Unities, for uncovering the worst arguments from around the blogosphere. He brought Andrew Sullivan’s rant to my attention (Sullivan was also wrong on his bizarre flat capital tax, btw), identified Kaplan’s piece on Malthus (also highlighted on Eddie’s blog), and recently shared this criticism of Florida’s buy-out of U.S. Sugar via Google Reader. (The story-behind-the-story is the news that the State of Florida would buy-out part of U.S. Sugar to protect the Everglades.)
I don’t follow Floridian environmental news to comment on the purchase itself. The mix of positives and negatives on a deal like this is complicated, and I defer to Floridians for informed comment. Still, this piece presents the worst imaginably argument against the buy-out. Author James Gibney complains:
Environmentalists are swooning over the agreement, which could restart the natural flow of water from Lake Okeechobee to Florida Bay. But don’t break out your plastic pink flamingos just yet. The deal smells worse than the stinkiest of the sulfate-contaminated wetlands it’s supposed to revive, continuing one of the longest-running rip-offs in the history of the republic.
Under the proposed agreement, Florida will pay U.S. Sugar Corp. $350 per share for its land and facilities. That’s about 20 percent more than the $293-per-share private offer U.S. Sugar received three years ago. More damningly, it is well above the highest “fair market value” price of $204 per share that the trustee of the company’s Employee Stock Ownership Plan was offering workers who retired. Republican Governor Charlie Crist, who engineered the deal, wasn’t particularly eager to talk about how the state came up with the $1.7 billion valuation. Doubtless the $30,000 that U.S. Sugar and its subsidiaries chipped in for his inauguration, and the $600,000 that it and other sugar companies gave to his campaign, had nothing to do with his calculations.
The entire argument boils down to this: U. S. Sugar has large negative externalities, and is politically powerful.
Well, obviously. Why else would there be a serious buy-out proposal? Has anyone proposed buying-out and shutting down Microsoft, Google, or some company with large positive externalities? Has anyone proposed buying-out drunk drivers, or some other disempowered minority?
Buy-outs are a method for increasing the general welfare by identifying processes of the economy that are harmful, and inducing the stakeholders of those processes to abandon their efforts. I first became aware of them during the Tobacco Buyout, which likewise reduced negative externalities by working with stakeholders.
Buyouts are alternatives to rule by fiat, where the government passes a law or promulgates a regulation that would simply end the externality-generating processes. This can be the case if the potential victim of the fiat is able to fend of political attacks, such as the tobacco farmers or U.S. Sugar.
Whether the everglades deal is good or bad, the hit-piece against it is bizarre.