How to Resolve the Externalities of Policy
Public policies implemented in a country or local government may have a negative effect on some people and populations, or may have a positive or negative effect on other public policies, or have a positive or negative effect on other countries or local governments. It can have a positive or negative effect on future generations that have not yet been born. These effects are termed “externalities of policy.”
If there is a negative impact on some people or residents, it will be an applied problem of what was described in “one vote per person and one yen per vote” (essay no. 7). In addition, the reason why one public policy can have a positive or negative effect on another public policy is that there is a complementarity or competition between the policies, or there are commonalities or some relationship between the factors that cause the two policy issues. Examples of public policies that can have a positive or negative effect on other countries or local governments or future generations include policies such as global warming countermeasures and energy policies.
Carbon dioxide (CO2) emissions from burning fossil fuels cause global warming and result in economic losses.
Given the views of the Intergovernmental Panel on Climate Change (IPCC), global warming measures to reduce CO2 emissions in one country (local government) have a positive effect on other countries (local government) and future generations. This positive effect also includes the mutual impact of national and local governments. On the other hand, energy policies that result in increasing CO2 emissions have a negative effect.
Regarding the externalities of policies between local governments (horizontal externalities) and the externalities of policies between the government and local governments in the country (vertical externalities), negotiations between the parties will be needed. The problem may be solved by the politics of the government, or by the courts of justice. On the other hand, regarding the externalities of policy between nations, that is, international ones, since there is no World Government, the problem may be solved through bilateral and multilateral negotiations (diplomatic negotiations). Alternatively, the problem may be solved by the International Court of Justice and other international courts as well as by the power of economic sanctions and military action.
However, the problems related to the negative externalities of policy that impact on future generations cannot be negotiated between the current and future generations, and it is therefore necessary to consider how the current generation will solve them.
(Author: Akira Yokoyama)
This essay is the English version of No. 45, August 6, 2019 on the Japanese website.