A classmate of mine asked an interesting question recently, and it inspired my response which follows. At root, this notion is a framework for combating the tendency of scale-free networks to coalesce into very “clumpy” distributions. Such networks, as exemplified by a completely open free-market have been shown to lead to Pareto-like distributions of wealth. Scale-free networks also characterize the growth of urban population centers.

Alternatively, this article may be viewed as proposing a way to facilitate prosperity while strongly discouraging excessive and profligate waste and over-use of natural resources.

Regarding the quesiton:

“The greatest challenge [to combating urban sprawl] will be overcoming the individual property owner’s fear of having lots of governmental intrusion into their property, and I am open to suggestions of what to do about that. For example: how can we convince people that live in the desert (say, Las Vegas) that having a grass lawn is probably not the best idea?”

Perhaps the idea of total cost is relevant? I would argue for digging to the root cause/concern of the issue, and addressing that. In the case of Las Vegas, the problem isn’t grass, it’s water use. So, going back to the notion of an asymptotic limit (or the 80/20 law, as it is sometimes stated), what about this: The first 200 gallons of water used per month are five cents each. The next 200 gallons cost 20 cents each. Anything greater than 400 gallons costs 2 dollars a gallon.

This goes back to an idea I’ve been playing with that flat rates, including taxes, credits and incentives, lead to “uncontrolled feedback” situations such as the power law kinds of super accumulation (or exploitation) typical of scale-free networks. That’s a lot of ideas to swallow all at once, so let me state it less formally: Systems which grow exponentially but which are priced (or taxed) linearly encourage exploitation, explosive growth and critical-mass kinds of accumulation. Such systems benefit from economies of scale – but economies of scale do not represent a world where resources become increasingly harder to extract (or contaminating to produce) as demand increases.

By wisely constructing exponential economic rewards and penalties, you encourage a person (or company, etc.) to live economically within predetermined means. Any time they exceed such means, the costs become incredibly prohibitive very quickly. Thus, such a framework is not regressive (i.e. penalizing the poor or making basic needs very expensive to satisfy), while powerfully discouraging excessive/flagrant consumption.

These means may also be applied at the scale of municipalities rather than individuals. The water problem and my proposed solution essentially an example of an explicit accounting for elastic and inelastic demand. People need some water to live and maintain hygiene. This demand must be fulfilled, no matter the cost. Anything beyond that (especially anything MUCH beyond that) is an extravagance and should be priced at least according to standard supply and demand rules, and perhaps by artificially inflated price. But let’s say the problem in Las Vegas is not 1000 people using 900 gallons/month, but 100000 people using 300 gallons/month. What do we do then? In that case, you might tax the municipality by making new building permits enormously expensive. This constitutes the recognition that the root problem has changed from one of water use (e.g. 1000 green lawns) to one of population load (too many toilets). We thus take the commensurate step of making extravagant population an incredibly costly option, instead of extravagant water use.

In any case, treating a root enabler with non-regressive financial incentives or penalties which take on exponential characteristics will be a profoundly powerful way to modify behavior and curb exploitation, while ensuring the resources for a very nice (though perhaps not extravagant) lifestyle remain affordable and accessible. Unfortunately, I know of no real law that imposes such a rational, fair and powerful taxation paradigm.

Sunday, February 11th, 2007 @ 4:20 am Towards a New Liberalism
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