Comment by pevey | Hacker News Reader

Comment by pevey | Hacker News Reader

Parent Full thread

I think what they are really trying to do here is come up with a legal theory that internalizes what economists call "externalities." One economic actor, in doing what is in its individual best interest, creates negative effects that may be much, much larger than the positive effects.

We're not talking about Coke taking market share from Pepsi, which is analogy I saw elsewhere. A better analogy would be Company A that doubles its own profit by, say, destroying the public shared water source 5 other companies rely on, with total profits 10x the extra profits for Company A. So the overall portfolio effect of the actions is very negative.

For many years, economists have just sort of accepted that externalities are a thing, and are bad, and there is not much you can do about them. By definition, you can't hold companies accountable for these costs. If you could, they would not be externalities. This suit is trying a new legal theory to change that.

IANAL

You could make this argument that Apple has done this with their IDFA changes. Wipe out the public water source (data attribution) to benefit their internal apple ads (new DSP + Apple app and search ads). Overall portfolio effect of that IDFA change has been extremely negative for every company but Apple.

Should I as a shareholder of both Apple, Meta and Google be able to sue Apple for their changes?

You could just as well argue that apple have done a public good by preventing pullution (data sharing) by other companies.

All of these arguments pretty much point to the absurdity of this lawsuit. It's not hard to pull lots of different second order consequences out of your ass and then point to some big, societally impacting company as the source of whatever consequence (good or bad) you can dream up.

It's nice that the lawyer may have good intentions, but the legal theory is still crackpot.

I don't cheer for silly legal theories to prevail just because of good intentions. The unintended consequences of silly legal theories prevailing are likely to be higher than any good achieved in this one instance.

I haven't given it a lot of thought, but I tend to agree with you. The sister comment to your comment (about AAPL and it's tracking/privacy changes and the effects on other companies) is a good example why. Some externalities may be realized as effects on other companies that may be part of a portfolio, but some may not be. For example, what about how users value their privacy?

It's a very interesting legal approach, but that doesn't make it right. Externalities are very tricky.

Normally the lawyers in these cases have one of either 2 motives - 1) idealogical (will pursue theses cases to push a political point so as to influence/intimidate others and to develop a political policy down the line) or 2) Financial. And if all things go well they get both done. Whether or not these intentions are good probably depends on whether you think freer markets should be allowed or not. Or whether they should be governed by idealogy pushing the money to one side of the political spectrum or another.

How nice would it be if corporations were held accountable for externalities? You'd almost immediately have all the big fossil fuel companies, automotive manufacturers, and likely banks sued into oblivion for defrauding shareholders.

IANAL, but I don't think this will hold up.

There is a theory in economics that the government could do this by imposing taxes on negative externalities.[1] The purpose of these "Pigovian taxes" is to make society whole for these negative externalities and ensure that over time the prices of goods reflect their total marginal costs, not just the direct costs to the producer. Of course there are practical problems in estimating the right level for these taxes accurately.

[1] https://www.economicshelp.org/blog/glossary/pigovian-tax/

It’s not a theory for any meaningful sense of the word theory. The government could indeed price in externalities through taxes if it so desired. Also it’s not “Pigovian taxes”, it’s just Pigovian taxes. That’s exactly what a Pigovian tax is. No need for quotes here.

Taxes are regularly used to encourage or discourage investments. The fact that no government does is a political one.

To be clear, when I say theory, the theoretical part is not that these taxes could exist but that the tax could adequately price in negative externalities, which is hard because generally price discovery is hard to do and in particular one of the things about the negative externalities of lots of activities is they are not fully known at the time the goods are produced. eg when the would was going ham producing asbestos it was probably not fully appreciated quite how harmful that was. So lots of the information which would be the raw material for that price discovery is unavailable.

Governments do sometimes impose pigovian taxes and as you say, this can be politically unpopular which is why they don’t always stick. For example, in the UK there was the “fuel price escalator” which was a direct response to climate change. The government decided to impose a tax on retail petrol and diesel prices that would rise in line with inflation or faster to encourage people to move away from fossil fuels over time. It led to a weird uprising where truck drivers picketed oil depots and the country ran out of fuel so the escalator was abandoned.[1]

[1] https://en.wikipedia.org/wiki/Fuel_protests_in_the_United_Ki...

There is a documentary called "Duty of Care" about lawsuits along these lines. Governments are getting sued for endangering their own citizens through inaction on climate change. Similar lawsuits are being brought directly against oil companies.

Reply on news.ycombinator.com