Externalities - Economics and Ecology: United for a Sustainable World - page 78

Many costs, properly termed externalities , are never acknowledged in
the determination of the market prices and quantities of all we consume.
This includes the social burden for workers who become injured or ill, or
for whom little health care is provided. Substandard working conditions or
inadequate pay for valuable services provided are not included in the price.
Firms extract resources from public lands and pay fees that are a ludi-
crous fraction of their true value; yet they often receive subsidies for doing
so. Moreover, many public resources—other than those in question—are
depleted, polluted, or destroyed in the process. Normally, these are not
counted when the costs are added up and rolled into a price. In fact, any pro-
posed regulations that would either limit the damage or force compensation
are vigorously opposed and denounced as inefficient.
Within business practices, taxpayers support the communications and
transportation systems. Huge public relations, lobbying, and advertising
campaigns are supported at public expense—often to convince us that the
damage is negligible. Overly generous salaries and fringe benefits for the
executive decision makers impact innocent third parties through their tax
deductibility. What's more, we are often paying to be polluted by industry.
In summary, the factors that fall under the heading of externalities com-
pose many, if not most, of the perceived failings of a market-based economy.
It is patently obvious that factors, which the discipline terms external , are
totally to blame for the fact that we face potentially disastrous and irreversible
impacts to the global climate.
Most economists would argue that by acknowledging externality theory,
the body of method has the capability of addressing these all-important
issues and, in effect, of proposing effective solutions. But it does not seem
to happen in the real world. In the real world, both our economic and envi-
ronmental fate as a culture may well depend on how we choose to deal with
externalities. We can choose to use economics as a tool to either help or
harm our efforts to foster social-environmental sustainability in the years,
decades, and centuries to come.
As we will see in this chapter, jargon is a serious problem. But the inad-
equacy of the language is also a glaring indicator of a deeper and more
serious problem: The practical effectiveness of any body of analysis must
be seriously questioned if it refers to the world in which we live and upon
which we depend for our existence as “external.” This is the ultimate
irrationality.
Understanding the Language
The topic of externalities in economic theory provides a graphic insight into
the failure to use the discipline of economics to deal effectively with many