An externality can be thought of as a "side effect". The basic principle of market economics is that the costs of the production and consumption of a good are reflected in the price paid. This is generally called a "price signal", and it's why free and frictionless markets are so good at moving to equilibrium.
The problem, however, is that externalities are generally things that fly under our radars. For example, for a very long time, all forms of air pollution went without any regulation or oversight. In essence, it was "free" to belch soot into the air. Eventually, this created both public health and environmental issues. Because the human cost of the pollution was never placed into the cost of making the goods/energy that produced the pollution, people were effectively paying too little for their goods, and the result was that an excess of pollution ended up having a cost in other ways. A core belief in the right to unregulated commerce is that "if I sell it and someone buys it, it's our right to do", but if the service or production of the good has an effect on third parties, then the libertarian notion of not forcing others is broken and requires attention. This, for many of us, is the argument for regulation, oversight, and the general existence of the democratic state. -- Rhett. http://www.weatherlight.com/greentime http://www.weatherlight.com/freetime > Your post was very interesting, Im still learning about economics, could > you explain this > stuff about externalities? > > Does it have anything to do with, for example, if the finite nature of > resources was > factored into the price from the start, the masses may never have got to > command the > equivalent of thousands of horses to move them around? > > Cheers > > Steve Elbows > > --- In videoblogging@yahoogroups.com, "J. Rhett Aultman" <[EMAIL PROTECTED]> > wrote: > >> The problem I see here is externalities. If the costs of externalities >> were baked into every transaction, this would be true. All too often, >> it's not. >> >> -- >> Rhett. >> http://www.weatherlight.com/greentime >> http://www.weatherlight.com/freetime >> > > > > > > > Yahoo! Groups Links > > > >
