externalities
1.
Definition of externality: a cost created by a
company’s operation that, in a free market, does not appear on the company’s
books.
àpolluted
water caused by coal mining is one example
2.
Several particularly difficult types of
externalities
A.
“Tragedy
of the Commons”: individual pursuit of self-interest is collectively
self-defeating; but the cost of individual pursuit of self-interest is not
borne to any great extent by any individual company (e.g. overfishing in the
North Sea)
àmoral
of the story may be that forced agreement and forced follow-through are
required to solve the problem (compare Joseph Stiglitz’s comment about the
pervasiveness of externalities and how it creates problems for free markets in Wikipedia article on him)
B.
Unpriced Natural Capital:natural resources that
are consumed by corporations that do not pay for their use (see David Roberts,
“None of the world’s top industries would be profitable if they paid for the
natural capital they use,” http://grist.org/business-technology/none-of-the-worlds-top-industries-would-be-profitable-if-they-paid-for-the-natural-capital-they-use/ )
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