I think the place where this model breaks down, and perhaps the source of most of the apparently ideological conflict around it, is that the abstraction of the

I think the place where this model breaks down, and perhaps the source of most of the apparently ideological conflict around it, is that the abstraction of the externality tax doesn’t cash out to reality well enough. Modeling an externality in dollar terms seems like a fine and good thing to do, but the system in practice only works if those dollars are actually allocated to mitigating the literal, physical externalities. Eg. a good situation would be like Acme corp is poisoning the water supply, they are taxed for the actual, continuous cost of cleaning that water supply such that the water supply is no longer dirty or some other actual solution that addresses the concrete problem with the water. This can be a literal tax or it can be a de facto “tax” in the sense they have to switch to a more expensive process that doesn’t poison the water supply. In any case, the externality has been addressed and we can talk about it in dollar terms since dollars are moving, but we can also talk about in concrete outcome and activity terms because that is also happening. In practice it seems to me that the scenario is almost never like this. The externality tax, precisely correct or not, approximately never actually later gets allocated to mitigating the externality. Acme pays its pollution tax, and then… nothing. The military gets an extra tank or the tax is allocated to local teachers and police or a stadium project, but the water supply is still polluted. It’s a super difficult problem because in reality it’s never just one concrete externality that can be legibly solved, it’s a morass of factors that resist measurement and has a very long tail, but it seems basically like we’re not even trying, and regardless of how hard the problem is this misallocation is a serious issue, according to me. My favorite world is one where we, by and large, substantially address the concrete externalities using the taxes that are ostensibly for that purpose. I think we do that more than zero, but not nearly enough. I think this fact causes numerous irresolvable conflicts on the local level, because when someone’s family is drinking cancer water what they want is to not be drinking cancer water anymore. And when some smartass retorts that the pollution externality has been efficiently priced in so it’s fine, it not only doesn’t seem fine to the family, it feels like a callous and disingenuous runaround ignoring the fact that they are still drinking cancer water and will be for the foreseeable future. If this disconnect were somehow addressed correctly on a systemic level, I think there would be a lot less frustration all around.