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The classic externality is pollution. Some industrial process produces valuable goods, but the air becomes unhealthy to breathe for everyone. A good government

The classic externality is pollution. Some industrial process produces valuable goods, but the air becomes unhealthy to breathe for everyone. A good government solution to this has been emissions trading¹. The government sets up a maximum allowed emission rate, and producers can trade those rights between them. By making it costly to pollute, producers have incentives to lower pollution, and the allowed rate can be lowered over time, improving the air for everyone. If markets are so stupid and short sighted, it's hard to understand how they've generated 250 years of huge and sustained increases of material wealth all over the planet. 10x as many people now live far richer and healthier lives than 250 years ago. True, a river burned in Ohio 50 years ago, but that's very, very small potatoes in the big picture as I see it. ¹ https://en.wikipedia.org/wiki/Emissions_trading https://en.wikipedia.org/wiki/Emissions_trading

paulryanrogers 4y ago
Not so sure you can attribute 250y of gains solely to markets. In fact much of the health gains come from government funded research. Now, you admit collective action is needed. Great. Because unbridled markets gave us slavery, child labor, 12h-7d work schedules, company towns, the food pyramid, greenwashing, and robber barons. So the solution to externalities is largely collective action. Because obviously the market alone didn't make emissions trading happen. Markets were backed into a corner. And it feels like a half assed solution considering we don't need to burn coal any more. The market just values profit more than quality of life of those near the site of production. If we look solely to markets and careless regulation then the biggest companies will capture regulators. Then we're on the path to modern day feudalism. Seeing Amazon hollow out local competition only makes this feel more and more real here in the Midwestern US.

paulryanrogers 4y ago

Not so sure you can attribute 250y of gains solely to markets. In fact much of the health gains come from government funded research. Now, you admit collective action is needed. Great. Because unbridled markets gave us slavery, child labor, 12h-7d work schedules, company towns, the food pyramid, greenwashing, and robber barons. So the solution to externalities is largely collective action. Because obviously the market alone didn't make emissions trading happen. Markets were backed into a corner. And it feels like a half assed solution considering we don't need to burn coal any more. The market just values profit more than quality of life of those near the site of production. If we look solely to markets and careless regulation then the biggest companies will capture regulators. Then we're on the path to modern day feudalism. Seeing Amazon hollow out local competition only makes this feel more and more real here in the Midwestern US.