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> The problems start when externalities (pollution shirking) and middle-men (rent seeking) enter the room. Both of these distort the price signals, which should
by abeppu 3y ago
> The problems start when externalities (pollution shirking) and middle-men (rent seeking) enter the room. Both of these distort the price signals, which should (but rarely do!) convey the true underlying environmental cost.
This makes it sound like externalities are the distortion rather than the primary driver of the environmental cost. This is not my area, but my understanding is that b/c environmental systems almost never have an "owner" who is a party to transactions/development, the environmental costs are almost entirely externalities. What are the important underlying environmental costs which _aren't_ externalities?
- schiffern 3y agoI don't think we disagree on this point. Externalities are both "a [pricing] distortion" and also "the primary driver of the environmental cost." The former is what allows the latter problem to persist, despite the efficient market hypothesis.