Externalities: costs passed on to the outside

Posted:  April 14th, 2011 by:  The Environment Site comments:  0

Externalities is a term that economist use to reference costs and benefits which are not directly carried by the company involved. They are usually passed on to the consumer, government or the environment. As with many things, they can be good or bad. The trouble is that sometimes you cannot tell until later.

You can find examples of passed on externalities in many areas. The chemical industry, the coal industry, the automotive industry, the alcohol industry and just about any business which seeks profit above all. They operate in a manner which mandates finding ways to shed costs and put them on the shoulders of those outside their system. The entire fossil fuel machine would not survive if they did not follow this principle.

There are two kinds of externalities. Economist call them positive/negative externalities or costs. Positive benefits are those that improve the lives outside the system. A prime example of a positive externality is the school system. The general goal is the creation of a smarter worker, but educating the populace is the hidden benefit or externality. The examples of negative benefits are so numerous as to be unlistable. The corporations will quickly lay claim to the positive, but will completely deny the negative.

The biggest guilty party is the fossil fuel industry. They completely avoid taking any responsibility for the current global situation and will go any extreme to deny their part. To see a perfect example look into mountaintop removal for mining coal. Across the country big coal companies are simply blowing the tops of the mountains off to get the coal underneath. They fill the valleys with waste products from the process which leaches into streams and water tables. This leads to increased health problems for those living in the area which someone else has to pay for. This is just one of multitude of costs that are passed to other people so companies can claim that coal is cheap.

If you want a bigger picture just go to any search engine and type in pollution, fossil fuels and health problems together. The external costs of oil production, coal production, combustion engine and many other things we take for granted are dumped into someone else’s lap.

Further References:
Wikipedia: Externalities
Environmental Externalities and Air Pollution
Harvard study: Coal costs US public up to $500 billion annually

Dee Neely is an avid technologist, writer and green activist. She is the Knoxville Green Activism Examiner for Examiner.com. You can follow her on Twitter as cayceedeeneely.

Picture Credit: http://www.flickr.com/photos/christianrevivalnetwork/2724218930

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