chapter  3
30 Pages

At Once Ubiquitous and Elusive, the Concept of Externalities is Either Vacuous or Misapplied

Withwith David Fogerty, Claude Jeanrenaud

Mainstream neoclassical economics knows of two major types of market failures that justify government intervention: public goods and externalities. Under the doctrine of public goods, government must act to prevent an undersupply of positive goods; under the doctrine of externalities, government must act to prevent an oversupply of harmful goods. In the contemporary political struggle over the environment within which the concept of externalities plays an important part, harmful effects of technology are often said to be hidden, involuntary, and irreversible. Rather cultures are constructed by individuals who share values and beliefs legitimating their preferred pattern of social relationships. Meanings are socially constructed by individuals in at least four different cultures: hierarchy, fatalism, individualism, and egalitarianism. Egalitarians tend to overestimate the benefits of a governmental action and to neglect the opportunity costs. From the standpoint of egalitarians, market systems are living negative externalities in that they create, reinforce, and perpetuate inequalities.