The Case for Ending Externalization
There are both strong non-market and market reasons to end the “externalization” of pollution, harm to workers, and other costs.
Cost “externalization” in the form of pollution destroys the beauty of the environment. It kills and sickens human beings by fouling our land, water, and air. It also puts at a competitive disadvantage the firms that refuse to wreck the environment to save a buck.
Cost “externalization” also takes the form of putting workers in danger on the job due to unsafe facilities or production techniques…or selling consumers dangerous or defective product. Or misleading investors. Or conspiring to fix prices.
All these practices hurt people, physically or economically.
There is also an intrinsic market-based reason for ending such cost “externalization.”
When firms externalize their costs by “sticking it” to the environment, workers, consumers, and investors, they gain an unfair competitive advantage over competitors that do not engage in such damaging practices. Just as we don’t want sports teams to win by cheating but insist that the best team should win, we should push back against businesses that try to win by cheating and insist that the best businesses—the most creative and efficient ones—should triumph in the market.
The solution is straightforward. It is the role of government—in order to create an effective market—to enact and enforce regulatory safeguards for the environment, workers, consumers, and investors. Such regulations must be powerful and smart enough to prevent businesses from ”externalizing” costs in ways that damage people and give cheating firms an unfair competitive advantage.