Externalities refers to the economic concept of external costs:
"An external cost is a cost not included in the market price of the goods and services being produced, i.e. a cost not borne by those who create it".
The less real costs are factored into a product, the less the market able to efficiently price it. Many of our greatest modern problems could be ameliorated if we handled external costs better: pricing industrial runoff, CO2 emissions, antibiotic resistance, etc.
We mostly choose not to price in those costs, because the consequences of such are generally delayed, and it allows us greater standard of living for the moment. When given the options "meat will be cheaper but infections harder to cure in 20 years", or "energy will be cheaper but large scale climate disasters will be common in 50 years", we've chosen cheap meat and energy.
>The less real costs are factored into a product, the less the market able to efficiently price it. Many of our greatest modern problems could be ameliorated if we handled external costs better: pricing industrial runoff, CO2 emissions, antibiotic resistance, etc.
I'll add to this that in many cases this also eliminates a lot of the subjective/contextless moralizing around spending of energy/mass surplus that goes on, resulting in more individual freedom. It's common in environmental discussions for example for someone to complain about <xyz> form of transportation, often cars or aircraft but I've also seen it come up in rockets. This can lead down all sorts of rabbit holes in terms of cost/benefit etc. But the entire discussion could be avoided as far as AGW if we'd simply make all hydrocarbon fuels CO2 net neutral (either via producing them directly from atmospheric CO2 with renewable energy or scrubbing an equal tonnage of emissions from the atmosphere for every ton CO2 released). Then whatever price the fuel was would fully reflect the CO2 cost, which would naturally filter out to all users, and everyone would be free to spend on that or not as they wished. All sides would optimize to the pricing, producers would search for ways to make the net neutral hydrocarbons cheaper, users would seek ways to use them more efficiently, and those buying services would do the same. That's a Free Market at work, the emergent result of lots of decentralized individual decisions is a much more efficient allocation of resources, and without any central judgement around "oh, that's not a worthy usage" needed.
"An external cost is a cost not included in the market price of the goods and services being produced, i.e. a cost not borne by those who create it".
The less real costs are factored into a product, the less the market able to efficiently price it. Many of our greatest modern problems could be ameliorated if we handled external costs better: pricing industrial runoff, CO2 emissions, antibiotic resistance, etc.
We mostly choose not to price in those costs, because the consequences of such are generally delayed, and it allows us greater standard of living for the moment. When given the options "meat will be cheaper but infections harder to cure in 20 years", or "energy will be cheaper but large scale climate disasters will be common in 50 years", we've chosen cheap meat and energy.