Home > Environment > A study in externality

A study in externality

I have written previously that I am concerned about polluting externalities in the supply chain.  This is despite my Austrian leanings (some Austrians believe the “market price” – even in today’s debt-based monetary system – can appropriately balance disposal consumption with recycling). 

There is a huge plastic waste dump site in the Pacific Ocean that is twice the size of Texas (although some scientists allege it is much bigger, perhaps up to twice the size of the continental United States).  This is killing fish and ocean life, as many sea creatures mistake plastic for seaweed or other edible food.  This is contaminating the whole food chain in the Pacific Ocean, with evidence of cancers occurring in whales and other sea creatures, because of this toxic contamination of the food chain.

The problem is an extreme example of an externality: No one “owns” the ocean, so no one has standing to “sue” for damage to this “property”.  So the costs of pollution are not included (“endognised”) into the price.  The price of plastics “should be” (hypothetically) around double the price it is today, just to pay for the costs of cleaning this waste up and encouraging recycling.  If George Soros or Goldman Sachs or Al Gore or Israel owned the Pacific Ocean, I guarantee every single piece of plastic trash would be paid for by someone.

However, at the moment no one owns the Pacific Ocean, so no one sues, so no one cares and the price of plastic doesn’t reflect the true costs of both the production and waste of this product.  It’s “out of sight, out of mind” for most people.  Until their child contracts cancer from contamination in the food chain.

We ultimately eat the fish that swim through these waters.  Clearly we have a vital interest in fixing this problem, aside from the simple moral imperative of cleaning up after ourselves. 

I fail to see how this is sustainable, or aligns with our long-term values, or appropriately “endogenises” all the “externalities” involved in the production of plastics.  We may need to control this out-of-control process by increasing the cost of plastic production to “endogenise” these long-term costs, because the madness of the debt-based monetary system ‘artificially” skews incentives towards disposal consumerism.  A higher oil price would achieve this, and reduce “greenhouse gases”.  What’s wrong with a higher oil price?

Alternatively, we need to get back to a gold standard, where savers are rewarded for saving and “disposable” items become more expensive relative to real incomes (and housing prices collapse in real terms). 

This is not sustainable, and I defy anyone – Austrian, Keynesian, Marxist, Fabian – to say that it is:

Categories: Environment
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