Externalized costs

Assume there is a resource pool, it can be fixed or it can be growing, but we can all see that pool of resources as being legitimately used by a firm in order to generate revenue. If nothing used the resources there would be no benefit to them and they could no longer be called resources with a straight face. Or if one person sells a resource to another the price of that resource can be a seen as a legitimate cost. Either way the resource is obtained is just fine.

But there are other costs that must be dealt with, beyond obtaining resources there is also the cost of dealing with waste products. In a modern economy this cost is the dumpster fee. We pay someone else to make our garbage problem their garbage problem. If they are clever they can even take that garbage problem and another problem and turn the two problems into one solution. but paying someone to take your problem isn’t the only way to be rid of it. You can in source the remediation, by further processing your waste into a less significant problem, to an extent this occurs when a box store compresses cardboard boxes in a bailer to make them easier to deal with, or you can just dump your problem while no one is looking. Yes we do have corporate litter bugs, though typically they litter into the air. We used to have all sorts of problems but in the US the EPA has been able to coerce most of the companies into in sourcing the processing of most of the gases that they were externalizing. If you go to a crowded city and are greeted by smog it is because people are externalizing deferred maintainence costs on their automobiles into the common air.

Now the fact that these chemicals spewed into the common space are seen as negative is not really germane to the issue. If you were driving your car along and the earth was about to plunge into the sun then a little smog of CO2 would be irrelevant. What matters here, what makes it an externalization, is the fact that the car exhaust cannot be easily contained by the car. it would be possible to collect the exhaust with a compressor and store it in a large pressure vessel, but that would really hurt gas mileage.

Now when a cost that doesn’t matter is externalized that’s not a big problem, and when externalizing some cost actually improves utility (such as heat externalized from power plants that helps keep an otherwise frozen pond producing fish) that’s actually a good thing. Evil Corporate America has other plans though, they release things that are bad for the environment, like acid rain and CO2. This destructive behavior is not the invention of the corporate class though, it’s as old as life itself. If you went back to the primordial earth it would be a utopia, with great sweltering heat building fantastical rain storms, that scour the land into the ocean, and the air would be full of CO2, with out any of that pesky oxygen around to spoil things. Now you are thinking that this is not your idea of utopia, this is because the utopia I was describing was not a utopia for you, but a utopia for photosynthetic microbes. They would capture the carbon and sunlight and use them to build their bodies and reproduce. This may still not be your idea of utopia but simple life has simple needs. During the course of their spectacular success the organism would produce O2, a highly reactive species, that could tear their fragile microbe bodies apart. However this product would simply drift away, and they could go on reproducing and externalize the cost of their O2 production.

This process continued for a great deal of time and evolution pushed the photosynthetic organisms to be better and better at capturing carbon and that meant they also made more O2 but it was no problem because it still just floated off. Over time the O2 was discovered not to have floated off but to be building up in the atmosphere. Now the O2 formed O3  and stopped the UV light that was raining to the surface of the earth and killing everything but it also did its own destruction. The O2 crisis may have been the first real encounter life had with the realization of an externalized cost. As life continued it had to build adapt to this new O2 rich world, a world we are still living in, but as we discussed before, the outcome for the external world is not what makes it an externalization. We Externalize our CO2 waste products, just like a plant externalizes its own O2 waste product (and CO2 waste product when it makes them) and together we turn our mutual problems into mutual solutions.

When it comes to dealing with industrial waste products the best solution is going to lie in taking advantage of those that can be economically taken advantage of (like repurposing fish bones and organs into fertilizers) and tolerating those that don’t threaten us waste heat into the air, makes hot air which doesn’t really do any damage, and finally forcing the costs back on the entities when the first two options don’t pan out. Of course forcing those costs back on the corporations that generate them has its own set of consequences, it means more cost in what ever product or service is being produced, so sometimes turning the costs back can lead to bigger costs for society than simply tolerating the problem.

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About opcnup

Emerson White is a biology student working on post grad while doing private research on the side.
This entry was posted in Bit of a Rant, Economics, Science. Bookmark the permalink.

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