Why complaining about “private profit and public cost” misses the boat.

February 9, 2025 by Joshua
in Freedom, Nature

The difference between an externality and coercion.

An externality is a cost imposed on someone else. A cost is something that if you pay for it, you undo the cost or make them whole. An example might be if in doing my work, I undo some of yours and it takes you an hour to redo it. You could in principle consent to the work if I compensated you enough for it.

If I cause a child to be born with a birth defect, no amount of money can make up for it. No one can consent to be born with a birth defect. To call causing birth defects is a category error. Nobody would call murder an externality. No amount of many makes up for it.

Adam Smith was clear about the need for what he called justice. John Locke described the need to protect life, liberty, and property, which the US Constitution implemented.

The United States Constitution
The United States Constitution

Slavery was not an externality. Taxes wouldn’t solve it, nor would regulation. Lincoln stated it well: a house divided against itself could not stand. A constitution can guarantee freedom or permit slavery but not both.

Some pollution may cause problems that money can make up for and could qualify as an externality, but many forms are not, like if they cause birth defects or kill people. Taxes don’t resolve them. On the contrary, they can augment them by motivating the parties receiving the taxes in benefiting from more of the problem.

Those complaining about “private profit and public cost” related to pollution and many other problems of unsustainability mis-attribute as externalities coercion no one can consent to or be made whole for. If Lincoln had seen slavery as an externality, he wouldn’t have seen the need to end slavery, requiring a constitutional amendment.

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