Externalities is a word we use to refer to unpaid costs or benefits. Most of Us are Liberals and/or Social Democrats and believe in market economies, therefore we sometimes use market-specific words to express ideas. Externalities is one of those ideas. In production, the total cost of an item produced is the total of the costs incurred in it's production and presentation at market. Sometimes, the total cost fails to include all the costs incurred in production of an item or provision of a service. When costs are incurred (or benefits are realized) by people who aren't party to the market transaction, we call those costs external costs (benefits) externalities. Many of the things we now call negative externalities used to be called nuisances in the old common law.
The most obvious externalities are pollution. Pollution is a common side-effect of many human activities which lowers the utility, and therefore the value, of someone's property, or according to arch-conservatives, nobody's property. Pollution can of course also in some cases harm the Whole planet. The producers of external costs may, or may not have been aware that they were generating external costs.
Dealing with externalitiesEdit
In theory, our system provides means to recover external costs through the courts. In reality, using the courts is difficult and expensive, and only the most affected will likely attempt to recover through the courts. Liberals believe our system also provides for the possibility of government intervening to address external costs. In general, Liberals would prefer that external costs be estimated and assigned to producers (internalized) and that government use the revenues collected to mitigate the damages of the externalities. American Liberals believe that our government has the power and the responsibility to do this (not only to protect our lives, rights and our private property, but also our common rights and property), but many conservatives and of course many of the producers of externalities deny that our government has the Constitutional power.
We also believe that in the case of some externalities which affect property beyond the control of any nation or government, it is proper to find a means to internalize those externalities.
In recent decades, many of the conflicts between Liberals and Conservatives in the USA have centered around externalities. US Conservatives have made major gains in the courts by appointing and advancing conservative judges, through tort reform, and by underfunding oversight agencies and by appointment of industry insiders to administer those agencies.
Many people have become so concerned about the effects of externalities that political parties have grown to adress those concerns. Some Liberals may disagree with some greens on how to address externalities, but more and many Liberals are extremely concerned.
Many on the left like Social Democrats believe in subsidizing green technologies, this is frequent in Europe. An alternative solution favored by more market orientated Liberals is to assign external costs and allow greener technologies to emerge based upon their relative costs and consumer appeal. If these new technologies also contribute external benefits, and those benefits can be valued, the possibility of payment for those benefits is also consistent with a market based solution.