I read a comment on a friend’s page where someone they know said privatizing everything and allocating through markets could account for all externalities. It’s worth quoting,
Privatize everything. Assign property rights to all the land, sea, and air such that those who pollute must reimburse those who are hurt. In this way all externalities are internalized and through the market we reach an optimal level of pollution.
Since privatization and markets already exist all over the place the obvious question is: If they can do that then why don’t they? And who would be assigned the “property rights to all the land, sea, and air”? If I own the air we breathe then what about that ownership means I will pay you anything for it being polluted? In fact, the bargaining power I get from owning the air you breathe entitles me to extreme influence over decision-making. What are you going to do, not breathe?
This is far from complete but, am I really to believe the environmental and social costs of the burrito (a beef burrito with cheese, onion and salsa on a flour tortilla wrapped in paper and stuffed in a paper bag with three napkins) I had for lunch – which includes the growing of the corn, wheat, cattle, onions, tomatoes, other herbs and spices used, the water, land, pesticides and feed used, the pollution and toxic chemicals generated, the remittances for the farmer, and since we live in a global economy where trade accounts for a lot our products we should include the cost of gas and shipment (including the salaries of all those who worked on the ships) of those products transported, the costs of rent, electricity and utilities for the store location, the wages for those who took my order, made my order and delivered my order, those who will pickup and dispose of my “trash,” and the ecological impact of the disposal of what remains of my lunch – only cost $2.70 (includes sales tax)???? Not hardly.
To account for all externalities it would be necessary to consider all costs and benefits involved in the production, allocation, consumption and disposal of the product used. Markets don’t offer this one bit, and if Don Juan’s Taco stand did account for the true social and environmental costs of his products that he uses at his private enterprise (of which is part of a market system) then he would be put out of business by tomorrow. Why? Because private enterprises allocated through market systems push off accurate prices in order to make a profit and if Don Juan won’t do it then his competitor will.