Externalities

"SuperFreakonomics: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance" by Steven D. Levitt and Stephen J. Dubner has a discussion of externalities on p. 171.

They define an externality as: "It's what happens when someone takes an action but someone else, without agreeing, pays some or all the costs of that action. An externality is an economic version of taxation without representation.

One of the econ courses on the ship has a segment on externalities. I have a little personal interest since I wrote a Master's thesis a long time ago entitled "Economic Effects of Mercury Pollution on Commercial Fishing and Recreation-Related Business on Pickwick Lake in Alabama. I got my thesis out last week and skimmed through it and realized how much economic theory I have forgotten.

The discussion of externalities has broadened since my thesis was written in 1973. It has gotten much more mathematical, so I don't understand much of it. But, economists are still trying to figure out how to measure costs. And now it seems to include more of "unintended consequences" kinds of things. My thesis was more along the lines of "Party A dumps chemical waste into the waterways, and now Party B (ie. local water authority) has to incur higher costs to clean it up for drinking water."

Leavitt and Dubner look at it from a standpoint of what effect an action has further down the line. As a simple example, I decide to buy a specific car, and it has a lower mileage rating than one alternative. They would follow the trail of more gasoline needs to be produced, more refineries built, more drilling done, more ships to haul the petroleum, etc.

Now, you're probably asking "Why is Warner getting into all this?" Well, since our voyage has the theme of "sustainability", I've decided to try to notice externalities as we go through the trip. You will see some of them described here in the coming months.