Externalities: Calculating the Hidden Costs of Products

An externality is where there’s an additional cost imposed by whatever product is being produced or consumed, that’s not accounted for in the price of the product.

The environment is finite and precious, so we have to price the product properly and fold that back into the cost of products.

If people are wasting water, or polluting in other ways, society should charge them what it costs to clean up the pollution and return the environment to a pristine state.

But if you raise the price high enough, you’ll knock out pollution. That’s much better than feel-good measures like banning plastic bags.