Economists (and members of the general public) have long known that economic outcomes are distorted to the extent that people make decisions without taking full account of the effects that their decisions have on third parties. Whenever such “externalities ” exist, the outcomes of free choices cannot be correctly assumed to be socially optimal. Such outcomes are, at least in principle, able to be improved either by changes in the institutional structures that influence individual choices or by direct intervention by some agent sitting, and acting from, outside of the system.
Early 21st-century Americans today suffer from such externalities. One externality in particular directly and ominously threatens the physical environment in which we live. If matters continue unabated, not only the health of Americans, but of people worldwide, will decline. Compared to what would prevail if this externality were ‘internalized,’ our life-expectancies will be lower; the air we breathe will be more foul; the quality of our lives will be reduced.
This externality is the result of private citizens daily making countless private decisions that, while each decision benefits its individual maker, combine in total to threaten the fragile climate that makes our lives prosperous, clean, and healthy.
Many noted scientists – some of them Nobel-prize-winning experts in the field  – have long warned against the folly of ignoring this problem. These experts note that the climate that makes our lives possible – that keeps nearly 7 billion people alive on the globe, and that keeps the vast majority of these people healthier and more prosperous than anyone has been at any time in history – cannot sustain the continued battering it is receiving as a result of these private decision-makers who remain insufficiently constrained in making private choices that add to the accumulating poisonous effluence that is destroying the climate.
Admittedly, there are deniers, even among the scientists . But we all know that there is no proposition so lunatic that some people will not buy it. Some people, sad to say, still deny that the Holocaust ever happened.
(Not all of the people accused of being deniers, however, are really deniers. Some of the ‘deniers’ are simply people who admit that the externality might well exist but who doubt that there is any cure for it that would be better than the ailment itself. These people, while more reasonable than the outright deniers, are insufficiently aware of the grave and irreversible tragedy that will befall humankind in just a few years if actions are not taken today to solve the externality.)
The externality, of course, is political decision-making – every decision from casting ballots in voting booths to the President of the United States signing legislation that gives government greater power to regulate capitalist acts among consenting adults. Political decision-makers make their decisions based upon their own private calculus – each decision-maker deciding according to what is in his or her own best private interest. But, obviously, because every political decision affects countless strangers who have little or no input into each decision being made, each and every political decision emits external effects – ‘political pollution,’ if you will; countless irresponsible private decisions that, set adrift into the body politic, will dangerously change the climate to one of hostility toward markets and enterprise . The overall outcome of these decisions cannot, scientifically, be presumed to be optimal.
Many economists understand that free markets, and a culture that celebrates bourgeois values and activities, are a powerful force for prosperity and improved human living conditions . Quality housing without the filthy dirt floors and vermin-infested thatched roofs that our ancestors endured; automobiles that keep our streets clean of animal manure and the resulting swarms of flies; personal-hygiene and first-aid products that keep our persons cleaner and healthier. The list is very long. Unfortunately, because individual political agents make decisions without having to account for the full effects that their decisions will likely have on the economy’s ability to continue to generate this cornucopia of human-climate-improving benefits, the continuing – indeed, expanding – role of politics in our lives poses a grave threat to humanity’s future.
I actually am not among those persons who believes that the economy will crumble into chaos at the slightest introduction of unwarranted intervention. But do note that the same sort of story daily told about the threat of climate change to humanity’s future can be told, just as compellingly, about the political interventions aimed at mitigating the effects of alleged market imperfections, including those that bring about climate change.