Markets Already Internalize Externalities

Source: American Institute for Economic Research
by Joakim Book

“I make a voluntary and mutually beneficial trade with Bob. Both of us walk away from the transaction richer than we were walking into it: I gave up something I considered of less value in exchange for something I valued higher; Bob did the same but his value scales were reversed — inequalities make markets. Charges of externalities emerge when some consequence in that trade damages John, a third-party observer who had no say in the transaction that I and Bob made. John innocently suffers from the outcome of me and Bob selfishly pursuing our own ends. … Individual action, and market mechanics, internalize externalities.” (09/08/21)