"A negative externality (also called "external cost" or "external diseconomy") is an economic activity that imposes a negative effect on an unrelated third party. It can arise either during the production or the consumption of a good or service. Pollution is termed an externality because it imposes costs on people who are "external" to the producer and consumer of the polluting product. Barry Commoner commented on the costs of externalities:
- Clearly, we have compiled a record of serious failures in recent technological encounters with the environment. In each case, the new technology was brought into use before the ultimate hazards were known. We have been quick to reap the benefits and slow to comprehend the costs.
Examples for negative production externalities include:
- Air pollution from burning fossil fuels. This activity causes damages to crops, (historic) buildings and public health.
- Anthropogenic climate change as a consequence of greenhouse gas emissions from burning oil, gas, and coal. The Stern Review on the Economics Of Climate Change says "Climate change presents a unique challenge for economics: it is the greatest example of market failure we have ever seen."
- Water pollution by industries that adds effluent, which harms plants, animals, and humans.
- Noise pollution during the production process, which may be mentally and psychologically disruptive.
- Systemic risk: the risks to the overall economy arising from the risks that the banking system takes. A condition of moral hazard can occur in the absence of well-designed banking regulation, or in the presence of badly designed regulation.
- Negative effects of Industrial farm animal production, including "the increase in the pool of antibiotic-resistant bacteria because of the overuse of antibiotics; air quality problems; the contamination of rivers, streams, and coastal waters with concentrated animal waste; animal welfare problems, mainly as a result of the extremely close quarters in which the animals are housed."
- The depletion of the stock of fish in the ocean due to overfishing. This is an example of a common property resource, which is vulnerable to the Tragedy of the commons in the absence of appropriate environmental governance.
- In the United States, the cost of storing nuclear waste from nuclear plants for more than 1,000 years (over 100,000 for some types of nuclear waste) is, in principle, included in the cost of the electricity the plant produces in the form of a fee paid to the government and held in the nuclear waste superfund, although much of that fund was spent on Yucca Mountain without producing a solution. Conversely, the costs of managing the long term risks of disposal of chemicals, which may remain hazardous on similar time scales, is not commonly internalized in prices. The USEPA regulates chemicals for periods ranging from 100 years to a maximum of 10,000 years.
The list of business frauds against consumers grows longer every day as does the list of dangerous products, etc. (e.g. dangerous air bags, Wells Fargo Bank scam, dangerous ignition locks, Bhopal.) Short-term profits and covering up are the primary pursuits of most large businesses. Other values fall by the wayside. Criminal prosecution or civil suit after the fact cannot really remedy the damage.
Check out any of the links here.