External Costs

by Bill Duesing

First broadcast on WSHU/WSUF-FM, November 5, 1999

Almost any thing we buy these days costs more than the price we pay for it. We'd be much better off if what we paid for goods and services more closely reflected all of their real costs. This is especially true now because low prices and high volume have become a societal obsession.

Typically, the price of purchased goods or services includes direct costs such as raw materials, labor, packaging, transportation, marketing expenses and expected profit. There are hidden costs, however, which are often not included. Economists call them "externalities." They are paid for by society in general, by taxpayers, or with environmental degradation. As production and marketing efficiencies bring lower prices, greater sales follow. However, each sale still has the same external cost. Lower prices mean more sales and higher external costs.

When we buy gasoline, we pay for getting crude oil out of the ground and refining it, but we don't pay for the air pollution and global climate change its burning creates, or for the permanent depletion of a non-renewable resource. Since almost everything we buy consumes fossil fuel as a raw material, and/or in its manufacture, transportation and marketing, the polluting effects of fossil fuels are a serious external cost for our society.

Think about plastic packaging shipped in from China or Korea, made from a chemical created in New Jersey out of oil pumped from the ground in Saudi Arabia. When we discard this packaging, a truck hauls it somewhere else for burning or burying. We all pay for waste disposal. More waste means higher external costs. A recent National Public Radio story highlighted the mounting disposal costs for computers, cell phones, televisions and other high tech, quickly-obsolescing products which are multiplying like rabbits in this society. Most of them contain dangerous, toxic heavy metals which are very expensive to separate for reuse.

The group Sustainable America recommends using "environment-friendly taxes" to shift the tax burden from work and income to pollution and waste. Encourage what we want and tax what we don't want. We probably shouldn't hold our breath for those, though. Industries with high external costs such as tobacco, weapons, chemicals, petroleum, and automobiles are often very profitable. They have lots of money to buy influence with elected officials.

In the meantime, we should consider the external costs of our purchases. And, although it is contrary to the current, culturally-sanctioned frenzy of consumption, there is no way around it. We should buy and consume less while we learn to get more of what we need from our local ecosystems. Using organic growing methods and simple solar solutions creates fewer external costs and many environmental and health benefits.

This is Bill Duesing, Living on the Earth

This page and its contents are copyright © 1999 by WSHU-FM, Fairfield, CT, and by Bill Duesing.