Objectivists/Libertarians don’t really like to admit that “Externalities” exist. Quite frankly, a significant amount of Objectivist/Libertarian “thought” goes into either evading the fact that Externalities exist at all, or attempting to explain them away as insignificant.
Further, the issue of “Externalities” is much larger than mere “economics”.
Put bluntly, an “Externality” is the effect of any given socioeconomic transaction, on “third parties” — those OTHER than the specific individuals who happen to be DIRECTLY participating in that specific transaction.
Importantly: these “third parties” have NOT explicitly consented to being effected:
As Wikipedia describes the issue:
In economics, an externality is the cost or benefit that affects a party who did not choose to incur that cost or benefit….For example, manufacturing activities that cause air pollution impose health and clean-up costs on the whole society, whereas the neighbors of an individual who chooses to fire-proof his home may benefit from a reduced risk of a fire spreading to their own houses.
The basic conceit of Objectivist/Libertarian thought amounts to a truism: the claim that individuals are entitled to control/use/dispose of anything created by their own efforts. The problem is: How much of any given individuals “output” is ONLY traceable back to their OWN efforts?
It turns out: very little.
Even the pseudo-intellectual corporate lickspittles at “Cafe Hayek” can’t help but acknowledge the above:
Yes, it’s true that entrepreneurs and investors who profit in the marketplace typically don’t build much of the infrastructure they use to connect with their input suppliers and with their customers….
Second, no serious proponent of free markets has ever denied the reality that government supplies a great deal of useful infrastructure. Nor has any serious proponent of free markets denied that the use of infrastructure built by others, government or not, is beneficial to all of those who use it productively.
Third, and relatedly, all serious proponents of free markets understand that every person in a free market today, every minute of every day of every year of his or her life, depends upon the productive efforts of hundreds of millions of people. The fact that some of the hundreds of millions of people upon whom each of us depends are government employees, or are set to their tasks by politicians, does not make those particular workers or those particular tasks any more important to each individual’s success in markets than are the tasks that are performed by the private sector. A government-built road might have contributed to Smith’s success, but so, too, did the privately produced truck that he uses to serve his customers. Likewise with the privately produced fuel for that truck and the privately produced and manned filling stations* where that fuel is pumped into the truck. So, too, for the food that Smith eats to stay alive and alert, the privately designed and manufactured clothing that he wears, and the privately supplied financing that tides his business over during a slump and privately supplied insurance that makes his business risks more bearable.
Fourth – and following closely from point number three – those who scream “You didn’t build that!” are oblivious to the importance of the margin. The government-built road that Smith uses to earn handsome profits by serving consumers might well be absolutely essential to Smith’s success, but this fact doesn’t mean that the road’s contribution at the margin to Smith’s success is significant. Smith’s profits depend upon what he adds to the road’s services – how Smith himself uses the road to create value for consumers. If Smith uses the road to ship truckloads full of ordinary toothpicks to market, he might earn just enough to continue in that line of work, but he’ll not earn magnificent profits. If instead Smith uses the road to ship truckloads full of new’n’improved toothpicks – toothpicks that sell at prices only slightly above that of ordinary toothpicks but, in addition to doing what ordinary toothpicks do, also are guaranteed to prevent gum disease, cavities, bad breath, insomnia, and erectile dysfunction – then Smith profits magnificently. Smith’s “above normal” profits (as economists call them) have nothing to do with the road (or with, say, the private efforts of entrepreneurs who are responsible for the delivery truck Smith uses) and everything to do with Smith’s own innovative efforts.
First, to claim that the hypothetical toothpick “Entrepreneur’s” success has “nothing” to do with the road/trucks etc. is idiotic.
Why? Let’s do a thought-experiment:
Some months ago, I assisted in an (admittedly somewhat minor) aspect of renovating a building: prying nails out of a wall.
The nails themselves had originally be used to anchor “baseboards” around the lower portion of the walls. These baseboards had been removed, but many of the nails had remained.
The task consisted primarily of using a claw-hammer to extract the nails — often, having to attempt to straighten them first, in order be able to pull them out.
At any rate: although it is undeniably true that my “individual efforts” were the (proximate) cause of the nails being removed. However, acknowledging this fact does not — and CANNOT — serve as an excuse for evading the myriad OTHER factors which made even such a (seemingly) minor undertaking possible at all:
- I had access to a claw-hammer. Without that tool, the project would have been virtually impossible.
- That claw-hammer was NOT the product of “private” (let alone “individual”) efforts:
Quite frankly, anyone who attempts to claim that corporations are “private” businesses is deliberately obscuring the (pervasive and fundamental) differences between corporations, partnerships, and sole-proprietorships.
Most notably; Corporations (both notionally “for-profit” AND “not-for-profit”) are, at the most basic level, a form of blatant governmental collusion and privilege. Corporations are so-called “legal persons” created (and in far too many cases, mollycoddled) by the State.
Raw nature does NOT offer “limited liability”. Nor do (most) sole-proprietorships/partnerships.
Ironically enough, one of the primary complaints among the “anti-corporate” Left is that the for-profit corporation amounts to an “externalizing machine”:
As wikipedia (aptly) summarizes the issue:
The documentary shows the development of the contemporary business corporation, from a legal entity that originated as a government-chartered institution meant to affect specific public functions to the rise of the modern commercial institution entitled to most of the legal rights of a person. The documentary concentrates mostly upon North American corporations, especially those in the United States. One theme is its assessment of corporations as persons, as a result of an 1886 case in the United States Supreme Court in which a statement by Chief Justice Morrison R. Waite[nb 1] led to corporations as “persons” having the same rights as human beings, based on the Fourteenth Amendment to the United States Constitution.
So….no: the phrase “private corporation” is both a (deliberate) oxymoron, and a brazen con-game counting on the (regrettable) fact that most people really can’t tell the difference between genuinely PRIVATE (locally-based) “Mom and Pop” businesses (which — not coincidentally — are mostly sole proprietorships/partnerships), and the (extremely elaborate) system of privileges which allow (for example) Walmart to achieve “economics of scale”.
Quite frankly, the corporation (as a business-model) would NOT EVEN EXIST AT ALL, unless it DID provide significant privileges to its users.
Now, what does corporate pull have to do with me pulling nails out of a wall?
Simple: it is overwhelmingly likely that the tool which enabled me to perform that specific task at all (the claw-hammer) was MANUFACTURED AND/OR SOLD by a corporation, somewhere or other.
Most likely (given my own shopping habits) the hammer was originally bought from Home Depot, Dollar General, or (regrettably) Walmart. (I don’t remember exactly, because I’ve had the hammer in question for at least 15 years.)
Now, okay: it IS theoretically possible that (if those CORPORATE retailers didn’t exist) I could have bought an equivalent hammer from the sort of “Mom and Pop” hardware store (sole proprietorship/partnership) which “Corporate America” killed off 50 years ago.
Then again, it is also theoretically possible that, if the (Government-created and tax-financed) roads didn’t exist, that somebody or other would have HAND-CRAFTED that hammer in a (local) Blacksmith’s forge, and then transported it to the hardware store via horse-cart — most likely over dirt roads.
I hope you “get” where I’m going with this:
In the (deliberately idiotic) toothpick example: Smith’s profits have (almost) nothing to do with his OWN, INDIVIDUAL INGENUITY OR EFFORTS, and (almost) everything to do with the almost incomprehensibly vast, complex, and (to a great extent “Statist”) INFRASTRUCTURE — both physical (roads/machines etc. — and “social” (for example: those “public health busybodies” Libertarians/objectivists are always whining about from the CDC, who — however inexactly — protect their stupid asses from the next “superbug” crisis — which allows more of them to survive for longer, and be HEALTHY enough to continue whining about “nanny-state tyranny”.)
Quite frankly: if Libertarians/Objectivists were correct about the (relative) unimportance of infrastructure etc.: why the fuck aren’t they all flocking to Somalia?
Of course, they typical Objectivist/Libertarian cop-out is to claim that the myriad of “positive externalities” from which even they themselves benefit every second of every day would (magically) still have happened in the absence of State intervention.
If so, then why have they NOT happened in places like Somalia, where the State is too damned inept/powerless to even combat local gangsters/warlords?
It might just possibly have a little something to do with THIS:
6:30 a.m. You are awakened by your clock radio. You know it is actually 6:30 because the National Institute of Standards and Technology keeps the official time. And you can listen to your favorite radio station only because the Federal Communications Commission brings organization and coherence to our vast telecommunications system. It ensures, for example, that radio stations do not overlap and that stations signals are not interfered with by the numerous other devices – cell phones, satellite television, wireless computers, etc. – whose signals crowd our nation’s airwaves.
6:35 a.m. Like 17 million other Americans, you have asthma. But as you get out of bed you notice that you are breathing freely this morning. This is thanks in part to government clean air laws that reduce the air pollution that would otherwise greatly worsen your condition.
6:38 a.m. You go into the kitchen for breakfast. You pour some water into your coffeemaker. You simply take for granted that this water is safe to drink. But in fact you count on your city water department to constantly monitor the quality of your water and to immediately take measures to correct any potential problems with this vital resource.
6:39 a.m. You flip the switch on the coffee maker. There is no short in the outlet or in the electrical line and there is no resulting fire in your house. Why? Because when your house was being built, the electrical system had to be inspected to make sure it was properly installed – a service provided by your local government. And it was installed by an electrician who was licensed by your state government to ensure his competence and your safety.
6:45 a.m. You sit down to breakfast with your family. You are having eggs – a food that brings with it the possibility of salmonella poisoning, a serious food-borne illness affecting tens of thousands of Americans every year. But the chance of you getting sick from these eggs has now been greatly reduced by a recently passed series of strict federal rules that apply to egg producers.
7:00 a.m. You go into your newly renovated bathroom – one of a number of amenities that you enjoy in your house. But the fact that you can legally own your own house is something made possible by government. Think about this: “ownership” and “private property” are not things that exist in nature. These are legal constructs: things created by laws that are passed and enforced by government. You couldn’t even buy your home without a system of commercial laws concerning contracts and a government that ensures that sales contracts are enforced. So the fact that you live in your own home is, in part, a benefit of government and the rule of law.
7:01 a.m. Government also helps you own your house in more than the legal sense. On a more practical level, the federal government actually gives you money every year to help pay for your house. It’s called a mortgage interest tax deduction and it is one of the larger benefit programs run by the federal government – amounting to over $60 billion dollars a year. You can also deduct any real estate taxes you pay. These largely overlooked subsidy programs have enabled millions of people to buy their first home or to move up to a larger home than they could afford otherwise.
7:02 a.m. Back in the bathroom. You use the toilet and flush it. Your local government then takes care of transporting this waste, treating it, and disposing of it in an environmentally responsible manner – all without a second thought by you.
7:20 a.m. As you are getting dressed, a glance outside the window shows some ominous clouds. You check the weather on your TV. All these weather forecasts are made possible by information gathered and analyzed by the National Weather Service, a government agency. Every day, on your behalf, it takes in 190,000 weather observations from surface stations, 2,700 from ships, 115,000 from aircraft, 18,000 for buoys, 250,000 from balloons, and 140 million from satellites – all just to help you plan what to wear and make sure you don’t get stuck in a snow storm. And oh yes, this agency may save your life with its hurricane and tornado warnings.
7:30 a.m. Before you leave home, you take your pills to control your high blood pressure. But how do you know that this medicine is safe or effective? Without the testing required by the Food and Drug Administration, you wouldn’t. And without the vigilance of the FDA, you could easily fall victim to unscrupulous marketers of unsafe and worthless medicines.
7:45 a.m. You put a couple of letters in your mailbox. For less than the price of a cup of coffee, a government employee will come to your house, pick up the letters, and have them delivered in a few days to someone on the other side of the country. A pretty good deal.
7:50 a.m. You and your child walk across the lawn to your car and arrive without getting dog poop on your shoes. A small but welcome achievement that is made possible now by a local law that requires people to clean up after their pets. Also, the reason your neighborhood is not plagued by stray cats and dogs is that your local Animal Control officer is on the job dealing with this constant problem.
7:52 a.m. You help your young child into your car and you pull out of your driveway. You have now entered an experience that is improved by government in almost more ways that you can count. Driving your car is inherently dangerous. But it is made immensely safer by government laws and regulations, such as those mandating child safety seats and the use of seat belts – rules that have saved tens of thousands of lives. Driving down the street is also made much safer by a local government that enforces traffic laws and discourages people from driving too fast or driving drunk. Most state governments also minimize your risk of being run into by someone driving on bald tires or with faulty brakes by requiring regular inspections of all vehicles. And state driver’s license examinations ensure that all drivers are at least minimally competent and can actually see the road. In addition, if you are hit by another car, the potentially disastrous costs of an accident are covered because the government requires that all drivers to have auto insurance. In fact, without this extensive network of government laws and regulations covering automobiles and driving, it would be foolish for us to ever venture out on the road.
8:15 a.m. You drop your child off at day-care. It took a long search to find a good program and it is an expensive one, but it is worth it so you can feel confident that your child is in a safe, nurturing, and stimulating environment while you are at work. One of the reasons you can afford this program is the $3,000 child care tax credit you get from the federal government every year. Equally important, your child benefits from the fact that most state governments now enforce day-care requirements for group size, ratios of children per staff member, teacher training, nutrition, health, safety, and space requirements.
8:35 a.m. Your trip on the freeway is much safer due to federal restrictions on the number of hours that truck drivers can operate their vehicles without resting. Thousands of people die every year from truck-related traffic accidents, but it would be much worse without these regulations that keep sleepy truck drivers off the road.
8:55 a.m. You arrive at work and take the elevator. You just assume that the elevator is safe; and it is, thanks in part to the annual elevator inspections conducted by your state government. It is probably nothing you will appreciate until the next time the elevator breaks down with you inside, and that makes you think a bit more about the reliability of elevators.
9:00 a.m. While at work, your rights and wellbeing are constantly protected by a wide-ranging network of federal and state laws. The Occupation Safety and Health Act works to protect you from unsafe and unhealthy work conditions. Federal law protects you from workplace discrimination based on race, gender, religion, national origin, or disability. State laws may also require your employer to purchase worker’s compensation insurance so that you are covered in case you are injured on the job
Noon. For lunch you have your usual sandwich and microwaveable cup of soup. But why did you choose that particular soup? Perhaps because it was low in salt and fat. But how do you know that? Because the government requires all food packaging to have a truthful and easily readable panel on the label that supplies you with the nutritional information necessary to make a good choice. Food companies tell you what they want you to know about their products, but the Food and Drug Administration’s labeling requirements tell you what you need to know to eat in a healthy way.
How do you know the lettuce in your sandwich is not laced with unhealthy doses of pesticides? Because the Department of Agriculture has developed and is enforcing uniform standards for pesticide residue on raw foods.
Microwave ovens are potentially very dangerous machines, but you can use this one with confidence because of detailed government regulations that limit the maximum amount of radiation leakage and mandate two different safety interlocks that prevent its operation with the door ajar or open.
12:45 p.m. After lunch, you walk to a nearby ATM and get some cash out of your account – and your money is actually there. That wasn’t always true during the economic depression of the 1930s when many banks failed. But your money is safe — as it was during the recent financial and banking crisis — because the government guarantees your deposits. In addition, those pieces of paper you put in your wallet are only worth something thanks to the federal government. Our monetary system is entirely a government creation, and the value of money is only maintained because the government regulates the money supply and protects it from counterfeiters. Quite an important service really.
1:00 p.m. Back at work you hear rumors about a new downsizing plan being talked about by management – a fairly typical occurrence in these days of heightened national and international corporate competition. You know your job is one that could be lost, but you also know that you will be eligible for state-mandated unemployment insurance should that happen. This is just another way that government helps you to cope with the economic risks and uncertainties of a modern economy.
3:00 p.m. On a break, you call your elderly mother in the hospital to check on how she is recovering from her broken hip. Thanks to Medicare, her medical expenses are covered and she does not have to worry about this becoming a financial disaster for her. Thanks to the federal Family and Medical Leave act, you will also have the right to take several days off to tend to your mother when she comes home from the hospital.
3:10 p.m. You call to arrange for a physical therapist to work with your mother when she comes out of the hospital, and again this is paid for by Medicare. And you can be reasonably confident that she will get good therapy because your state Department of Health has a program of examining and licensing these therapists in order to ensure the quality of their work.
5:00 p.m. You leave work—thanks to the government-mandated 40-hour workweek. Labor Department regulations prevent your company from making you work past 5:00 unless it pays you overtime.
5:15 p.m. You stop at a local gas station to fill up. The very fact that this oil company offers this gas to you for sale is dependent on the existence of certain government laws. This company would not do business in your town without a legal system that assures them that you will pay for any gas you pump into your car. This economic exchange – like buying your house – would not be taking place without a system of statutory and common law that protects private property and regulates sales transactions. This simple sale is covered by Article Two of the Uniform Commercial Code – dozens of pages of laws that regulate every phase of a transaction for the sale of goods and provide remedies for problems that may arise.
5:15 p.m. You pump 15 gallons of 87 octane gas into your car and pay for it. But how do you know that you really got 15 gallons, and not 14½? And that the gas was actually 87 octane? This is only ensured by the presence of that little sticker on the gas pump that shows that a worker from your city’s Division of Weights and Measures has inspected the pump and the gas. These public employees make sure that you get what you pay for – from a pound of sliced turkey breast to a carat of diamond – by constantly testing and inspecting all commercial meters and scales, and by verifying the accuracy of checkout scanners. This is a crucial service, since more than half of the income of the average family is used to purchase necessities bought by weight or measure or scanned at a checkout station.
5:15 p.m. How do you know the price you are paying for this gasoline is a fair and competitive one? In many states, the Department of Attorney General has been responsible for finding and prosecuting cases of price manipulation and price fixing by oil companies and distributors.
5:30 p.m. As you drive home, you notice the tree-lined streets and the nice houses in your neighborhood – generally a pretty good place to live. Thanks again to government. Without zoning rules, you might have an auto body shop or a fast-food outlet move in next door. Or worse yet, a fertilizer plant or a toxic waste site. But there are no noxious smells in the air, no excessive and dangerous traffic on your street – thanks to your government. Pleasant and livable neighborhoods are only possible with extensive government planning and zoning regulation.
5:35 p.m. As you approach your house, you see your child coming down the sidewalk. The government-provided sidewalk. The sidewalk that allows your child to walk to the neighbor’s house down the street to play with a friend without the risk of being hit by a car.
5:45 p.m. You go for a jog in your local public park.
6:30 p.m. You take your family out for dinner at a local pizza restaurant. You enjoy a good meal and no one gets sick from E. coli or other food-borne illnesses. This is in large part because your local government conducts regular inspections of all food establishments to protect the health of customers.
7:30 p.m. Back at your house. You settle in for a quiet evening at home – one that is undisturbed by those annoying telemarketers calling you up to try to sell you something. This is because you have signed up with a state or federal no-call registry – a government service now enjoyed by over 60 million Americans.
8:00 p.m. You do a quick check of your e-mail – just one of the many services you enjoy over the internet every day. We all tend to think of the internet as the product of those talented and imaginative entrepreneurs in the high-tech companies. But the internet actually began with government programs that created ARPANET and later NSFNET, early computer networking systems that developed the software and networking infrastructure that form the foundations of today’s internet. The government also helped to fund research that led to web browsers like Internet Explorer and search engines like Google.
11:00 p.m. You go to bed. During your sleep, you are protected by a smoke detector that your city requires to be installed in every residence. Maybe you would have bought one of these yourself, but this law helps to ensure that everyone is protected from the dangers of fire.
4:00 a.m. You are asleep in your comfy bed. Unlike that time you stayed in a small inn in Costa Rica, where you were woken up regularly at 4 in the morning by the roosters crowing in the neighborhood. By law, no one can keep roosters in your neighborhood and so you remain in blissful slumber.
Now, my point with this article is NOT to engage in what Leonard Peikoff would demonize as “worship of the omnipotent State”. My point is merely to illustrate the fact that even the most “principled” advocate of “Laissez-faire” MUST deliberately engage in truly massive, mind-destroying level of “evasion” to be able to ignore the fact that — literally EVERYTHING THEY DO, 24/7, is (in some way — no matter how seemingly minor) at least partially made possible (or at least, infinitely more convenient) by a myriad of (unexamined) inputs which are ANYTHING BUT “their individual efforts”.
You wanna know what your “private, individual efforts” are actually capable of achieving absent the mindbogglingly vast positive externality known as “civilization”: two words: THIRD WORLD.
This is ALSO why whining about progressive taxation is fucking indefensible: it is PRECICELY plutocratic liars (like the Koch brothers/the Walton family, etc.) who derive most benefit from all of that pesky stuff that President Obama (ineptly) reminded them that they didn’t build.
Who derives more benefit from (say) the Interstate highway system? Some cubicle-monkey, or the CEO whose (notionally “private”) business is only made possible by the transport of both raw materials AND finished products over those roadways?
Another thing: “Pyramid of ability’, my ass:
Strip Ben Stein naked and dump his ass on a “Desert” island. He’ll be dead in a week.