The invisible elbow Sometimes these external costs are paid in money. But often the costs are not quantifiable. Nearly all environmental problems are externalities . If consumers had to suffer all the pollution caused by the products they bought, they wouldn t buy them in such damaging quantities. It is precisely because costs are passed on to third parties that we let them occur.
Environmental degradation is a genuine case of passing the muck.
There is an exception - the contamination of food and water by chemicals is an externality. If you buy a fruit or vegetable coated with pesticide residues then you are the person being poisoned. You are paying the cost of the pollution yourself - although lots of other people may pay too, such as the workers spraying the pesticides and future generations whose water is polluted. This is why there has been such a boom in organic foods and mineral waters. Consumers may not care what happens to others but they are certainly worried about the costs they pay themselves.