In the real world of unregulated markets, successful players get larger and, in many instances, use the resulting economic power to drive or buy out weaker players to gain control of even larger shares of the market. The larger and more collusive individual market players become, the more difficult it is for newcomers and small independent firms to survive, the more monopolisitic and less competitive the market becomes, and the more political power the biggest firms can wield to demand concessions from governments that allow them to externalize even more of their costs to the community. Given this reality, one might expect the neoliberal economists who claim Smith's tradition as their own to be outspoken in arguing for the need to restrict mergers and acquisitions and break up monopolistic firms to restore market competition. In other words, they use a theory that assumes small firms to advocate policies that favor large firms. Market theory also specifies that for a market to allocate efficiently, the full costs of each product must be born by the producer and be included in the selling price.
Economists call it cost internalization.
Externalizing some part of a product's cost to others not a party to the transaction is a form of subsidy that encourages excessive production and use of the product at the expense of others. When, for example, a forest products corporation is allowed to clear-cut government lands at giveaway prices, it lowers the cost of timber products, thus encouraging their wasteful use and discouraging their recycling. While profitable for the company and a bargain for consumers, the public is forced, without its consent, to bear a host of costs relating to water shed destruction, loss of natural habitat and recreational areas, global warming, and diminished future timber production. The consequences are similar when a chemical corporation dumps wastes without adequate treatment, thus passing the resulting costs of air, water, and soil pollution to the community in the form of health costs, genetic deformities, discomfort, lost working days, a need to buy bottled water, and the cost of cleaning up contamination. If the full cost of producing and driving cars were passed on to the consumer we would all benefit from a dramatic reduction in urban sprawl, traffic congestion, the paving over of productive lands, pollution, global warming, and depletion of finite petroleum reserves.