In other words, ideal conditions that will never happen on any large scale in any functioning society.
Externalities are something that happen with almost all commercial transactions and are ignored at a society's peril.
I was thinking about externalities as I walked a short distance from where I parked my car to the post office. Rather than park twice, I parked in front of the liquor store and walked to the post office with my package. As I walked I thought about all the proposed post office closings.
Many of these closings will mean that many people will have to drive farther to a post office. The customer travel time is one cost of this change. Second, is the increased fuel usage. Third is a possible longer wait at the post office, more customer time. If we use more fuel, then the cost of gas can go up because of higher demand. If we keep using gasoline, we will need more oil. Because access to oil is considered a "national security issue", trigger-happy politicians would stump for yet another costly war. For want of a post office, a war was lost.
Sure, this is a far-fetched scenario, but a similar lack of looking at the bigger picture permeates our "free market" society. We shouldn't abandon a "market economy" because of its flaws, but we should at least recognize these flaws and their added costs.
Now, how many externalities are there in my driving to buy those heavy wine bottles shipped from Italy?
