The (Tragically) Unspoken Cost of Doing Business

“Externalities” sounds like something horribly complicated and boring, and, well, it can be. But it can also be damn simple, and once you get it, you’ll wonder why the hell it’s so regularly ignored.

Imagine with me. You’ve got a dog. This dog tends to poop in the back yard. That means you have to deal with the poop.

Imagine you start taking the dog for a walk every day, right about the time they poop. Instead of pooping in your yard, they poop on the greenway next to the sidewalk. No longer your problem! You walk on, not having to clean up poop.

That’s a negative externality. The “cost” of poop cleaning is shifted to someone else, possibly without their knowledge or consent.

Imagine again with me. You are a parent. You make sure your child, at least, knows to wash their hands, use hand sanitizer, and so on. You get the direct benefit of your child not bringing the plague home from school, yes. The externality here is that your child also contributes to the better health of all the children in their class by not bringing or spreading the plague at school.

That’s a positive externality. It provides benefits to the community at large that are not reflected in the reason or “cost” of why you had your kid wash their hands.

Negative externalities are frequently ignored when talking about corporations – through pollution, their employees being low-key expected to be on government assistance, and the like. These companies are not accurately charged for the cost their activities have on society. (The poop left on your sidewalk.)

Positive externalities are frequently ignored when talking about benefits. Providing healthcare, for example.

Community health flips the script on the old adage, “You take care of you; I’ll take care of me.” Instead, public health experts agree that the health of a community can have far-reaching—and sometimes surprising—impacts on individual health and beyond.

“Community health impacts everything—educational achievement, safety and crime, people’s ability to work and be financially healthy, life expectancy, happiness and more,” Bognanno says. “Health impacts every other facet of life, from a child’s ability to learn to an adult’s ability to work, so health is critical for education and financial well-being.”

https://www.rasmussen.edu/degrees/health-sciences/blog/what-is-community-health/

Heck, even buying local has positive externalities. A dollar spent that stays in your community (through a locally owned business) will have several times the impact on a community than a dollar that goes to an absentee owner in, say, Little Rock.

It’s important to look at more than just the direct effects. Sure, that coal mine is generating jobs right now, but will it continue to do so? Is it going to create effects that harm the health of those nearby? Is the money going to stay local, or is it mostly going to absentee landlords? Is funding education equally across zip codes going to help society in more ways than individual student success? (yes, by the way)

Once you start being aware of externalities, you will see how often they’re “conveniently” omitted, particularly when it’s by talking heads chattering at all of us.

But now you know what to look for.

Now it won’t be so easy for them to play you.

Featured Photo by Clark Young on Unsplash

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