Is Climate Change an Externality?
Document Type
Blog Post
Publication Date
12-1-2025
Publisher
The Law and Political Economy Project
Language
en-US
Abstract
In Free Gifts, Alyssa Battistoni traces the concept of the “externality” across the past century. This history begins in 1920, when the economist Alfred Pigou observed how private market transactions could impose uncompensated harms on third parties, such that the prices of goods failed to reflect their true (social) cost. Fortunately, he argued, these external costs could be rectified by government intervention: adding a tax equal to the social cost, which would cause market trading to “internalize” the harm and produce the optimum amount of the activity in question. Free-market advocates viewed such externalities as a rare exception to the general rule of the wisdom of the market.
Recommended Citation
Madison Condon,
Is Climate Change an Externality?
,
LPE Project Blog
(2025).
Available at:
https://scholarship.law.bu.edu/shorter_works/282
Publisher URL
https://lpeproject.org/blog/is-climate-change-an-externality/
