A Different View of Externalities in the Context of Global Warming and Climate Change

An externality is a cost or benefit that affects a third party who did not choose to incur that cost or benefit. Externalities can be both positive or negative. A positive externality is anything that causes an indirect benefit to individuals. A GSM operator that uses the new technology to make phone calls cheaper and the vaccination of people against infectious diseases are examples of a positive externality. A negative externality is anything that causes an indirect cost to individuals. A factory's wastes that destroy plantations and some fishermen catch fish with purse seine in shallow waters with the desire to maximize their profit are the examples of negative externalities. This concept, first mentioned by Knut Wicksell, was later developed by Alfred Marshall.

However, the theories and methods put forward to internalize negative externalities have examined the social costs incurred at the local level; The threats posed by external costs, which have global effects such as global warming and climate change, for today's and future generations, have been ignored in the context of externalities.

Today, global warming and climate change are predicted to turn more than 143 million people into climate migrants due to the rise in hurricanes, storms, sea level rises, food, and water scarcity which depends on extreme drought and epidemic diseases. This entire migration movement will take place in Sub-Saharan Africa, South Asia and Latin America, representing 55% of the developing world population. In addition to the famine and natural disasters triggered by global warming and climate change, millions of people have migrated to Europe since 2013 as a result of political instability. This results in xenophobia as well as shrinking Europe's economic resources. Global warming and climate change cause some species to become extinct and migrate because of the inability to keep up with the changing climate conditions. Besides, the rapid proliferation of mosquito, tick and pest species that cause plagues are predicted with the disruption of nature.

In other words, from an economic point of view, negative externalities occur at the global level that threatens both our present and future generations. So, who will pay for the social and economic costs of negative global externalities? What is a daily marginal social cost that we have to bear in return for the marginal social benefit of making the earth livable one more day? Or, is it not an economic and social problem of homo economicus which seeks its self-interests in a narrow and rational way, because the costs of the global negative negativities mentioned above will be reflected to the next generations?

The Economic Policy of Wearing Mask In Consideration of Externalities and Turkey Example

In economics, an externality is a cost or benefit that affects a third party who did not choose to incur that cost or benefit. Externalities might be both positive or negative. Positive externalities are benefits that are infeasible to charge to gain; negative externalities are costs that are infeasible to charge to avoid. In other words, in both negative and positive externalities, consumers don’t pay, and producers are not paid for costs or benefits. Planting trees is an example of a positive externality, while air pollution is an example of a negative externality.

Externalities stem from the selfishness of people, and it undermines the social benefits of the public. Despite the fact that people consider their own interests in their economic and social activities, they ignore the social benefits and costs of their activities.

If we adapt mask example to externalities, not wearing a mask and infect other people is an external cost while wearing a mask and prevent other people from infection is an external benefit. People suppose that other people wear mask, or they ignore the social benefits of wearing a mask because some people have low-risk perception. Thus, the consumption and production of masks remain below the social optimum level. At that point, the most rational political selection is to subsidize and mandate the use of masks. In other words, It is the best way to be given masks to free to the public by the government. Because the cost of wearing one mask and shortening the spread of pandemic one day is much less than the cost of causing one more COVID-19 case.

In Turkey, the government has started the distribution of masks freely through pharmacies and obliged to wear mask in public places in the early days of April. The graph below shows the positive impact of subsidizing wearing mask. After the third week of April, daily new cases start decreasing clearly. It definitely prevented the uncontrollable spread of cases. It needs to be lasted until shortening the marginal benefit of pandemic one day economically becomes equivalent to the marginal cost of wearing a mask.

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(source:https://www.worldometers.info/coronavirus/country/turkey/)