Do you know what externalities are?

Externality - this concept was born as early as 1890, yet few know it. I first heard about it in the spring of this year, when it began to become increasingly relevant to my business. But do you know what externality is?

Its meaning is simple: external economic impact. You have a business, for example, you open a store where you sell cheap Chinese gadgets, in good quality, with a guarantee. You buy the  wholesale products, discard the faulty ones, pay the rent and tax, charge yourself some margin for your invested work, and sell the product at the price you want. So you include the price of the product, the shipping fee, the tax, your work, your rent, your other costs, and that's all.

But there's a little problem with that. Or a big problem.

The factory throws a lot of smoke into the air, which may not bother you, but not a little others. The ship that brings your stuff consumes more fuel than the whole small town where you opened your shop. Your cheap goods end up in the trash in a few years, and whole hills shall rise from it on the outskirts of your city.

Does this cost you money? No, not yet.

After all, the factory has included their heating bill in the product, you have paid the cost of the ship with the shipping fee, and your customers and you pay for the waste management. With the external economic effects of your business, you seem to have nothing more to do.

However...

If the pollinating insects disappear in ten years, the food will be a little more expensive. Let's say it will cost ten times as much as it does today. If, because of climate change, your country will have to accommodate not thousands but millions of people, surely your tax will not be the same as it is now. If in twenty years the air quality in your city reaches a critical level, you will have to spend more often not only on masks, but also on doctors. If there is nowhere to put the waste, and everything that just surrounds your children will be contaminated with microplastics, it will affect the economy that may not survive. I'm not thinking that drinking water will cost twice as much as today, but whether everyone will get it ...

You and your children will be reimbursed for these costs. And of course everyone else involved in the economy will share the problem. Will they be able to pay for the expenses you and other people have imposed on them over the years? Don't think so.

Then what can we do?

I will share the solution - my solution - with you on the next page.