One of the most important ideas in economics is that of an “externality.” An externality is a consequence of a person’s behavior that he or she doesn’t take into account when deciding whether to engage in that behavior.
Externalities are important because they often lead to socially wasteful — in economic jargon “inefficient” — decisions. Pollution problems are classic examples. Suppose I operate a business that generates $100,000 in profit to me, but causes $200,000 of pollution damage, with this damage being equally distributed among the 1,000 people who live near my business.
Even if I’m one of these people, I’m suffering only $200 of damage, so I’m $99,800 ahead. From my perspective, the decision to keep running the business is eminently rational (assuming I’m indifferent to the damage I’m doing to my neighbors). But my business makes society as a whole $100,000 poorer.
Now suppose my neighbors have the right to sue me for the damage the business does to them. In that case I’ll no longer engage in it, because the costs to me will outweigh the benefits. Economists call this “internalizing” a social cost. I’ve been forced to take into account the consequences to others of my behavior.
Of course, lawsuits are just one method for internalizing social costs (for example, my neighbors could pay me to stop operating the business). The general point is that, all things being equal, it’s desirable to eliminate externalities by internalizing them. When the benefits of a behavior go to me, but the costs fall on you, it’s easy to see why I might keep engaging in that behavior even if the overall costs are higher than the benefits.
Charles Rangel, the incoming chair of the House Ways and Means Committee, has announced he will introduce a bill to reinstate the draft. Although Rangel argues that at its current size the military isn’t big enough, his main reason for wanting to bring back the draft is really an argument for internalizing externalities.
Rangel’s point is when the people who decide whether the nation should go to war don’t bear the costs of that decision; they are likely to overestimate the benefits of doing so.
As the occupation of Iraq all too clearly illustrates, nothing is easier than posturing about how “we” are disarming a tyrant, or fighting terrorism, or bringing democracy to the Middle East or whatever this month’s justification is for sending someone else into a war zone that “we” wouldn’t be willing to go anywhere near for all the whiskey in Ireland.
When Jonah Goldberg, a columnist for the National Review and the Los Angeles Times (and a man of prime fighting age), argues that “we” should “throw a crappy little country against the wall” every few years, just to remind the rest of the world who’s the boss, this “we” has a special, technical meaning. In fact it’s the meaning normally conveyed by the word “they.”
Goldberg and his ilk — and in this latest splendid little war his ilk includes pretty much the entire American upper class — are always somewhere else when the trigger is being pulled. “We” can blather on about how freedom isn’t free, and Gettysburg and Omaha Beach, but it’s the great anonymous “they” — the kids from the projects in Rangel’s Brooklyn congressional district and from depressed farming towns in North Dakota, and from East Los Angeles barrios — who do the fighting and the dying.
A draft, or indeed even the serious threat of one, would start internalizing some externalities. Would American troops spend another week in Iraq if the real costs of the occupation were in any measure borne by those who have the power to bring the troops home?
To ask the question is to answer it.
(Paul Campos is a law professor at the University of Colorado and can be reached at Paul.Campos(at)Colorado.edu.)