The History of Life and Economic Externalities

The History of Life: Larger-scale Organization

A long time ago, bacteria organized into cooperative communities to form the first eucaryotic cells or protists. Mitochondria are actually highly specialized bacteria that can have their specialized functions turned on and off to meet the needs of the larger organism. Single-celled eucaryotes have many different types of mitochondria, each performing a specific function necessary to sustain life.

When protists began to organize themselves into communities and communicate and cooperate with one another, each member of these communities started to emphasize certain mitochondrial functions, while decreasing others. Multi-cellular organisms established a cooperative division of labor among their cellular constituents in a manner analogous to the division of labor established among mitochondria in single-celled organisms.

Societies are collections of multi-cellular organisms that live cooperatively as a unit and exchange information and resources. Human society is currently plagued by problems related to the fact that we have some members performing actions which are antithetical to the interests of the larger 'organism'.

When some member cells of a multi-cellular organism begin to take resources from the larger organism and promote their own growth without returning a proportional amount of resources or benefits to the larger organism, we say that there is a cancer in the organism.

When some members of human society perform actions that promote their own interests while failing to consider the adverse impacts of their actions, we might say they are pursuing profit in a capitalist system. The adverse impacts on the larger community that result from actors' pursuit of self-interest are known as negative externalities. Negative economic externalities occur because we have not yet established appropriate forms of communication between actors and the larger community that would inform the actors about the adverse impacts of their actions in ways that would cause them to curtail those actions and reduce or eliminate the adverse impacts.

While we fail to inform economic actors about the adverse impacts of their actions, we also mis-inform them about, or needlessly deter them from, actions which they might perform in their own interest even when those actions are not particularly detremental to the larger community. For example, income taxes deter people from seeking more income, even when doing so produces no harm to the larger community but might actually benefit the community.

A shift of the tax burden from goods, such as income and sales, to bads, such as pollution and resource depletion, could eliminate the cancer of human society known as 'economic externalities'.