Every product carries a second price paid by people who never bought it. In 1920 economist Arthur Cecil Pigou named the flaw, showing that a factory's smoke imposes costs on its neighbors that never reach its books. The episode previews the series' disasters and cites the Lancet Commission's estimate of about nine million premature deaths and $4.6 trillion in annual welfare losses.
Who's who
- Arthur Cecil Pigou+3 more episodesCambridge economist who formalized private versus social cost
- Alfred MarshallPigou's teacher; coined "external economies"
- Ronald Coase+3 more episodesEconomist whose 1960 paper challenged Pigou's approach
- Philip LandriganPediatrician; co-chair of the Lancet Commission on Pollution and Health
- Richard FullerFounder of Pure Earth; Commission co-chair
Where it happens
- Cambridge, EnglandWhere Pigou held the chair of Political Economy
- Donora, Pennsylvania+1 more episode1948 inversion killed about 20 people
- Minamata, JapanChisso's methylmercury poisoned the bay
- Flint, Michigan+3 more episodes2014 switch to corrosive river water
- Parkersburg, West Virginia+1 more episodeDuPont's C8 contamination case
Timeline
- 1920Pigou publishes The Economics of Welfare, systematizing the negative externality.
- 1948A five-day inversion in Donora, Pennsylvania kills about 20 people.
- 1960Ronald Coase publishes "The Problem of Social Cost."
- October 2017The Lancet Commission reports 9 million deaths and $4.6 trillion in annual losses.
- May 2022A progress update finds roughly 9 million deaths still, with modern pollution deaths rising.
Still debated
The nine million deaths are modeled estimates, not counted deaths, and the $4.6 trillion is a welfare valuation rather than cash spent. Economists still argue whether Pigou's taxes or Coase's property rights are the better remedy.
