Ever wonder why coal-fired power is so much cheaper than the alternatives? Coal-producing communities aren’t paid for their personal health impacts, the environment is not paid for streams turned acid, and mountains are not paid for their removal. More subtle costs are also passed on: rising rates of asthma from particulates in the air, introduction of malaria into previously unaffected areas from a warming world, and the relocation of whole countries due to sea level rise.
Pollution is a classic example of an economic externality – companies choosing not to sequester chemicals in their effluent pass the cost of pollution and remediation on to those downstream. Therefore the cost of production signaled by price does not represent the true cost of production. The contradiction is deeper, however, and forms one of the main critiques of capitalism – the “second contradiction of capitalism”. Capitalism relies on the continual growth of the market, costs determined by the raw material and labor inputs. However, these costs assume limitless availability of what Marx calls “conditions of production” – the infrastructure and environmental services that are required for production. These, however, are not limitless and therefore not cost-free. Rising costs will eventually outpace price and production will therefore cease (O’Connor 1998).