What is it about?

The actions of market participants have positive as well as negative spillover effects on non-participants. These spillovers are called externalities. Since the 1920s, authors of economics textbooks have consistently overemphasized negative externalities. Such textbook treatments of externalities instill an anti-market bias.

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Why is it important?

Free market capitalism is a process that has done more to enrich civilization than any other known system for coordinating scarce resources. Economics textbooks that focus on negative market spillovers (externalitites) to the exclusion of positive spillovers undermine human thriving.

Perspectives

Through their under-emphasis of the positive spillovers that come from free market exchange and production, economics textbooks have, for nearly a century, undermined the case for capitalism and hence the process by which civilization advances.

James E McClure
Ball State University

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This page is a summary of: The Greatest Externality Story (N)ever Told, The American Economist, July 2016, SAGE Publications,
DOI: 10.1177/0569434516652040.
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