Externalities are one way in which markets and private enterprise can fail to reach socially desirable outcomes. An externality exists whenever there’s a third party or parties that are affected by a transaction, yet they have no direct say in the transaction. Typically we assume that any market transaction involves two parties, a buyer and a seller. Either is free to refuse, negotiate, or accept an offer depending on whether the total package including price is right for them. If the two parties agree, then there’s a deal.
But what happens if two parties agree to a deal but the decision to pursue the deal causes harm to others who don’t have the power to say no to the deal? That’s an externality. And it’s one of the justifications for having government regulation or even prohibition of some transactions.
Supporters of nuclear power like to claim it’s a clean industry and energy source. By that, they imply there are no externalities. But that’s not quite true. Nuclear power as traditionally implemented has enormous externalities of two types. First, when something goes wrong, it goes really wrong. Three-mile Island, Chernobyl, and Fukashima wrong. All are externalities because the original designers/operators do not suffer the consequences of their mistakes. Second, nuclear power as traditionally implemented produces enormous radioactive waste that the nuclear power plant operators are not responsible for. Perhaps thorium is a better way, perhaps not. We need to be very careful. And we need to remember that whenever possible corporations will attempt to manipulate the regulatory authorities so as to create the maximum externality and minimum responsibility.
In the meantime, it’s worthwhile to review the full extent to which nuclear power and nuclear bomb development has made many places on the planet totally uninhabitable. Der Speigel magazine has an excellent expose here on the fifteen no-man’s lands created by nuclear power. It’s worth the read and viewing. It’s sobering.