Capitalism is generally defined by the market effect. Information about what people want is collected by sales. This information informs sellers about what to make. That’s its primary feature.
By definition, this ignores externalities.
Here is a simple example.
I am a taxi driver. The market sets the price of my services. When I drive, I emit CO2 into the atmosphere. I do not pay for CO2 emissions. It’s an externality of the transaction.
Capitalism has no way of measuring (getting a price signal) on the externality. So under capitalism, that externality doesn’t exist.
Capitalism is generally defined by the market effect. Information about what people want is collected by sales. This information informs sellers about what to make. That’s its primary feature.
By definition, this ignores externalities.
Here is a simple example. I am a taxi driver. The market sets the price of my services. When I drive, I emit CO2 into the atmosphere. I do not pay for CO2 emissions. It’s an externality of the transaction.
Capitalism has no way of measuring (getting a price signal) on the externality. So under capitalism, that externality doesn’t exist.