Of externalities, elbows, and knowing one from the other

Economists tend to think that murder is a bad thing. Why? Well, despite the murderer presumably enjoying the act, his gain comes at a cost that he doesn't personally bear: the death of his victim. That's the kind of cost that economists tend to call an externality. And so economists tend to support laws against murder. We similarly tend to support laws against theft: while the thief tends to think taking other folks' stuff is a good idea, the thief's victims tend to be hurt by it and the thief won't weigh those folks' losses against his gains. In these kinds of cases, individuals' rational calculation of their own costs and benefits lead to socially bad outcomes because of the substantial external costs.

No, this isn't heading towards commentary on the Clayton Weatherston trial. Rather, consider Adrian Slack's latest response to our critique of BERL's analysis of the costs of alcohol.

“So for example someone who murders someone, from the individual’s point of view, Eric would be, I presume, quite comfortable with that. The person who decides to murder someone else makes an evaluation of what are the benefits and costs to me of this action? Society says ‘well some people do murder other people’, but society says ‘that’s not good.’”

Is this close enough to Godwin's Law for BERL to be deemed as having conceded defeat?

For the record, I do not support murder: I care about the external costs. One of our biggest critiques of the BERL report is that they conflate internal and external costs. I don't think that BERL has a ... conventional ... understanding of the difference between the two. As we reminded BERL in our report:

Externalities can be imposed on private citizens and, conversely, costs to a business of employing an unproductive worker are not externalities. Perhaps this misunderstanding contributed to BERL’s decision to count private costs as social costs. A basic staple of principles-level economics is that costs or benefits are not external if the agents are linked through a contractual nexus: the baby crying next to me on the long-haul flight does not impose an externality on me because I have chosen to buy a ticket that includes the risk of such unpleasantness and was accordingly charged less for that ticket. Similarly, a worker who slacks off on the job or takes inordinate numbers of sick days does not impose externalities on his employer. It is worrying that BERL does not seem to recognize this basic definitional issue.

Adrian, what colour is the sky in your world?