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It's an Externality, Stupid

With Copenhagen on our minds, some remarkably incisive commentary coming from — of all places — the IMF. Here’s Carlo Cottarelli, the Director of the Fund’s Fiscal Affairs Department:

The science of the issue can get pretty incomprehensible pretty quickly. And the politics are clearly very ugly. Let’s not forget, however, that much of the economics is simple.
It’s an externality, stupid — so price it.

An informed citizen trying to follow the debate may easily become overwhelmed. But Cottarelli is right: the economics principles here are pretty straightforward.
(Hat tip: Peter Martin)