GRAZING THE COMMONS - AN EMPIRICAL-ANALYSIS OF EXTERNALITIES, SUBSIDIES AND SUSTAINABILITY

An empirical means of measuring externalities in the fifty states of the US is presented and the relationship between externalities, subsidies and sustainability is investigated. Firms seeking to maximize profits create externalities thus securing implicit internal subsidies. The subsidies are generally supported by those less well off and the socioeconomic, energy and environmental indicators of the public sector worsen as externalities and subsidies increase. Implicit subsidies, due to externalities in pollution control, energy consumption and taxes are quantified, the amount of subsidy is calculated by state, and statistically compared to socioeconomic, energy, environmental and economic variables. Poverty, unemployment and income disparity are found to increase significantly while income, economic development attractiveness, energy efficiency and environmental quality decline with increasing externalization across states. An empirical method of operationalizing sustainability is presented and the relationship of sustainability to subsidies is investigated and found to be significant and negative. Recommendations are presented for minimizing the effects of externalities.