The market is in many ways an incredible institution. It allocates resources with an efficiency that no central planning body can match and it easily balances supply and demand. The market
has some fundamental weaknesses, however. It does not incorporate into prices the indirect costs of producing goods. It does not value nature’s services properly. And it does not respect
the sustainable yield thresholds of natural systems. It also favors the near term over the long term, showing little concern for future generations.
One of the best examples of this massive market failure can be seen in the United States, where the gasoline pump price in mid-2007 was $3 per gallon. But this price reflects only the cost
of discovering the oil, pumping it to the surface, refining it into gasoline, and delivering the gas to service stations. It overlooks the costs of climate change as well as the costs of tax subsidies
to the oil industry (such as the oil depletion allowance), the burgeoning military costs of protecting access to oil in the politically unstable Middle East, and the health care costs for treating respiratory illnesses from breathing polluted air.16 Based on a study by the International Center for Technology Assessment, these costs now total nearly $12 per gallon ($3.17 per liter) of gasoline burned in the United States. If these were added to the $3 cost of the gasoline itself, motorists would pay $15 a gallon for gas at the pump. In reality, burning gasoline is very costly, but the market tells us it is cheap, thus grossly distorting the structure of the economy. The challenge facing governments is to restructure tax systems by systematically
incorporating indirect costs as a tax to make sure the price of products reflects their full costs to society and by offsetting this with a reduction in income taxes.
-Lester Brown- Plan B 3.0