In this article I have used real estate speculation to illustrate the nature of external costs. However, external costs are not limited to real estate. They are general and result from every economic activity. The point is not that the villain is real estate speculators. The point is that in America property rights are so poorly and often so one-sidedly defined, that the costs of capitalism can be imposed on those who are excluded from the profits. Without common sense regulation, the external costs can exceed the value of the projects that impose the costs.
Who is the bad guy in all of this? Is it the real estate developer or is it the failure of economists and legislators to take external costs seriously? It is the latter. Generally, external costs are explained away or disposed of theoretically on the grounds that they can be compensated. The US judicial system was poisoned by right-wing foundations underwriting law and economics courses taught to judges that, in effect, leave all rights in the hands of the capitalists.
It is the fault of law, not the developer, that he can come into your neighborhood or community, disrupt your life and activities with noise for long periods of time, block your view, create congestion, and cause your property taxes to rise even though your house has been devalued by the developer's expropriation of your view. Americans are so brainwashed that they describe this as progress.
Think about the external costs of corporate agriculture and its herbicides, pesticides, and chemical fertilizers. Think about the external costs of concentrating 90 percent of the US media in six mega-companies repeating the identical propaganda. Think about the external costs of Google's, Facebook's and YouTube's ability to censure the Internet. Think about the external costs imposed on America by corporations offshoring their production of goods and services sold on the US market. Think about the external costs of fracking. Think about the external costs of energy exploration in environmentally sensitive areas.
Without common sense regulation and an understanding that Earth's resources are finite, capitalism is a mechanism for destruction.