It's late at night and I'm snarky.
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Externalities are bogus concepts that are (mis)used to justify government intervention. The emotion they play on (that others' actions can have effects one's happiness without action from the one that is effected) is a real one, but their application is always arbitrary. Additionally, they assume to know the preferences of the individual that is affected by them, even though that individual has expressed no preference (i.e. he hasn't acted).
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Your language here is contorted. An externality is an economic concept, not a person. It does not play on someone's emotions, it cannot know anyone's preferences. What exactly are you talking about?
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Is that cost greater than the cost of allowing the pollution? If that cost is so great, it should be more than enough to discourage polluters.
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This makes no sense whatsoever. You are arguing that the cost to the infringed, to organize a lawsuit, should provide a powerful discouragement to polluters.
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Essential in your schemata (sp) i believe that energy companies are stealing, insomuch, as they are using a resource (a non-polluted enviornment) that does not belong to them without paying for it. The typical arguement here is that if people value a clean enviornment they should organize and delinetate the rights to clean air, however i would argue that this organization is incredibly costly to the point of being nearly impossible.
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Why, then, would it be possible in a state system?
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There is this innovative idea in a state system called a 'tax' which goes about implementing this very thing. You can find more information about it
here.
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Note that class-action lawsuits are often massively expensive, much more expensive than any one member of the class would be able to afford, yet they are routine. Even individual lawsuits that cost more than the plantiff could ever afford are taken up by lawyers every day.
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Let's return to this in a moment.
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Why is this not possible? What trade is not allowed?
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Please quote me the market price for one liter of unpolluted air, or a hike in a pristine forest, or forty years of someone's life that occured when they didn't catch cancer. Sources please.
Anticipating your response: Yes, the value of each of these is different to every single person. The same is true of every single concrete good that is actually traded on every single market. So what?
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Also note that if producers of "cheap" but dirty energy are actually held accountable for their pollution and forced to pay for damages they cause, the price they are able to offer their energy at will have to reflect those costs - the supposed externality has been internalized.
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Sounds great to me. Now let's think, who will be in charge of getting the producers to internalize their costs... I'm sure there's someone who does these kind of thing all the time...
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Let's allow that government does enable organization costs to drop. What about the costs it imposes elsewhere?
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So in other words, government is the wrong answer, even if it is the right answer.
You mentioned before that someone needs to handle collating, evaluating and enforcing these costs on public goods by these goods' 'consumers'. In analogy to law firms, and class-action lawsuits. This way, the cost of prosecuting each individual's rights could be spread out amongst the class of the infringed.
Of course, in the case of clean air, the infringed would be everyone. To different extents. So for this lawsuit, everyone in the world would have go about choosing or electing representatives to handle their case. And those representatives would have to have occasional public meetings to decide a fair value for the infringed rights. I mean, they can just read off the numbers from the clean air markets which apparently exist. These representatives could then serve as executors of this market, by extracting payments from the infringers, and then returning it to the people, perhaps in the form of mitigation efforts to remove damage that has already occured. If they had sufficient legal power, they could skip the middle step altogether, by merely artificially raising prices at the consumer level and then applying the revenue directly.
I'm sure it's obvious how this would be completely unlike and totally superior to our current system.