The "granite floor" RV put the following hypo in my mind. Imagine two situations:
The healthier the finances, the smaller the reaction to costly gasoline. Leonard Mintz . . . who made his money in the plastics machinery business, just finished an 800-mile trip through the Northeast in his . . . bus-size . . . recreational vehicle [with] granite floors. Miles per gallon: 6. Concern: zilch. . . . Low- and middle-income families seem to be doing most of the conserving, by necessity.
A) A luxury vehicle leaves in its wake tiny, sticky particles that make all standard vehicles have to "work" much harder to travel (say the particles require as much effort to get past as, say, a 10% uphill grade in the road). The average driver of the cheaper vehicles has to buy twice as much gas in order to travel the same distance.I think economists would have no problem identifying the particles in A) as an externality. But why not the extraordinary demand in B)? In both cases the drivers of standard vehicles are paying twice as much for gas because of the actions of the luxury car drivers.
B) A luxury vehicle consumes five times as much gas as standard vehicles. The price of gas doubles due to the popularity of such vehicles.
I suppose the classical response would be: the extra demand just shifts the demand curve out, and eventually suppliers will respond by bringing more fuel to market. But in the short and medium term, supply is pretty fixed. If their buying power is very high, the luxury car drivers will not be sensitive to the "signals to conserve" the market is sending via high prices, and may instead lead those signals to become ever "louder" to those lacking their buying power. (This differential signalling process always struck me as a fundamental flaw in Hayek's essay The Use of Knowledge in Society...but that's another post!)
This hypo might seem fanciful, but I think it brings together some interesting insights on the costs of inequality and creeping positionality in consumption. Don Herzog has suggested (in "Externalities and other Parasites") that the externality concept can be a valuable entry point for a more holistic approach to economics. Given that the increase in U.S. gas consumption from 1995 to 2005 is about two-thirds of China's entire current consumption, it's something to think about.