Recently, large scale natural disasters such as hurricanes and tsunami severely damaged whole regions and killed thousands of people. This are some of the hidden costs (externalities) of a consumistic society which does not admit the global impact of its opportunistic and short sighted choices.

We intend as externality the side consequences implied in an action, which can affect positively or negatively other people. For definition, the cost of the externality cannot be easily evaluated thus nobody is billed and nobody is refunded in exchange for it.
An example for a positive externality or "merit good"is the sun. Its energy gives us light, heat and grow up our crops, though we do not have to pay anything for enjoying it.
An example for a negative externality or "damage"is the earthquake. It causes destruction and deaths but we cannot pursue the direct responsible for being refunded.
There are also externalities caused by man activities which have a global effect. Two opposite examples can be education (merit good) and pollution (damage). Although it is difficult to enforce a strict control, the State uses a policy of incentives/compensations and disincentives/penalties to maximize merits and to limit damages in the interest of the collectivity.
Some externalities such as global warming`s consequences are so wide that correction policies have to be discussed at a multinational level (eg. the Kyoto Protocol, 1997). The need to control externalities is felt by mature economies and it seems as some progress has been done both in terms of the effectiveness of the measures and of the actual reasults.

How to deal with externality in the city?
In Japan very little is done to evaluate and control the effects of externalities on the urban system.
At a local and micro-social level (the city scale) we can say that externality is about reciprocity. In a compact city, all activities are closely connected: we keep good the old saying "your rights end where somebody else`s start". When externality control measures are enforced, our freedom may be limited by the need of respecting others, but if we preserve the balance of the city, the system will generate positive energy and in the end we also will benefit. See also love and the city.
The legislation tends to be quantitative rather than qualitative: it regulates the limits of private property, but this is not enough to protect and enhance the common good.
We should be aware that as a community we have the ethical and legal right to control and oppose dangerous externalities. For instance, in Italy a building owner is not free to demolish his property in case it is an hystorical buildings or if it is believed to have importance for the city. This may be seen as a limitation of freedom, and actually obstacles the creation of speculative profits connected with short term real estate speculation. Anyway the gains for the community and for the building owner himself as part of the community is much greater in absolute value. Proper regulation protect the short sighted property owner from making big mistakes.

Action: Promoting a more strict regulation (see also rules) to protect the city heritage from egoistic private speculations is the only way to enhance its quality and thus its value.