Economics is about choices, not money. Money is only a useful measuring tool. But as the Hoover Institution's Thomas Sowell has so rightly observed, what economists measure best are not those things that matter most.

Yet, the economic way of thinking helps me understand two divisive issues, sexually oriented business and the burning of tires to fuel the Swiss-owned Holcim Inc. cement plant near Three Forks. Both hinge on "externalities," a term you understand even if you've never used it.

The concept of externalities explains why laws such as the Clean Air Act and the Clean Water Act provide large social benefits. These laws are designed to constrain behavior that injures the well-being and wealth of others.

Milton Friedman describes externalities as "spillovers" or "neighborhood effects." These are the consequences of actions that affect others, not merely the decision makers.

These spillovers can be socially positive or negative. For example, when Ramona and I invest time, effort, and money in improving the fish and wildlife habitat on our ranch, the benefits spill over. We are not paid for these benefits. (But the rewards for providing fishing for Eagle Mount are huge, although immeasurable.)

Negative externalities, such as those associated with strip clubs and tire burning, receive the most attention, as well they should.

Imagine a rural community noted for its cooperative spirit and environmental quality. Just suppose that someone proposes to convert a failed business in that community to a strip club. Assume he has every legal right to do so, the means to accomplish that end, and that he neglects community feelings. He is motivated by simple accounting, not the negative economic, ethical, and nuisance spillovers on neighbors.

I predict that under these circumstances the strip club will open. And then what, the social ecologist asks, are the logical consequences of his action? They aren't good. Negative externalities dominate.

In 2000, the National Law Center for Children and Families published eleven summaries of "SOB (sexually oriented business) Land Use" studies by municipal and state governments. The locations range from Times Square in NYC to St. Croix County, Wisconsin.

Here is a sample from the Police Department Investigative Services in Tucson, AZ. (I've selected those acceptable for a family paper.) "Officers found a wide variety of illegal sexual conduct at all adult businesses. At virtually every such business, employees were arrested for prostitution or obscene sex shows."

In Garden Grove, CA, "Crime increased significantly with the opening of an adult business…. The rise was greatest in 'serious' offenses" (homicide, rape, robbery, assault, burglary, theft, and auto theft). A friend whose judgment I trust estimates that litter increases by a factor of four within two miles of the club. Clearly, more than body parts spill over from topless establishments.

Environmental issues are technically complex and carry heavy emotional baggage. These are ingredients for error and acrimony. The proposed tire burning at the Holcim plant is an excellent example of this toxic stew.

Burning tires in cement plants is a far more difficult issue to evaluate than is a strip club. There are some positive implications to burning, for carelessly scrapped tires have significant environmental impacts. Burning them under carefully controlled and monitored circumstances may offer a reasonable solution.

But I'm a skeptic. Here's why. Combusting tires generates not only heat, but also some physical and surely phantom or psychological externalities. There is substantial evidence that folks feel at risk when down wind from a tire-burning facility.

Let's assume the process is technologically benign, just as its supporters claim. After all, it's done at over 50 cement kilns in the U.S. This does not mean it's appropriate here.

The question is not one of science alone. The risk may present only a phantom externality, just as proponents of burning claim, but perceptions dominate physics. And the widely held perception is that the toxic stew spilling from the stacks will poison us. Eighty-two physicians of Gallatin County "…have serious concerns about the negative health impacts of burning tires at the Trident cement plant." Who are folks more likely to believe, spokesmen for a foreign-owned company or the docs to whom we entrust our lives?

Topless bars and burning tires may prevail. But we'll feel worse off if they do. Externalities explain why