Krugman correcting a flaw in an Obama speech about the energy bill. It’s very unfortunate that the president didn’t get this right, since externalities are the whole point behind cap and trade legislation. If he isn’t able to articulate this point consistently and correctly, he won’t (and shouldn’t) be able to convince anyone. Moreover, any bill that comes out of this process that isn’t based on people understanding (and admitting to understanding) externalities will likely be hopelessly flawed.