Car manufacturers have no real incentive to maintain emissions standards or follow safety regulations, but we created those things because they were negative externalities.

Pollution is a classic negative externality, but safety (for car occupants) is a benefit mostly realized by car buyers. But let's think through the incentives.

Ford is in the business of selling large, complex transportation machines. When you shop for a car, the dealer encourages you to add options like all-wheel drive, premium sound, the sports package, and a bigger engine. Ford makes more profit when it sells more equipment with the car. If enough customers demand a refrigerator in their car, manufacturers will provide them.

Why would Ford be opposed to adding emissions control equipment to a vehicle? Ford is interested in making profit, not pollution.

The primary reason Ford would be opposed to putting emissions equipment in cars is that customers don't want to pay for it.

For example, the cost of taking a 4-cylinder 1.5L gasoline engine from no emission controls to the most stringent proposed EU standard (Euro 6) is around US$360, whereas the cost of taking a 4-cylinder 1.5L diesel engine from no emission controls to Euro 6 standard is around $1400.

--from an International Council on Clean Transportation report published in 2012. Euro 6 standards took effect in 2014.

If customers demanded emissions controls (and were willing to pay the cost), manufacturers would already have incentive to provide them.

Rational customers might calculate that the air they breathe won't be noticably cleaner if they pay for emissions controls but most other people don't, so it's not a worthwhile expense for them. If they knew everyone else would also buy the controls if they do they might (or might not) decide the benefit is worth the cost.

Legislation is a way to solve this coordination problem (making people internalize the cost of their externalities), by forcing everyone to buy cleaner cars. Like anything else, this approach has pros and cons.

The problem is humans will usually always choose short term convenience over long term consequences

That sounds like something a model would predict... and it's not entirely irrational. The short term is more predictable than the long term. Spending money now, or buying on credit, means you will definitely get to enjoy the product. I save in a retirement fund, but there is some risk that I won't be around to enjoy the savings, or some misfortune will make the funds unavailable when I want them. Spending resources today to reduce the risk of a catastrophe in 100 years could be a mistake if (1) the catastrophe happens anyway or (2) some other catastrophe happens or (3) some unforseen innovation would have averted the catastrophe at much lower cost.

Regarding the model - I don't think any model is ever going to really work.

Agreed, no model is perfect. If you want to understand and predict human behavior, you can make random guesses or use an imperfect model. An assumption like "when stuff costs more, people buy less of it" is reliable enough to have some predictive power.

My main beef with libertarian economic theory is it feels like a simplification of reality much like Marxism is.

The rational-actor model isn't a libertarian concept. Any model is a simplification, the idea is to reduce the complexity of the universe to make it more comprehensible. The question is how accurately the model represents reality; behavioral economics has been challenging rational choice theory recently.

Back on topic: Caplan holds libertarian views. Does that mean that when he asserts that (1) tech companies produce great benefits and (2) people mostly complain about tech companies, he must be wrong because libertarianism is also wrong? That's the feeling I got from the responses here.