Social Costs

6 Key excerpts on "Social Costs"

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  eBook - ePub

  The Heterodox Theory of Social Costs

  By K. William Kapp

  • K. William Kapp, Sebastian Berger(Authors)
  • 2015(Publication Date)
  • Taylor & Francis

    (Publisher)

  36 and by means of subsidies, public investments or public enterprises, to encourage or enforce the production of social benefits. Such interference does not differ basically from the system of laws which regulates traffic or declares certain activities as unlawful if they are directed against personal or property rights of the individual. Whether these interferences with the competitive system have actually gone far enough or have gone beyond what is necessary is a question which cannot be answered in general terms but requires detailed case studies.

  In any event, much of our contemporary labor and social legislation has the purpose of internalizing the Social Costs of production into entrepreneurial cost accounts. It has been suggested that not only the history of economic and social legislation but of economic development in general could be written as the history of the success or failure to internalize the Social Costs of production and of the struggle to limit and resolve the conflict between individual and social interests.37 That is to say, economic history and economic policies have been shaped by precisely those aspects of economic life which economic theory in its preoccupation with formal rationality has either neglected or ignored altogether.

  More significant, particularly in the context of the economics of growth, is the question of the relevance of Social Costs and social returns for the acceleration of the development process. It can hardly be denied that the process of economic growth is bound up with substantial Social Costs such as the large-scale disruption of traditional processes of production and of old ways of life. Indeed, many of the classical cases of Social Costs such as the expulsion of farm workers from the land, the impairment of the health of women, children and of adult laborers, the depletion and erosion of the soil, the pollution of air and water, the obsolescence of old skills, the easy shift of the social overhead costs of labor in periods of unemployment, and the development of city slums arose first in the course of rapid economic advances in Western Europe during the Industrial Revolution. Indeed, it may be argued that the institutional arrangements which concealed the Social Costs of these early innovations and the absence of legislation which made it possible to shift these costs to third persons or to society-at-large were largely responsible for the dynamic character of economic change during the initial stages of the Industrial Revolution. Hence, any attempt by social legislation to force entrepreneurs to bear at least part of these Social Costs may have the effect of slowing down the process of economic development. In the light of this doctrine,38 it would appear that rapid economic development presupposes the systematic neglect of Social Costs, and that current attempts in many underdeveloped countries to force their productive units to internalize some of the Social Costs of production will have the effect of slowing down the rate of economic growth. Prima facie this argument seems to be irrefutable. However, closer analysis particularly of the economic effects of Social Costs and social benefits on the process of economic development reveals its limitations. In the first place, while it is true that the systematic neglect of Social Costs may make it possible to invest in projects which could not be undertaken if the Social Costs had to be internalized, it is equally true that the Social Costs once shifted have important adverse and cumulative repercussions on economic and social welfare. Thus, if in their effort to minimize the cost of current production, farmers in the underdeveloped world increase the rate of soil depletion and erosion at a more rapid rate; if expansion of industrial production in the growing cities of Asia is associated with the uncontrolled growth of slums and the widespread pollution of air and water;39 if the introduction of new industrial techniques is permitted to proceed without regard to the non-amortized value of older equipment in existing firms and the obsolescence of older skills; in short, if nothing is done to minimize these Social Costs of development, private costs are bound to rise before long if, indeed, the whole development process may not be brought to a halt by the exhaustion of the soil, the impairment of the human factor and the inevitable political polarization which such a policy of laissez-faire

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  Social Costs and Public Action in Modern Capitalism

  Essays Inspired by Karl William Kapp's Theory of Social Costs

  • Wolfram Elsner, Pietro Frigato, Paolo Ramazzotti(Authors)
  • 2007(Publication Date)
  • Taylor & Francis

    (Publisher)

  It is definitely clear that Kapp believes that the distinctive character of Social Costs is that they should be borne by entrepreneurs, but are not. It is as if they were dodging their responsibility. If entrepreneurs have a duty to bear these costs then the ‘community at large’ has the right not to be burdened by them. In other words, entrepreneurs are also violating someone else’s rights. In a nutshell, Social Costs are the monetary side of unprotected social rights. To look at Social Costs as violated social rights has, in my opinion, far-reaching consequences and puts on a firmer ground the difference between orthodox externalities and more radical Social Costs.

  Indeed, all the listed items in the preceding quotation relate to some type of social rights. Also, because of this it is foolish to assume that Kapp would consider these violations less relevant and would not care about them, were the value of damages in terms of perceived welfare loss smaller than the advantage enjoyed by business firms violating those rights.

  I am sure he was not interested at all in Pareto-inefficient situations where some rich people suffer a significant loss as a consequence of an action yielding only a small advantage to a poor. This may be Pareto-relevant but hardly fits into the conception of Social Costs as infringements of social rights. Social Costs might very well arise in a context that is not relevant to Pareto-efficiency, even though this is not a necessary condition. Kapp’s perspective is by no means Pareto-efficiency.7

  He wants to draw our attention to the many types of damage that businesses impose upon non-consenting people in the real world. He looks at the whole set of uncompensated damages caused by private capitalism in its real working. It is not a coincidence that the examples he provides are so different from the neutral and anonymous cases typically considered by the more traditional literature on externalities (the rancher and the cattler, not to mention the bees and the flowers).

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  Political economy of environment. Problems of method

  Papers presented at the Symposium held at the Maisons des Sciences de l'Homme, Paris, 5–8 July, 1971

  • (Author)
  • 2019(Publication Date)
  • De Gruyter Mouton

    (Publisher)

  As such they should define the empirical instances to which they refer. Our concepts are chosen and constructed for specific purposes; their relevance and usefulness are to be judged in terms of their effectiveness as instruments designed to grasp social facts even if some of these facts lie outside the scope of the traditional boundaries erected arbitrarily by the discipline. They reflect our perspective and thus help us to perceive novel and hitherto neglected aspects of reality. In this sense they may and indeed will reflect our value premises; the important thing is that these value premises be stated openly and are not hidden as in many endeavors to define concepts in an alleged value free manner, which conceal the hidden value premises of the investigator. The concept of Social Costs does not leave the reader in any doubt in this respect e . 4. C. Wright Mills, The sociological imagination, New York, 1959, p. 125. 5. G. Myrdal,' 'Value loaded concepts, in: H. Hegelland (ed.), Money, growth and method-ology, Lund, 1961, p. 285. 6. Beckerman's summary judgement that the term Social Costs is misleading and antiquated may be evidence of the fact that he holds different views about concept formation or he may have misread the article he quoted, which is directed against Pigou's use of the term Social Costs, this article points out correctly that my use of the term is identical to what the authors call uncompensated Social Costs, a term not quite unsimilarto my own suggestion to speak of unpaid costs. The predilection to render the term Social Costs innocuous by using it to designate the total costs reminds one of an earlier episode in the history of eco-nomic analysis when some neo-classical economists tended to identify market prices as 118 Political economy of environment In conclusion let me say that it is quite understandable that many econo-mists defend the traditional perspective, assumptions, concepts and the narrow scope of micro-economic analysis.

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  The Economics of Addictive Behaviours Volume II

  The Private and Social Costs of the Abuse of Alcohol and Their Remedies

  • John Joshua(Author)
  • 2017(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  However, the costs involved in reducing external costs may be offset against the costs saved by reducing external costs. Any costs incurred in reducing social harm, and therefore Social Costs should be regarded as being part of external costs, even though they may reduce some of the external costs; what is relevant here is the net benefit as assessed through a cost–benefit analysis. However, if Social Costs estimates are “highly questionable” (Wagstaff, 1987, p. 467), then this does not imply that policy decision makers should “ignore arguments for greater government action” in the area of drug abuse “which are based on Social Costs statistics” (p. 467), but rather that more research should be conducted to refine such statistics and knowledge about Social Costs have indeed widened since Wagstaff (1987) published his article. Studies on Social Costs cannot indicate which policies are cost-effective, but they show the magnitude of the detrimental effects of alcohol abuse; however, cost–benefit analysis may show which policies are worthwhile to implement. Intangible costs turn non-monetary harm such as sufferings, into monetary value, some of such costs are carried by the abusers of alcohol themselves and some are carried by others. Costs of substance abuse can be seen as opportunity costs which pre- vent resources from being used in other endeavours which can be referred to as opportunities forgone. However, the social and private costs of alcohol abuse are more difficult to assess because at low consumption of alcohol, it may not be harmful, whereas any use of tobacco is harmful to society so that it is easier to assess. An abuse of any drugs, including alcohol, as well as smoking will use more healthcare facilities than non- abusers. One way to measure the costs is to examine the excess admission rate of abusers above those of non-abusers. 70 J. JOSHUA

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  Fundamentals of Environmental Economics

  • Kumar, A(Authors)
  • 2021(Publication Date)
  • Daya Publishing House

    (Publisher)

  When a negative externality occurs the marginal social cost will be higher than the marginal private cost (price) and This ebook is exclusively for this university only. Cannot be resold/distributed. hence the private optimal level of output will be higher than the social optimal output. Government intervention is needed to internalize externalities in production and consumption decisions of individuals so that social optimal levels of outputs and private optimal levels of outputs will be the same. Environmental Externalities The Environment (Protection) Act, 1986 defines environment to include ‘water, air and land and the interrelationship which exists among and between water, air and land, and human beings, other living creatures, plants, microorganisms and property’. Due to population growth and rapid industrialization, environmental resources such as groundwater and water in lakes and rivers and clean air in many places have become scarce resources. Industrial discharge of untreated effluents into water bodies and emissions into air have deteriorated the quality of water and air respectively. Negative intertemporal externalities occur when exhaustible resources are depleted and when renewable resources are harvested at rates greater than the regeneration rates. Market Failures and Policy Failures Environmental problems such as pollution and depletion and degradation of natural resources arise because of market failures and government failures. Market failures occur because markets for environmental goods and services do not exist or when the markets do exist, the market prices underestimate their social scarcity values. Markets can exist and function efficiently only when property rights on goods and services exchanged are well defined and transaction costs of exchange are small. For environmental resources such as clean air, water in river and springs, oceans and atmosphere, property rights are not well-defined.

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  Price Theory and Applications

  • Steven Landsburg(Author)
  • 2013(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  C H A P T E R 13 External Costs and Benefits I n previous chapters, we have analyzed the gains from trade that accrue to voluntary participants in transactions. However, many transactions involve involuntary participants as well. The neighbors who breathe the smoke from a polluting factory, the naturalist who deplores the “ harvesting ” of whales, the shoppers who enjoy the spectacle of department store Christmas displays — all are incurring costs or benefits from transactions in which they had no part. Such costs and benefits are said to be external and are collectively referred to as externalities . External costs (like the annoyance of breathing factory smoke) are called negative externalities , and external benefits (like the pleasure from seeing Christmas decorations) are called positive externalities . In this chapter, we will see how externalities can be a source of economic inefficiency. We also will discuss what can be done about that problem. 13.1 The Problem of Pollution Pollution is an important example of a negative externality. Cars, for example, cause pollution — both when they are being manufactured and when they are being driven. We will use this example to illustrate all of the key ideas concerning externalities. Private Costs, Social Costs, and Externalities When car companies decide how many cars to produce, they consider such costs as labor, raw materials, and factory space. They typically do not, however, fully consider the costs their cars will impose on bystanders who are forced to breathe exhaust fumes. So when we talk about the cost of building a car, we need to distinguish between the private cost — the sum of all those costs the manufacturer accounts for — and the social cost — the sum of all costs, including both private costs and external costs. Exhibit 13.1 shows the private and marginal costs of automobile production.

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