The problem of social cost

The Economics of Welfare Negative externalities framed as a problem of restricting the emitter of social cost via civil liability, tax, or exclusion. But… Coase highlights, The reciprocal nature of the problem:

The problem of social cost

The nation suffers from out-of-control government spending, retains the most debt of any other nation in history, mounting social division on political issues is tearing the nation apart.

Entire generations of people are taught that violence and crime are acceptable and that hate and distrust of authority is correct.

We have racist, violent hate-groups posing as victims while committing crimes across the nation. Indeed many of them do share a common source of frustration, and the reality exists that much of the nations social issues are economic at their source.

The truth is, that American economic problems are a root source that shares part of the blame for many social issues today, and most of our economic problems are the direct result of liberal-minded policies and entitlement attitudes.

Big government, socialized programs, spending beyond our means, a thousand needless taxes, social freeloading, needless and excessive bureaucracy, and an absolute refusal to accept responsibility and accountability at all levels has led to digging an economic hole that is tearing the nation apart from many different directions.

What we have here is a classic example of a cry for real change, but nobody wants to actually be that change. Where did all those services come from? They had to be created somehow, right? Someone has to manage them, someone has to provide them, resources need to be brought in and provided to customers, and all of that costs money.

How did those people get paid, and how do the programs get paid for? Just let those thoughts sit in the back of your mind while we move on. ALL monopolies work the same way. This means that the price of a good in a market controlled by a monopoly is always higher, and the quantity supplied of that good is always lower, than either one of them would be in a market where competition takes place.

Well, there are tons of other companies who also produce similar computers that use the same or a similar operating system to run them. Customers will always choose to maximize their own utility, which means they want the best product they can afford for the cheapest price.

If your company is able to keep its cost of producing your product lower than your competition while still producing a quality product, you can offer a cheaper price, and customers will buy your product over your competitors.

Businesses who have no need to worry about competition have no need to worry about placing a product on the market at a competitive price. The company will still try to keep all its production costs as low as possible, but it will produce less and charge more for the same product in order to maximize its profit.

Monopolies create highly inefficient markets and lots of consumer loss compared to what could have been produced in a comparably competitive market.

The problem of social cost

Remember we started off by stating that American economic problems are the direct result of two distinct factors: Goods that are nonrival in consumption and their benefits are nonexcludable. Public goods — for example — are the product of liberal-minded policies that have produced things we all need and benefit from.

Social and Economic Costs of Violence: Workshop Summary.

However, all liberalism must be tightly controlled by conservatism if society is ever going to make those policies work, and furthermore, not all liberal-minded policies are a good idea.

There must be a balance. A problem intrinsic to Public Goods: Because people can enjoy the benefits of Public Goods whether or not they pay for them, they are usually unwilling to pay for them.

To provide for these services, everyone who lives there pays for them collectively as part of their monthly bill. Now, the next neighborhood over has been struck with an increase in criminal activity. First, police services are already available with what everyone already pays, your neighborhood has little to no crime, and all residents are happy from the benefit… But one or more of your neighbors realizes something… The law states that all who live there must be provided with the services regardless.

In other words, they would get the benefit of increased police protection whether they pay for it or not. Even if everyone else chips in extra money for increased protection, the one who refuses still gets a free ride. This dilemma is called the Free-Rider Problem, and all socialist programs create this problem.

Drop-in-the-Bucket Problem Next, lets increase the size of the problem to a whole city instead of a neighborhood. The amount it would cost to produce more of the service to such an extent to where everyone equally sees an increase in the service is equal to or greater than what they already contribute.

Consumers will always act in their own self-interest, and as such, have no incentive to contribute voluntarily to the production or increased production of public goods.

This is called the Drop-in-the-Bucket Problem. Social Freeloading and the Entitlement Mentality Now, the problems with the Free-Rider Problem and the Drop-in-the-Bucket Problem are that they lead to a number of social issues, and this is exactly where those entitlement attitudes we mentioned before come into play.

Because they are used to this mentality when thinking about the product or service in question, they falsely come to believe it should be free.The Problem of Social Cost” provides more than merely a revolutionary rethinking of the question of externalities.

It also suggests a new and interesting approach to the problem of defining property rights.


economics is a social science concerned with the logic of scarcity, cost, value, and choice economics is not all about money, math, and numbers money is just a Algorithms and Economics of Networks: Coordination Mechanisms -. The Journal of Law and Economics. Volume 56, Number 4 | November 1, SUBSCRIBE/RENEW.

"The Problem of Social Cost," The Journal of Law and Economics 56, no. 4 (November ): The Problem of Social Cost. Coase. Outsourcing Shareholder Voting to Proxy Advisory Firms. Larcker et al. Fast‐Food . The sad state of Social Security's COLA COLA is the annual "fix" the Social Security Administration applies to paid benefits that's designed to reflect the changing price of a basket of goods and.

Note: Citations are based on reference standards. However, formatting rules can vary widely between applications and fields of interest or study. The specific requirements or preferences of your reviewing publisher, classroom teacher, institution or organization should be applied.

The Problem of Social Cost Ronald H. Coase Ronald H. Coase is Professor of Economics at the University of Chicago. This paper is from the .

Effects of Consumerism — Global Issues