Social cost

Social cost with tax

Social cost in economics may be distinguished from "private cost". Economic theorists model individual decision-making as measurement of costs and benefits. Social cost is also considered to be the private cost plus externalities. Rational choice theory often assumes that individuals consider only the costs they themselves bear when making decisions, not the costs that may be borne by others.

Quotes

• All this talk of using tax policy to ‘assess social costs’...what a dumb idea. The only way to stop polluters is to put them against walls and shoot them.
  • David Brin, Earth (1990), Part VII (p. 327)

• The traditional approach has tended to obscure the nature of the choice that has to be made. The question is commonly thought of as one in which A inflicts harm on B and what has to be decided is: how should we restrain A? But this is wrong. We are dealing with a problem of a reciprocal nature. To avoid the harm to B would inflict harm on A. The real question that has to be decided is: should A be allowed to harm B or should B be allowed to harm A?
  • Ronald Coase. "The Problem of Social Cost", in: Journal of Law and Economics, Vol. 3. (Oct., 1960)

• In my youth it was said that what was too silly to be said may be sung. In modern economics it may be put into mathematics.
  • Ronald Coase (1988). "Note on the problem of social costs" in: The Firm, the Market, and the Law. Chicago: University of Chicago Press. p. 185

• In many societies the domestic social costs of adjustment to changing patterns of comparative advantage are believed to outweigh the advantages of further trade liberalization.
  • Robert Gilpin, The Political Economy of International Relations (1987) Chapter Five, The Politics Of International Trade, p. 228

• Social costs... are all direct and indirect losses sustained by third persons or the general public as a result of unrestrained economic activities.
  • K. William Kapp, The Social Costs of Private Enterprise. New York: Schocken Books, 1971, p. 12.

• To ignore social costs because they require an evaluation by society... and to leave social losses out of account because they are 'external' and 'non-economic' in character, would be equivalent to attributing no or ‘zero’ value to all social damages which is no less arbitrary and subjective a judgement than any positive or negative evaluation of social costs.
  • K. William Kapp, The Social Costs of Private Enterprise. New York: Schocken Books, 1971, p. 12.

• They (social costs) are damages or diseconomies sustained by the economy in general, which under different institutional conditions could be avoided. [. . .] if these costs were inevitable under any kind of institutional arrangement they would not really present a special theoretical problem. [. . .] to reveal their origin, the study of social costs must always be an institutional analysis. Such an analysis raises inevitably the question of institutional reform and policy.
  • K. William Kapp, The Social Costs of Private Enterprise. New York: Schocken Books, 1971, p. 186.

• K. William Kapp's book "The Social Costs of Private Enterprise" was one of the first economic treatise that called attention to the ecological and social external costs of the market economy. His book is considered one of the origins of and a foundation for ecological economics.
  • Kapp Research Center, "K. William Kapp, Biographical Information " at kwilliam-kapp.de, 2015.

See also

• Ecological economics
• Transaction cost