From the course: The Undercover Economist: The Economics behind Everyday Decisions (Blinkist Summary)
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Accounting for social costs
From the course: The Undercover Economist: The Economics behind Everyday Decisions (Blinkist Summary)
Accounting for social costs
- [Narrator] Blink number five. We need to ensure that a product's harmful side effects are included in the price. Does the market really provide the most efficient means of getting everybody what they want? That depends on what you want. If you value clean air or public transport, then you probably don't feel you've gotten what you want by being stuck in smoggy traffic on your morning commute. So, how can we account for this? The free market theory suggests that if we all pursue our individual desires, then everybody will benefit. However, this fails to take into consideration the possible negative consequences of our actions. In other words, if you want to buy a car, then the market is supposed to provide you with what you want for a fair price, which also benefits the seller. But there are social costs hidden in the equation that aren't included in the retail price. Every city in the world suffers from air pollution…
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