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@ianai, how is this an externality? Aren't externalities costs/benefits that accrue to third parties? But this doesn't seem to be in that category.
by winstonewert 10y ago
@ianai, how is this an externality?
Aren't externalities costs/benefits that accrue to third parties? But this doesn't seem to be in that category.
- ianai 10y agoAn externality impacts the market through a means other than the immediate price point of a good. As Milton Friedman put it, the market only affords one communication method between supplier and demander: price. That, alone is meant to encapsulate all input costs. If to employ someone to make or render a good or service the employer relies on an external factor such as the state of the world then the employer is exploiting a market externality.
- winstonewert 10y agoThat's a much wider definition of externality then I was taught when I studied economics. To quote wikipedia: "In economics, an externality is the cost or benefit that affects a party who did not choose to incur that cost or benefit" So, it's not just any state of the world, but in particular that my actions cause cost/benefits to other parties.