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Aren't the incentives in place to encourage exploration and improve supplies and supply stability? I suppose that you're correct, to some degree. However, in th

Aren't the incentives in place to encourage exploration and improve supplies and supply stability? I suppose that you're correct, to some degree. However, in the end, the equation is pretty simple when (cost of production + profit) > (the cost of an equivalent product, already in the market) then people will engage in that particular commerce. It's no more complicated than that.

kbenson 10y ago
Cost of production includes cost of locating and developing resources, so incentives that offset the cost of these allow for equivalent profit at a lower price. The real point though is that the negative externalities are not included in the cost of production, because we as a society do not attribute their cost to the company that causes them. The simplistic example is the company that pollutes the local water and the overall health of people in the community goes down. Even without major sicknesses and death, if it causes an average of an extra sick day per year for the local people, that's a major impact on the entire region[1]. But then what if we look at hard a little more removed? What if the river pollution affects other industries more directly? For example,if there's a ranch bordering the river, what if it makes the cattle sick, even just sicker than normal? What if it affects Salmon spawning downstream? These are all costs borne by others, so are not accounted for in the cost of the product the original company produces, but we all pay for it in litttle or big ways. What if it just affects a species negatively without an industry behind it? If it's causing the extinction of some fish or frog species, what is the cost of that? You could say it negatively affects even human being in some small way to cause an extinction, but I don't know how to quantify the cost. Originally we didn't account negative externalities because we didn't know it mattered. In the few cases where it was obvious we used the courts to deal with it. Now we're learning (or have learned) that things are interconnected much more than we believed, but we're stuck with a bunch of industries that are used to not paying for this, and a public that's used to the current costs of goods and services, and it's hard to change that. But hard to change doesn't mean it's economically sound. 1: http://ohvec.org/mountaintop-removal-articles/health/ http://ohvec.org/mountaintop-removal-articles/health/

kbenson 10y ago

Cost of production includes cost of locating and developing resources, so incentives that offset the cost of these allow for equivalent profit at a lower price. The real point though is that the negative externalities are not included in the cost of production, because we as a society do not attribute their cost to the company that causes them. The simplistic example is the company that pollutes the local water and the overall health of people in the community goes down. Even without major sicknesses and death, if it causes an average of an extra sick day per year for the local people, that's a major impact on the entire region[1]. But then what if we look at hard a little more removed? What if the river pollution affects other industries more directly? For example,if there's a ranch bordering the river, what if it makes the cattle sick, even just sicker than normal? What if it affects Salmon spawning downstream? These are all costs borne by others, so are not accounted for in the cost of the product the original company produces, but we all pay for it in litttle or big ways. What if it just affects a species negatively without an industry behind it? If it's causing the extinction of some fish or frog species, what is the cost of that? You could say it negatively affects even human being in some small way to cause an extinction, but I don't know how to quantify the cost. Originally we didn't account negative externalities because we didn't know it mattered. In the few cases where it was obvious we used the courts to deal with it. Now we're learning (or have learned) that things are interconnected much more than we believed, but we're stuck with a bunch of industries that are used to not paying for this, and a public that's used to the current costs of goods and services, and it's hard to change that. But hard to change doesn't mean it's economically sound. 1: http://ohvec.org/mountaintop-removal-articles/health/ http://ohvec.org/mountaintop-removal-articles/health/