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Externalities always felt glossed over in economics. So yes this business will ruin the river for everyone but please direct your attention to this chart and lo

by bix6 5mo ago

Externalities always felt glossed over in economics. So yes this business will ruin the river for everyone but please direct your attention to this chart and look at all that producer surplus!

Imustaskforhelp 5mo ago
At a certain point, businesses and the world in general focus way too much on the directly measurable rather than the accountance of the immeasurable (downstream effects) Although, I am all for a data driven world but somehow it is my opinion that we have ended up with the worse of both as combined with the goodhart's law, this measurable thing just ends up somehow getting manipulated for short term gains over real long term damages. As is your case in the example, the business will ruin the river for everyone having severe damage both culturally and I think financially as well given downstream effects of all people depending upon that river. But the business has externalized the losses to the people and the people have externalized the responsibility of the river to the government and the government believes in absolute free capitalism! (or sometimes the businesses give the government some money in the pocket ie. corruption. "Cost of doing business" they said.) I am not against capitalism itself (that Adam smith proposed) but capitalism in its current form is definitely something... and surely some if not most of us might agree to the fact that system isn't working as intended (well not working if it was intended for us ie.)
dfc 5mo ago
One of my favorite readings from undergrad and grad school was "The Problem of Social Costs" by R. Coase. I'm sorry you think externalities are glossed over by economics, but Im excited to tell you that this is certainly not the case. Coase won the Nobel Prize in economics in large part for his work on externalities. They don't hand out Nobel prizes for glossed over topics. It's definitely worth a read of you wish economics paid more attention to externalities: https://www.law.uchicago.edu/sites/default/files/file/coase-problem.pdf https://www.law.uchicago.edu/sites/default/files/file/coase-...
- cperciva 5mo ago
  They don't hand out Nobel prizes for glossed over topics. Leaving aside the fact that the Economics prize isn't actually a Nobel Prize, topics which historically haven't been given enough attention are exactly where the highest impact research takes place. If externalities had always received the attention they deserved, Coase would have never received his prize, because his work would not have been so important.
  - dghlsakjg 5mo ago
    Coase did his most relevant work in the 1950s, and it wasn't as if he invented the idea of externalities. It was first given serious academic weight in the 1890s, and Pigou created the concept of externality correcting taxes in the 1920s. His work was important because it proposed a more market based solution than Pigouvian taxes. I think its safe to say that externalities are not, and were not, an ignored sector given more than a century of serious work, and the fact that it is covered in any intro level Econ course.
    - cperciva 5mo ago
      There's a wide gap between "ignored" and "received the attention they deserved".
      - dghlsakjg 5mo ago
        Externalities arguably haven’t received the attention they deserve outside of economics, but I would disagree; what are climate change discussions, if not a discussion about externalities? Hell, just about any global issue is, in part, about externalities. Inside of economics, they have more than 130 years of work, and are taught in any intro class. If your argument is that we are bad at correcting for them, then yes. But that is different than not considering them.
        atmavatar 5mo ago
        > what are climate change discussions, if not a discussion about externalities? Climate change has been discussed for well over a half century, yet one of the main priorities of the current administration has been to hamstring renewable energy and promote coal and oil. I think it's pretty fair to say the issue is being ignored.
BurningFrog 5mo ago
This is a bit like the critique of physics that they ignore friction. It turns out that for many purposes friction and externalities are small enough that they can be ignored for most purposes. Physicists and Economists are very aware of the tradeoffs.
daedrdev 5mo ago
Econ 101 often ignores side effects, but I don’t think economist has a whole ignore side effects. That’s like one of their main topics of study.
- ripley12 5mo ago
  Externalities were a very big part of my first-year microeconomics course circa 2008, FWIW.
dgellow 5mo ago
Decision makers ignore externalities. Economists definitely not, it’s pretty much what their field of study is about
graeme 5mo ago
Economics talks about externalities constantly, but nobody listens to them because people hate thinking about externalities.

by bix6 5mo ago

Externalities always felt glossed over in economics. So yes this business will ruin the river for everyone but please direct your attention to this chart and look at all that producer surplus!

Imustaskforhelp 5mo ago

At a certain point, businesses and the world in general focus way too much on the directly measurable rather than the accountance of the immeasurable (downstream effects) Although, I am all for a data driven world but somehow it is my opinion that we have ended up with the worse of both as combined with the goodhart's law, this measurable thing just ends up somehow getting manipulated for short term gains over real long term damages. As is your case in the example, the business will ruin the river for everyone having severe damage both culturally and I think financially as well given downstream effects of all people depending upon that river. But the business has externalized the losses to the people and the people have externalized the responsibility of the river to the government and the government believes in absolute free capitalism! (or sometimes the businesses give the government some money in the pocket ie. corruption. "Cost of doing business" they said.) I am not against capitalism itself (that Adam smith proposed) but capitalism in its current form is definitely something... and surely some if not most of us might agree to the fact that system isn't working as intended (well not working if it was intended for us ie.)

dfc 5mo ago

One of my favorite readings from undergrad and grad school was "The Problem of Social Costs" by R. Coase. I'm sorry you think externalities are glossed over by economics, but Im excited to tell you that this is certainly not the case. Coase won the Nobel Prize in economics in large part for his work on externalities. They don't hand out Nobel prizes for glossed over topics. It's definitely worth a read of you wish economics paid more attention to externalities: https://www.law.uchicago.edu/sites/default/files/file/coase-problem.pdf https://www.law.uchicago.edu/sites/default/files/file/coase-...

cperciva 5mo ago
They don't hand out Nobel prizes for glossed over topics. Leaving aside the fact that the Economics prize isn't actually a Nobel Prize, topics which historically haven't been given enough attention are exactly where the highest impact research takes place. If externalities had always received the attention they deserved, Coase would have never received his prize, because his work would not have been so important.
- dghlsakjg 5mo ago
  Coase did his most relevant work in the 1950s, and it wasn't as if he invented the idea of externalities. It was first given serious academic weight in the 1890s, and Pigou created the concept of externality correcting taxes in the 1920s. His work was important because it proposed a more market based solution than Pigouvian taxes. I think its safe to say that externalities are not, and were not, an ignored sector given more than a century of serious work, and the fact that it is covered in any intro level Econ course.
  - cperciva 5mo ago
    There's a wide gap between "ignored" and "received the attention they deserved".
    - dghlsakjg 5mo ago
      Externalities arguably haven’t received the attention they deserve outside of economics, but I would disagree; what are climate change discussions, if not a discussion about externalities? Hell, just about any global issue is, in part, about externalities. Inside of economics, they have more than 130 years of work, and are taught in any intro class. If your argument is that we are bad at correcting for them, then yes. But that is different than not considering them.
      - atmavatar 5mo ago
        > what are climate change discussions, if not a discussion about externalities? Climate change has been discussed for well over a half century, yet one of the main priorities of the current administration has been to hamstring renewable energy and promote coal and oil. I think it's pretty fair to say the issue is being ignored.

BurningFrog 5mo ago

This is a bit like the critique of physics that they ignore friction. It turns out that for many purposes friction and externalities are small enough that they can be ignored for most purposes. Physicists and Economists are very aware of the tradeoffs.

daedrdev 5mo ago

Econ 101 often ignores side effects, but I don’t think economist has a whole ignore side effects. That’s like one of their main topics of study.

ripley12 5mo ago
Externalities were a very big part of my first-year microeconomics course circa 2008, FWIW.

dgellow 5mo ago

Decision makers ignore externalities. Economists definitely not, it’s pretty much what their field of study is about

graeme 5mo ago

Economics talks about externalities constantly, but nobody listens to them because people hate thinking about externalities.