*** Correction ***
Dear All,
Two modest corrections to the prior post. The company that appeared in
the example, Hi-Tech Zing, morphed into Hi-Tech Stuff when I picked up
the example later in the post. The issues in the two examples would not
change were I to use the names of two different invented companies, but
the point is clearer with one company.
The quote from The Economist was copied from the web site of The
Economist. It showed up without problem in my MS Word original, but
linked words disappeared in version carried by the list. My email system
seems to do something odd with linked words -- but it is precisely these
words are are important. I repeat the quoted passage below with the
words in place.
--snip--
This is why externalities are important to economists. The Economist
defines an externality as: “An economic side-effect. Externalities
are
costs or benefits arising from an economic activity that affect
somebody
other than the people engaged in the economic activity and are not
reflected fully in PRICES. For instance, smoke pumped out by a factory
may
impose clean-up costs on nearby residents; bees kept to produce honey
may pollinate plants belonging to a nearby farmer, thus boosting his
crop. Because these costs and benefits do not form part of the
calculations of the people deciding whether to go ahead with the
economic activity they are a form of MARKET FAILURE, since the
amount of the activity
carried out if left to the free market will be an inefficient use of
resources. If the externality is beneficial, the market will provide
too
little; if it is a cost, the market will supply too much.”
--snip--
Yours,
Ken
Professor Ken Friedman, PhD, DSc (hc), FDRS | University Distinguished
Professor | Dean, Faculty of Design | Swinburne University of Technology
| Melbourne, Australia | [log in to unmask] | Ph: +61 3
9214 6078 | Faculty www.swinburne.edu.au/design
|