Originally posted by Bartshttp://en.wikipedia.org/wiki/Externality
"Externality", as defined and used in economic literature seems to be a different concept from your "externality". It does not mean, "anything with effects on other people". Please try to get your terms correct.
The picture on the right examples a negative externality, that of exhaust gases effecting more than the truck driver and shipper.
A positive externality might be that due to the trucking industry we have more fresh fruit in our markets.
The fact that a free or relatively free market has millions of trades going on which most of us aren't directly involved with makes the results of those trades and contracts external to us. Some economics writers want to make it more complicated than that. Economics, like other social sciences is of little use if it obfuscates instead of clarifying.
Originally posted by bill718Folks dependent on government!!!
Do us a favor, and get off this "relying on the government" mantra. The vast majority of people on welfare and food stamps don't want to be there. Most of them are people who've held down jobs for years, but don't have jobs anymore, because the economy still sucks, or they've been outsourced overseas. Find something else to whine about!
Originally posted by bill718"The vast majority of people on welfare and food stamps don't want to be there."
Do us a favor, and get off this "relying on the government" mantra. The vast majority of people on welfare and food stamps don't want to be there. Most of them are people who've held down jobs for years, but don't have jobs anymore, because the economy still sucks, or they've been outsourced overseas. Find something else to whine about!
How do you know this, and why is it relevant?
Originally posted by normbenignhttp://en.wikipedia.org/wiki/Externality
http://en.wikipedia.org/wiki/Externality
The picture on the right examples a negative externality, that of exhaust gases effecting more than the truck driver and shipper.
A positive externality might be that due to the trucking industry we have more fresh fruit in our markets.
The fact that a free or relatively free market has millions of trades ...[text shortened]... Economics, like other social sciences is of little use if it obfuscates instead of clarifying.
Thanks for the definition, but I'm aware of it.
The picture on the right examples a negative externality, that of exhaust gases effecting more than the truck driver and shipper.
This is indeed an externality.
A positive externality might be that due to the trucking industry we have more fresh fruit in our markets.
Note that the wikipedia definition you linked to specifically notes that an externality is "a cost or benefit that is not transmitted through prices". In this example the supermarket is compensated for the fruit by consumers, the trucking company by the supermarkets, etc... All the value is compensated by market mechanisms. You could argue that there there are shoppers who derive value from fruit in the store without buying any and that this is a positive externality, but that's obviously not what you meant.
Some economics writers want to make it more complicated than that. Economics, like other social sciences is of little use if it obfuscates instead of clarifying.
So basically, you heard the term and made up your own definition and because it differs from economic literature, this literature is "obfuscating". Right.
Originally posted by BartsNo, I gave a consistent definition, based on my understanding of economics in general.
[b]http://en.wikipedia.org/wiki/Externality
Thanks for the definition, but I'm aware of it.
The picture on the right examples a negative externality, that of exhaust gases effecting more than the truck driver and shipper.
This is indeed an externality.
A positive externality might be that due to the trucking industry we have more fre ...[text shortened]... and because it differs from economic literature, this literature is "obfuscating". Right.
There isn't anything that isn't at least relatively controlled by the market, prices, supply, demand. The negative externality, in the end is transmitted to buyers as a cost factor.
Oatmeal for breakfast may be a healthy choice, resulting in diminished health care costs, or it may lead to greater longevity, and therefore greater healthcare costs. The externalitites of the Oatmeal business may be impossible to determine.
Originally posted by normbenignI agree you gave a consistent definition, unfortunately it is not consistent with the definition used in economics.
No, I gave a consistent definition, based on my understanding of economics in general.
There isn't anything that isn't at least relatively controlled by the market, prices, supply, demand. The negative externality, in the end is transmitted to buyers as a cost factor.
Oatmeal for breakfast may be a healthy choice, resulting in diminished health care ...[text shortened]... r healthcare costs. The externalitites of the Oatmeal business may be impossible to determine.
Your second paragraph is simply bunk, the actual definition of externalities is just that, they are not controlled by the market or prices. They are also not transmitted to the buyer. You can attempt to convince me otherwise though, tell me how market mechanisms will transmit the cost to my health to the buyer of transportation (to use your example). Note that giving a convincing argument might also win you a nobel prize by overturning a long standing and well supported theory in economics.
The final paragraph is again correct though, and even quite interesting. There are lot of externalities for the insurance industry, which is also why you'll find that their contracts are riddled with clauses like, "if you do x your premium increases by a" and "if you do y your premium increases by b", they're internalizing externalities.
Originally posted by normbenignThe market "handles" externalities by fobbing their cost (or benefit) to those who have no part in the economic transaction. This is economically inefficient by any reasonable definition.
I don't see externalities only in the case of unions, although they do exist there. They also exist when government rules on matters that the market could decide. For example, GM is prodded by government to prematurely sell the Volt, It does so with a $7K subsidy and still the car doesn't move, and is made at a considerable cost to taxpayers who are "exte ...[text shortened]... s, without coercion. It handles "externalities" because nothing is external to everyone.
Originally posted by BartsThe problem with externalities is that there is quite a bit of acknowledged difficulty in determining what they are in concrete terms.
I agree you gave a consistent definition, unfortunately it is not consistent with the definition used in economics.
Your second paragraph is simply bunk, the actual definition of externalities is just that, they are not controlled by the market or prices. They are also not transmitted to the buyer. You can attempt to convince me otherwise though, tell me ho ...[text shortened]... by a" and "if you do y your premium increases by b", they're internalizing externalities.
The use of "slippery" language became popularized in Keynes General Theory, in which he uses various terms in varieties of way, often totally contradicting himself, or presenting 17th century refuted maxims as revolutionary new truths.
I haven't read extensively on "externalities" but I suspect that if I did, I would find several usages, and not quite the dogmatic agreement you suggest. What you suggest is bunk, is supported by Mises, Haslett, Hayek, and others. I'll accept my usage may be debatable, but not that it is bunk.
Originally posted by no1marauder" This is economically inefficient by any reasonable definition."
The market "handles" externalities by fobbing their cost (or benefit) to those who have no part in the economic transaction. This is economically inefficient by any reasonable definition.
What is a more economically efficient manner?
Originally posted by no1marauderIf they are external, isn't there sometimes great difficulty in assessing such. Don't the negative and positive externalities sometime balance themselves?
Allocating the costs and benefits to those who engage in the transaction where possible.
For example the smoke belching diesel truck in the Wiki site. Doesn't it pay extraordinarily high fuel taxes? Aren't these costs past on to buyers of products shipped by the truck? There are probably positive externalities associated with the trucking business as well. The point is that they may be difficult if not impossible to measure, as to their effect on each individual.
As a boy in Boston, the El ran past my house and it shook like an earth quake when the train passed. Others who lived further away didn't have the pleasure. I rode the El for years to school, but my fare didn't quite take care of the discomfort of waking up at night.
In a market economy, billions probably trillions of transactions take place and calculating all of the extenalities to those transactions would be wasted energy.
Originally posted by normbenignSometimes estimating the value of externalities is hard. A bridge to a sparsely populated island may not be worth it, despite the external benefit of added mobility and reduced logistic costs. Sometimes the externalities are so huge taking them into account is a no-brainer, for instance guaranteeing public primary education and providing a police force, or banning dumping nuclear waste in rivers.
If they are external, isn't there sometimes great difficulty in assessing such. Don't the negative and positive externalities sometime balance themselves?
For example the smoke belching diesel truck in the Wiki site. Doesn't it pay extraordinarily high fuel taxes? Aren't these costs past on to buyers of products shipped by the truck? There are probably ...[text shortened]... lace and calculating all of the extenalities to those transactions would be wasted energy.
Originally posted by KazetNagorra"Sometimes the externalities are so huge taking them into account is a no-brainer, for instance guaranteeing public primary education and providing a police force, or banning dumping nuclear waste in rivers."
Sometimes estimating the value of externalities is hard. A bridge to a sparsely populated island may not be worth it, despite the external benefit of added mobility and reduced logistic costs. Sometimes the externalities are so huge taking them into account is a no-brainer, for instance guaranteeing public primary education and providing a police force, or banning dumping nuclear waste in rivers.
Even when they are huge, as are your examples, allocating the costs or benefits is nearly impossible. The market accomplishes this task remarkably well, though not to the perfect aspirations of government control types. Still in its imperfection it accounts more accurately that people who think they know better.
Take primary education. Costs are spread out to people who have no children, and in the US nobody is happy with the results. Costs are astronomical, and the emphasis on every child going to college is both foolish and wasteful. A market system would eliminate most of the waste, abuse, and provide what the consumer wants.
The same is true of other seeming "no brainers".
Originally posted by normbenignThe problem with externalities is that there is quite a bit of acknowledged difficulty in determining what they are in concrete terms.
The problem with externalities is that there is quite a bit of acknowledged difficulty in determining what they are in concrete terms.
The use of "slippery" language became popularized in Keynes General Theory, in which he uses various terms in varieties of way, often totally contradicting himself, or presenting 17th century refuted maxims as revolutio ...[text shortened]... aslett, Hayek, and others. I'll accept my usage may be debatable, but not that it is bunk.
Well yes, but that is kind of irrelevant if we're talking about the general definition of an externality.
The use of "slippery" language became popularized in Keynes General Theory, in which he uses various terms in varieties of way, often totally contradicting himself, or presenting 17th century refuted maxims as revolutionary new truths.
Just because you don't know a definition doesn't mean it's "slippery".
I haven't read extensively on "externalities" but I suspect that if I did, I would find several usages, and not quite the dogmatic agreement you suggest. What you suggest is bunk, is supported by Mises, Haslett, Hayek, and others. I'll accept my usage may be debatable, but not that it is bunk.
I can't find any works by any of the persons you named supporting your definition of "externality". I did find a quote by Hayek that, while not laying down an explicit definition, seems to about externalities as defined by other economists. Similarly, when I find something about externalities on the website of the "Mises institute", it addresses externalities as I know them. Please provide a quote or reference to support your claim that either of these three use your definition of the term.
Originally posted by BartsOk, save us time, and articulate the definition as you understand it. I can't agree with or argue against some undefined thing.
[b]The problem with externalities is that there is quite a bit of acknowledged difficulty in determining what they are in concrete terms.
Well yes, but that is kind of irrelevant if we're talking about the general definition of an externality.
The use of "slippery" language became popularized in Keynes General Theory, in which he uses various term ...[text shortened]... support your claim that either of these three use your definition of the term.