Economic Update: Externalities and Capitalism's Inefficiencies

Posted on January 11, 2021

d@w Contributor:
Richard Wolff
January 11, 2021

[S11 E01] New

This program introduces the economic concept of "externalities." Those are the real costs of employers' business decisions that employers do not pay for or take into account: costs "external" to businesses' profit/loss calculations. Examples include costly damage to the environment, to employees' private lives, etc. Those real social costs are external and additional to capitalists' private costs. Therefore, capitalists' investment decisions based on comparing costs and revenues do NOT take into account the real, external costs. Thus their decisions are not "efficient." Capitalism never was the efficient system its apologists claim.

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Showing 1 comment

Sonny Wiehe commented 2021-01-16 20:45:31 -0500 · Flag
Prof. Wolf ignores ALL the potential benefits of his examples that are not counted in the $1Mk cost of the building and restaurants while factoring in (meaning quantifying) ALL the potential costs (real and imaginable) $1M+. The potential benefits of his example may mean bringing more residents to that district which means increased tax revenue, which means potentially better government services, better public schools….you get the picture.

If you’re going to give examples to prove a point, please don’t use logical fallacies to prove your point. BTW, I will point out that residents DO have a say in what gets built. They are called zoning laws and there are public hearing for implementation and changes to these. Granted, most residents don’t get involved in making of proper zoning laws; they leave that up to corrupt government officials who will get bought by the building and restaurant owner because their is no opposite and equal reaction by residents to their influence. Their is a government component to capitalism. Its called regulation.You reap what you sow.

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