28 | Cost to Bystanders
A negative externality, or external cost, is a cost of a transaction paid by bystanders who were not consulted, and whose interests were not taken into account.
This video is an introduction to externalities, including the concepts of private cost, external cost, and social cost. Using the example of antibiotics and viruses, we take a look at how costs are passed along to different members of society beyond the producer and consumer.
What can the flu teach us about economics and externalities? In this video, we go over how vaccines produce positive externalities that help people stay healthy.
If Art sells potato chips to Betty, both Art and Betty are happy with the transaction. Betty has chips, and Art has been paid for them.
If Art sells potato chips to Betty, both Art and Betty are happy with the transaction. Betty has chips, and Art has been paid for them. If Betty eats her chips loudly and it irritates Carl, then Carl bears a cost because of Art and Betty's transaction. Carl didn't have anything to do with the sale of the chips, but now he has to listen to them crunching. The cost Carl bears is called an externality. It is a cost that affects someone outside of the transaction. Prof. Michael Munger explains how externalities can arise and some options for resolving them
When NPR's reporting team traveled deep into the Amazon rain forest to report on the environment, they took planes, a truck, and a motorcycle. Lots of fuel was burned. Lots of carbon was emitted. They felt guilty. In the process of reporting on the environment, were they making the problem worse?