History and Social Science, Part 83

Question 1: Define and discuss social costs.

Answer 1: Every economic decision has a social cost closely linked to it. The technical definition of the social costs of an economic action is the aggregate cost of that activity to society as a whole, as well as any costs incurred by the unit or agency making the decision.Negative externality is a situation that takes place when the social cost to society is greater than the cost to the decision maker. The classic example of negative externality is manufacturing pollution. This has a huge social (and economic) cost that is seldom paid for directly by the firm causing the pollution. When the costs are greater to the private sector than to society, a positive externality is in effect.Social costs are a major topic and economic measurement in welfare economics. Activists measure social costs and employ them in their arguments for social, political, and economic policy.

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Question 2: Define free goods as they relate to economic analysis.

Answer 2: In economic analysis, a free good is used rather loosely to designate a good or service that is abundant. This means such goods are available to everyone at little or no cost to the economy. Examples of free goods include natural resources owned by the public, water, and air. Some free goods are so easily available that everyone can have as much as they want under ordinary circumstances.Other free goods may be the result of cooperation between economic entities, including governments to yield an excess of a good for the general welfare. Some free goods are intangible. Examples would include the skies used by airlines, the oceans used to fish and dredge for assets, and ideas or inventions that fall into the public domain. A modern economic intangible is the creation on internet technology which is a complex combination of ideas, cutting edge technology, and public access. No one owns the internet, yet is used for a myriad number of economic (and personal) purposes.

Question 3: What are the purposes and effects of taxation?

Answer 3: Any assessment or charge to an individual economic unit by a government or quasi-government may be termed a tax.Some taxes are direct, such as a sales tax on goods and services sold. Other taxes may be indirect, property taxes being a prime example.Taxation has a long history dating back to biblical times. It is often mentioned in the Old and New Testaments, and some forms of taxation predate this. Earlier economic systems received taxes as goods and services rendered to a ruling authority. In contemporary economics, we usually think of taxes in terms of legal currency.Taxes have caused revolutions, No taxation without representation, overturned governments, and have become a social and political issue of controversy and debate. Who should pay taxes, how much should be paid, and the use of tax revenue are all critical issues in the fabric of society.The branch of formal economics most concerned with taxes is public finance.

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