Social Cost

The current topic of interest is social costs and their relation to environmental degradation. The concept of social costs relates to their understanding to be reciprocal and understanding of the decision-making unit. What determines the social cost is the social evaluation and the value placed. This depends on the social objectives. In this case, social cost is determined in a process of social evaluation, and is dependent on interdependence of human actions. The social costs and actions become quite relevant when there is an ambit of socially integrated factors.

“Social Cost” Relation to Environmental Degradation

Social costs in general lead to a call for public policy because of their nature to incorporate the masses and may even lead to institutional changes (Ramazzo, Frigato, and Elsner, 2006). Thus, a social cost directly affects the welfare of the public. The problem with social costs is that it is a problem of social choice, up to the consent of the public. Contrary to popular belief, this makes the problem worse, because maneuvering a society in a direction to solve a problem without the use of legislation or policy is quite hard. An example of this case would be the environmental situation currently facing the world.

For decades, people lived in a carefree situation polluting the systems around them until research uncovered there was a slim probability the world could continue in this system. The environmental movement was weak at first, but steadily gained momentum through awareness and policy. Therein lays the problem because it has been long and arduous. Social cost control would entail the same hard work against the masses and, sometimes, political power. Modern science would concern itself with the issues of social costs and benefits; however, it would not be enough to classify the social economical aspects.

The externalities noted in the social costs can also be positive. In this case, the marginal social benefit will be higher than the marginal private benefit. There are environmental externalities, as well. Most people think of the land when the word environment is mentioned. In fact, the environmental act of 1986 specifies the environment as air land and water (Sankar, 2011). The population growth experienced by globe has had a helping hand in the pollution factors of the world. Rapid industrialization has put a strain on resources like groundwater and clean water making them scarce in the current situation.

The problems associated with the environment leading to its degradation are mainly caused by failures within the market systems and government apparatus. This leads to the depletion, neglect, or both of natural resources. Market failures happen when there are no markets for environmental goods or when the markets underestimate the social scarcity. The thing with markets is that they exist on the property rights on the goods are well defined. However, this is not so with the environment because the property rights for this category of land air, and water are not defined.

In most of the countries, the resources are in the public domain, therefore, the users of these aspects usually defined as free or unpaid factors of production. In this way, they place a zero value on the price of using them even though the social scarcity value is positive in nature. Therefore, the problem with the market lies in the difficulty there is in defining, enforcing, and distributing the property rights. In other regimes such as forestry and industries, have common property right regimes. In these sectors, there is a high probability for overuse of the resources because of lack of binding agreements on the rates of extraction or sharing the costs and benefits.

Social Costs and Environmental Degradation Impacts

 Pollution and environmental degradation have certain costs that impose on the society in the form of health issues. These include life, as well as, illness all of which cause inconvenience and increased cost. These are classic cases of externalities because their effects are not registered in the market prices. In this way, it may seem that any business that tries to provide or preserve the environmental quality of the products it manufactures will seem to incur higher costs as compared to the competitors. As a result, the competitors will look for better options.

When externalities exist, the private and social costs of economic activity are not the same. The private cost of the activity is just the same way as stating that the total sum of resources used at the value of the market price. The social cost, on the other hand, details the aggregate value placed to the society of all the values used, which does not matter whether or not they are reflected as market prices. For example, the fish dying because of pollution from a steel mill would be counted as part of the social cost (Reinhardt, 2000).

 It falls to reason; firms wanting to increase their profits should minimize their private costs as much as possible. In a situation where private and social costs are interdependent and equal, the firms might inadvertently find they are reducing the social cost as they reduce the private cost. Business in this situation becomes a vehicle for overall efficiency. Many times, this does not apply because private and social costs will diverge in the interaction; thus, it is hard for companies to synchronize them to achieve an all rounded result.

The current commercial world exists solely on the concepts of capitalism. America is one of those in the forefront of the corporate structure, and industries fueling them ahead. The structure of capitalism is such that it avoids the conservation of the resource. In fact, the motor force of capitalism is described as the accumulation of capital (Hunt and Sherman, 1972). This does not link up with natural resources. This can be described as the ceaseless drive of the individual capitalists to make money and achieve growth.

The accumulation of capital depends on the ability of the workers themselves to create a surplus from their work. In this case, if the surplus is to be created then it will highly depend on the suffering of the laborers on account of being exploited for their services (Yates, 2003). Therein is where Marx specifies as the evil behind capitalism, in that, it polarizes the society between the rich and the poor or rather the differences between riches and misery. Thus, in this lifestyle wealth and poverty are things that go hand in hand. One cannot have one without the other.

The society is highly materialized into values based on monetary values. The values have no basis on the way that the environment maintains or does not maintain itself. Capitalism, in essence, is the reason why the poor and rich situation exists in the first place. In fact, there is no other system, whereby, class exploitation is mediated by the market (Wood, 1999). It set into motion the events that would have people care more for the state of material items such as cars, buildings, industries, and houses. All of these are sources of pollution and, thus, lead to environmental degradation even if it is only at an aesthetic level. These aspects lead to a level of pollution all instigated by the concept of capitalism in the first place.

However, capitalism own its own is not the sole cause of the present situation with environmental degradation. The blame lies with the policy and situation of the market. In the present look, there is the lack of a market price, and this reflects the monetary value of the user’s valuation. It is difficult to assess the social value on the side that favors consumption. In such a case, the value assessment should come from another source. The practice most relied upon is asking the users if they are able to pay for the service up and up to which point.

It would be quite relevant in assessing the gains as such from the various projects that are involved in helping the environment or at least providing an assessment on the environmental cost for those affected negatively by the environmental degradation (Hagen, 2011). There are different reasons why the price in the market does in the case of a well tuned market fails to offer the appropriate guidelines for assessing the social profits. Thus, the challenge lies in how to identify ways the market can be corrected in order to attain the willingness to pay the true social opportunity costs.

There are three main reasons why the market prices do not go hand in hand with the social prices that are optimal; natural monopolies, taxes that are fiscally motivated and external effects. The external effects are consequences that are economic in nature and are posed decisions by the agents on each other. These consequences are inclusive and affect each other. It is much easier for one to reject an offer when the options for taking it are to legalized or stringy in nature that it seems like a completely new process by just accepting it in the first place.

According to Foster, Marx believes that capital production systems alienate natural situations preferring to emphasize solely on issues (Foster, 2008). The private sector accounts for the situation. Therefore, they can direct the policy in a certain direction but choose not to further their economic agendas. There is such a thing as negative externalities when talking about the company. It happens when the market prices exaggerate the public’s willingness to pay for the consumption will impose a few negative effects on another. It could also be when a company’s costs undervalue the ones the total costs to society. At the same time, positive effects come in when the market prices undervalue the true social benefits.

A company overvalues the true social costs. While the examples of positive external effects are numerous, most common negative effect is pollution that everyone comes to terms with (Hagen, 2011). An example may be a firm that discharges pollutants into a river, which may cause some negative effects on users located further downstream. The effects will not be documented as part of the costs incurred by the company itself. The environment and subsequent users will incur them. It would count as a social cost and not a private one.


The trouble with the system is that it is accustomed to the ideology brought about by the capitalist in the first days. The system advocates that the owner of the means of production is not under legislation for the price it sets or the rate of production he or she churns. This gives undue power to an individual who will only pursue his or her interests. All too often, these do not include those of the environment. Finally, it leads to our current situation. Personal interests are most often the higher percentage of reasons for pollution.

Order now

Related essays