what are externalities and why are they so important in everyday life?
In: 14
Basically, in economic policy, there are two main considerations: downstream effects, and externalities. The downstream effects are things that are direct consequences of actions. Externalities are in-direct consequences of actions. Both are usually fairly foreseeable but if something unforeseen happens it’s usually an externality rather than a downstream effect.
Using IDK, the biggest piece of legislation to date as an example, in many states where abortion is banned the direct consequences is a smaller labor pool, and more families dependent on the government for various things. This costs money.
A good example of an externality, from the same policy, is when large private businesses very publicly pull out of those states, because they cannot attract the required talent to function, who are also willing to move to those states due to their political inclinations. [Eli Lilly was in the news](https://fox59.com/indiana-news/eli-lilly-to-seek-employment-growth-outside-of-indiana-after-abortion-ban/) most recently for this. This is a loss of tax revenue which means there is less money to go around.
Latest Answers