Wednesday, February 28, 2007

Blogs as a positive externality

We will be learning (probably later tonight) about externalities in the market place. Externalities are costs or benefits not captured in your basic supply and demand analysis (for example, pollution is a negative externality). But can economic blogs be considered a positive externality? Greg Mankiw muses here

Lastly let me note blogs such as yours and marginalrevolution.com provide positive externalities for those of us at teaching schools. I can check them and then alert my students to the "day's headlines." If you're interested, here is the link.

Am I underutilized as a blogger? Should I be paid because I offer a benefit not captured in the market? Hmmmmm....


Update: Wikipedia has a useful article on externalities. A positive externality would be graphed as follows:


As you can see, the market is underproviding this good because the private demand curve is lower than the social demand good. In reference to blogs, the private demand curve is where we are now. The social benefit of economic blogs, it is suggested, should be higher.
Please provide checks or cash payments when you have a moment.

5 comments:

Joshua said...
This comment has been removed by the author.
Joshua said...

At first glance it seems that externalities are dealing with what should be and are not necessarily making statements about what is. Are discussions regarding externalities methods for developing normative economic statements?

Matt Festa said...

Josh,

A lot of the times, yes, externalities entail a strong normative component. But there is a branch of normative economics that is a useful tool.

Our positive tools will explain what an externality is and leave it up the political debates to determine whether or not the externality justifies action. If it does, then we apply the positive tools we have ready made.

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