Econ 101 types are so insufferable and are often the C+ student in Econ 101.
Supply and demand only works in perfectly competitive markets where all parties have perfect information (literally taught in Econ 101).
Companies know this, and do everything in their power to ensure this doesn’t happen, because any surplus due to assymetries flow to the participant with the advantage (also taught in Econ 101).
Worst of all is that negative and positive externalities are also taught in Econ 101 but they are almost never mentioned by these types.
TL;DR For positive/negative externalities: Company produces pollution, pollution negatively affects the economic value of things outside of the company’s business (e.g. kills fish in rivers), company most efficient process should be produce less at higher price.
This means the supply/demand curve can be shifted with taxes (called Pigovian taxes) to correct the supply/demand curve so it accurately reflects the value of broader society. Conversely a healthy population is more productive so subsidising healthcare makes sense since creates more benefits than the benefit of the consumer and entity providing it.
Taxes and subsidies can be an effective tool to adjust the supply/demand curve to maximise the benefit of society as a whole in many cases when used aggressively enough.
You can effectively solve climate change pretty easily by taxing emissions from fossil fuels and providing the entire amount as energy subsidies. This way renewables get a massive advantage from the energy subsidies at no cost to the tax payer. You can count on the market to min/max based on the rules.
These types still go “Hurr durr, bUt ThE dEaDwEiGhT lOsS”.
Econ 101 types are so insufferable and are often the C+ student in Econ 101.
Supply and demand only works in perfectly competitive markets where all parties have perfect information (literally taught in Econ 101).
Companies know this, and do everything in their power to ensure this doesn’t happen, because any surplus due to assymetries flow to the participant with the advantage (also taught in Econ 101).
Worst of all is that negative and positive externalities are also taught in Econ 101 but they are almost never mentioned by these types.
TL;DR For positive/negative externalities: Company produces pollution, pollution negatively affects the economic value of things outside of the company’s business (e.g. kills fish in rivers), company most efficient process should be produce less at higher price.
This means the supply/demand curve can be shifted with taxes (called Pigovian taxes) to correct the supply/demand curve so it accurately reflects the value of broader society. Conversely a healthy population is more productive so subsidising healthcare makes sense since creates more benefits than the benefit of the consumer and entity providing it.
Taxes and subsidies can be an effective tool to adjust the supply/demand curve to maximise the benefit of society as a whole in many cases when used aggressively enough.
You can effectively solve climate change pretty easily by taxing emissions from fossil fuels and providing the entire amount as energy subsidies. This way renewables get a massive advantage from the energy subsidies at no cost to the tax payer. You can count on the market to min/max based on the rules.
These types still go “Hurr durr, bUt ThE dEaDwEiGhT lOsS”.