Externalities and Internalities

Gibbons grooming each other - small

A Christian look at unintended ways that our lives affect others, and what to do.

The Cat House Café at the Memphis Zoo sits beside the gibbon exhibit, where Ringo and Talulah entertain guests with their funny faces and their acrobatics. When we eat there, my family and I get a table as close as we can to the picture windows overlooking their home, and yesterday the closest table was next to some loud, rambunctious little boys. Valuing Ringo and Talulah more than a quiet table, knowing that it is senseless to expect little boys to be quiet at the zoo, and being loud sometimes ourselves, we sat down and enjoyed a cheeseburger, waffle fries, and chicken strips for lunch.

Being a business and economics-minded person, I could not help but think about how the various people in the café were affecting each other; the costs and benefits of each interaction. The direct and intentional interactions were between workers preparing and selling food and drinks, and customers eating and drinking. There were indirect and unintentional actions as well. These can be thought of as externalities, which Investopedia defines as “A consequence of an economic activity that is experienced by unrelated third parties.” Typically, the costs or benefits of the goods or services being bought and sold do not reflect the costs or benefits of the externality. A classic example of a negative externality is a factory generating air pollution that its workers and nearby residents breathe. A classic example of a positive externality is that same factory cleaning up its exhaust and planting a park for its employees. The surrounding neighborhood would also benefit.

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