• Entry
  • Reader's guide
  • Entries A-Z
  • Subject index

The term social cost refers to the larger effects on society of externalities created through productive economic activity. The theory of social cost attempts to analyze the total cost of economic activity, including the cost not only to those directly involved in the transaction but also to society as a whole. It attempts to allocate responsibility for harm caused by economic activity among the various parties affected. This theory has application across a broad spectrum of economic activities, but is particularly important in evaluating the environmental impact of certain kinds of production. By attempting to assess the effects of externalities on the surrounding community, it seeks to determine how best to account for and correct for those externalities, with the goal of minimizing the overall ...

    • Loading...
    locked icon

    Sign in to access this content

    Get a 30 day FREE TRIAL

    • Watch videos from a variety of sources bringing classroom topics to life
    • Read modern, diverse business cases
    • Explore hundreds of books and reference titles