17.5 The Relationship Between Social Goods
and Externalities
Social goods generate value through their interaction on social systems and
interdependencies – arising from the social nature of the same goods. Social goods
demonstrate their value as system-effects – i.e., effects observed when the system
(or network) is analysed from a macro-level, rather than at the micro-level where the
performance of individual actors within the system are analysed. This value might be
probably measurable in terms of system performance, scope, robustness, or growth.
Sometimes, the value may show up as individual effects disseminated across a social
group, for example, when the good satisfactorily meets the preferences of group
members. Or these effects may be combined.
Social goods contrast from classic private or public goods in two correlated ways:
(1) how they create value; and (2) the types of externalities associated with the good.
The value of both private and public goods is obtained when consumed or used.
The person may consume or use it to accrue benefits (value, utility, happiness, etc.).
With their rivalrous character, private goods create value for a particular consumer,
while public goods may be beneficial to many consumers. Producing public goods
will potentially generate positive externalities. The conditions of access and how the
producer internalizes the value obtained by others will determine whether the
benefits are external to production or not. For example, a person planting flowers
in his front yard generates potential positive externalities for persons who walk by
and appreciate their beauty. These persons will obtain some pleasure. The view and
enjoyment of the flowers is nonrivalrous, because the pleasure received (consumed)
by one person does not eliminate the view or beauty, nor the pleasure available to
other persons. However, this pleasure received depends on access. If the homeowner
builds a fence to obstruct, he restricts effective access to admiring the flowers, and
the potential for positive externalities is not fully tapped. If there is no such fence,
access to the view is unrestricted and external benefits may be obtained.
In contrast, social goods do not manifest their value directly, rather in a more
osmotic fashion as they impact on social welfare through a modification or change of
environmental conditions and social interdependencies. If democratic dialogue or
education are considered, while active participants may obtain direct benefits
through their activity, nonparticipants and nonconsumers also gain from the way
societal conditions are modified by the dialogue or education and the systemic
effects induced. The institutional and social environment improves. These effects
do not depend on access and use conditions as for private and public goods, nor are
linked to the characteristics of public goods (nonrivalry, nonexcludability). Rather,
these effects rely on how members of a social group or community relate to each
other and how the good under consideration relates to those relationships and
interdependencies.
To recap, public goods production can potentially induce positive externalities for
nonpaying consumers and users, while producing social/nonmarket goods creates
diffuse externalities.
17.5 The Relationship Between Social Goods and Externalities
483
and Externalities
Social goods generate value through their interaction on social systems and
interdependencies – arising from the social nature of the same goods. Social goods
demonstrate their value as system-effects – i.e., effects observed when the system
(or network) is analysed from a macro-level, rather than at the micro-level where the
performance of individual actors within the system are analysed. This value might be
probably measurable in terms of system performance, scope, robustness, or growth.
Sometimes, the value may show up as individual effects disseminated across a social
group, for example, when the good satisfactorily meets the preferences of group
members. Or these effects may be combined.
Social goods contrast from classic private or public goods in two correlated ways:
(1) how they create value; and (2) the types of externalities associated with the good.
The value of both private and public goods is obtained when consumed or used.
The person may consume or use it to accrue benefits (value, utility, happiness, etc.).
With their rivalrous character, private goods create value for a particular consumer,
while public goods may be beneficial to many consumers. Producing public goods
will potentially generate positive externalities. The conditions of access and how the
producer internalizes the value obtained by others will determine whether the
benefits are external to production or not. For example, a person planting flowers
in his front yard generates potential positive externalities for persons who walk by
and appreciate their beauty. These persons will obtain some pleasure. The view and
enjoyment of the flowers is nonrivalrous, because the pleasure received (consumed)
by one person does not eliminate the view or beauty, nor the pleasure available to
other persons. However, this pleasure received depends on access. If the homeowner
builds a fence to obstruct, he restricts effective access to admiring the flowers, and
the potential for positive externalities is not fully tapped. If there is no such fence,
access to the view is unrestricted and external benefits may be obtained.
In contrast, social goods do not manifest their value directly, rather in a more
osmotic fashion as they impact on social welfare through a modification or change of
environmental conditions and social interdependencies. If democratic dialogue or
education are considered, while active participants may obtain direct benefits
through their activity, nonparticipants and nonconsumers also gain from the way
societal conditions are modified by the dialogue or education and the systemic
effects induced. The institutional and social environment improves. These effects
do not depend on access and use conditions as for private and public goods, nor are
linked to the characteristics of public goods (nonrivalry, nonexcludability). Rather,
these effects rely on how members of a social group or community relate to each
other and how the good under consideration relates to those relationships and
interdependencies.
To recap, public goods production can potentially induce positive externalities for
nonpaying consumers and users, while producing social/nonmarket goods creates
diffuse externalities.
17.5 The Relationship Between Social Goods and Externalities
483