Social Cost

Social cost refers to the total harm or expense caused by an activity, considering both private costs (borne directly by those involved) and external costs (imposed on society or others who are not directly involved). For example, pollution from a factory not only affects the company's expenses but also impacts the health, environment, and quality of life for the broader community. Understanding social cost helps policymakers and businesses evaluate the true impact of actions, encouraging more responsible decision-making that accounts for all consequences, both immediate and societal.