social costs

Social costs refer to the total negative effects of an activity on society, including both private costs (borne directly by individuals or businesses) and external costs (imposed on others or the environment). For example, pollution from a factory not only harms the environment but also affects public health and healthcare costs. These external costs are often not reflected in the activity’s market price, leading to overconsumption or overproduction. Recognizing social costs helps policymakers implement regulations or taxes to reduce negative impacts and promote overall societal well-being.