jpsmith
19
3
jpsmith has not written any posts yet.
jpsmith has not written any posts yet.
I guess thinking of this in terms of externalities maybe isn't quite right. It might be more useful to say that system-level safety is a public good, since, for all the workers in a particular firm, safety would be non-rival (one worker benefitting from a safety measure doesn't prevent other workers from benefitting) and non-excludable (nobody can exclude a particular worker from benefitting from the system-level safety measures).
Each worker only has an incentive to look out for their own safety, not to implement any system-level safety measures. Before the workman's comp laws, firms also didn't have an incentive to provide the system-level safety public good--the cost of providing it must have outweighed... (read more)
This was a very informative read. One thing I've been wondering about a lot lately is to what extent innovation relies on exploiting unpriced externalities, and I think this piece provides a good example.
As you note, the key issue is that safety in a factory involves externalities, and the workman's comp laws effectively internalized the cost of those externalities to the firms. If the workman's comp laws had been in place from the beginning (or if the externalities had otherwise been internalized from the beginning), how would that have changed the course of innovation and technological progress? Would innovation have slowed down, or would we have missed out on some innovations altogether, because it would have been too costly for firms to operate when they were fully internalizing all their external costs from the beginning?
I've mostly been wondering this in the context of pollution, but I think it applies to worker safety too after reading this.
I don't think this is quite right, but I think digging a little deeper here can be informative. In your apples and brass example, there was no technological progress in producing apples, but we still measured real GDP growth of 1.36 using year 1 prices. So real GDP growth doesn't just measure what's happening in the least-revolutionized goods, but it certainly does get dragged down by stagnation in one sector.
As an interesting contrast, consider what would happen if producing apples and brass both became 2x more productive in year 1, causing the... (read more)