Tuesday, January 22, 2013

Total Social Benefit


Total social benefit, according to Hyman (2011), is the quantity of economic good available in a given period that provides certain satisfaction to those who consume it. Taxpayers expect to get acceptable returns for every penny spent though that may not be the case as services provided may not meet their expectations. Populations often make poor economic projections either because they do not have the knowledge or they may be driven by interests that suit their political contributors. When a good is provided to deliver extra gain, society expects to gain marginal social benefit.

The minimum amount of money required to compensate producers of a certain good is the marginal social cost. The amount spent on that good could be a $1 though producers could be better off if they received more than the $1 initially spent. The politician’s calculation of the social benefit for space exploration sets a bad economic precedent.  Because his poor mathematical calculations could cause economic strangulation, the measure must be reversed or else the results could be catastrophic and financially burdening for the state coffers and taxpayers. When total social benefit equals total social cost, we could expect negative gain and no loss. The efficiency of a provision can be realized when there is equality of marginal social benefit and marginal social cost.

References

Hyman, D.N. (2011).Public finance: A contemporary application of theory to policy. Thousand Oaks, CA: Sage Publications, Inc.

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