Private costs

Second, intervention is justified because social costs may exceed private costs as well as private benefits. For example, when an individual chooses to take a personal automobile to work instead of mass transit, the individual driver receives the short-term benefits (privacy, comfort, speed, and convenience) while the negative social costs (greater air pollution, highway construction, traffic jams, and resource depletion) are shared by all. Intei vention usually is an attempt to lower the social costs. Flowever, the prob-... 

The problem of the choice of environmental policy instruments has been an issue since Pigou [2] analyzed the need for state intervention when private costs diverge from social costs and suggested that the solution would be to internalize the externalities through taxation.1 Coase [4] criticized the proposed state intervention and affirmed that there is no reason to suppose that governmental regulation is called for simply because the problem is not very well handled by the market or the firm. 

In general, economic inefficiency in resource allocation would be the result of a divergence between private benefits or costs and social benefits or costs, i.e. the result of externalities. Private costs (or internal costs) are directly taken by the buyer. Private costs for a transport user would, for example, include expenses for wear and tear, energy cost of vehicle use, transport fares, taxes and charges, as well as welfare effects such as own time costs. 

Social costs reflect in this example all costs occurring from the provision and the use of transport infrastructure, such as wear and tear costs of infrastructure, capital costs, congestion costs, accident costs and environmental damage costs. Some of these costs are already indirectly included in the private costs through taxes and charges, while others are not. In the context of environmental economics, private and social aspects are of importance. Mainly since it is often the case that environmental degradation is a social cost caused by private activities. Hence, the distinction between private and social is as presented above another impact of costs not being properly internalized in prices. 

Direct and indirect costs are compared public and private costs are estimated at 3.5-4 times those for EPA in 1981. Among the former is loss of innovation. While several studies of this factor have been made for the industry, their reliability is questioned, due in part to lack of sound data prior to 1976. No mention was made of economic trends affecting corporate expenditures for research and development, or of trends in the maturation of industrial chemistry itself. Other indirect costs, such as concentration of manufacture within the industry, may result from costs of compliance, especially for smaller manufacturers. These factors were not compared with extrinsic factors, such as shifts in feedstock supply and commodity manufacture from the United States to other countries. 

The cost of TSCA administration is high. Hundreds of people are now employed in the Office of Toxic Substances. Direct public and private costs total millions of dollars and there may be other indirect costs that cannot be estimated. Certainly some things could be done to get more for our money. The PMN system could be modified to spend less time on low-risk chemicals. The ability to regulate existing chemicals should be increased. Voluntary compliance by industry should be stressed because it is cheaper and more efficient, but this must obviously be backed up by the possibility of regulatory action by the government. 

Push mechanisms induce firms to undertake research in specific areas by reducing the firm s private cost of research. There are two widely used types of push mechanisms direct funding incentives and tax incentives. Tax incentives reduce the firm s cost of research by allowing tax credits for relevant research and may be useful in some situations. 

Internal costs, also called private costs, which are those appearing in company s accounts, as well as those incurred by consumers or other stakeholders. These costs have a dear market value. In this group we find conventional costs (materials, fuels, labor, equipment, etc.) and potentially hidden and less tangible costs, which are usually assigned to overheads in company s accounts (permits, post-closure care, liability costs, etc.). 

The capital market in the United States is distorted by the corporate income tax which increases the before tax return to corporate capital and reduces the before tax return to capital in the remainder of the economy from the level which would prevail in the absence of the taoc. V/hile the private rates of return on capital are used to estimate the expected present value of private cost saving, the social opportunity cost of capital is used to evaluate the expected present value of the social cost savings. 

The tensions between commercial and safety concerns have undoubtedly been heightened by privatization. Costs are increasingly visible as commercial interests become more prominent and tendering is important. The Inspectorate s Plan of "Work 1996—97 noted ... 

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