### Date : 2024-08-15 14:13 ### Topic : Classic example of a positive externality where the social benefits exceed the private benefits #macroeconomics #healthcare #externality ---- ### Breakdown of the Concept: 1. **Private Benefits:** - These are the direct benefits that an individual or entity receives from an action. For example, when a person gets vaccinated, the primary private benefit is their own protection against disease. 2. **Social Benefits:** - Social benefits include both the private benefits and the additional benefits that others in society receive as a result of the action. Continuing with the vaccination example, the social benefits include not only the protection of the vaccinated individual but also the reduced likelihood of disease transmission to others, which contributes to overall public health. ### Example: Vaccination - **Private Benefits:** The individual who receives a vaccine is less likely to contract the disease. This is a direct, personal benefit. - **Social Benefits:** The individual's vaccination also reduces the risk of spreading the disease to others (herd immunity). Even people who are not vaccinated benefit from lower disease prevalence. This broader impact on public health constitutes the social benefit. ### Why Social Benefits Can Exceed Private Benefits: In cases like vaccination, the total benefit to society is greater than the sum of the benefits to the individual because the positive externalities (such as reduced transmission of disease) benefit many others in the community. This is why certain actions that may have limited appeal on a purely individual basis can have significant societal value, justifying public policies that encourage or mandate such actions (e.g., government-funded vaccination programs). ### Policy Implications: When social benefits exceed private benefits, there is often a rationale for government intervention. For instance, governments may subsidize vaccinations because individuals might not fully appreciate or act on the broader social benefits of being vaccinated. Without intervention, the positive externality might lead to under-consumption of vaccines, which could result in higher overall public health costs. ### Conclusion: In summary, when "social benefits exceed private benefits," it indicates that the action has broader positive impacts beyond the individual, contributing to greater overall welfare in society. This concept justifies various public policies aimed at increasing the provision or uptake of goods and services that generate significant positive externalities. ### Reference: - ### Connected Documents: - [[Potential Externalities in the South Korean Healthcare Market]] - [[13.1 Externalities and Market Failure]]