Earlier this month, I wanted to spend some time with my friends by breaking bread with them. So we walked over to The Biltmore and had dinner. While we were eating dinner, something seemed off to me. The food tasted good, the company was good, but I felt an imbalance of costs and benefits! But the strange thing was, I didn't miscalculate the cost (I thought of everything from monetary to time costs), but rather, I miscalculated the benefit! All of a sudden I realized that Crozet Pizza–which is located right next to the Biltmore–had booked a live band for that same night. This practice is common at Crozet as bands have been shown to (potentially) be a great financial benefit to a restaurant/bar. Since they were playing outside, I could enjoy the music at Crozet while eating food at Biltmore.
After I remarked how lucky we were to one of my friends, the conversation quickly devolved into an argument. My friend remarked that this remarkable event was a positive externality; I remarked that it was a public good. After having some time to think about things, I realized that we were both right. First I realized that this was a positive consumption externality. "Positive" because my friends and I were benefitting without having to compensate another person and "consumption" because Crozet was not being compensated for consuming live music. If markets were perfect, we (or more accurately, Biltmore) would have been paying some money to Crozet. But this is also a public good because Crozet could not exclude us from using the good nor did their consumption of listening to live music affect our consumption.
After my friend and I finished our discussion on the economics of that night, we moved towards maximizing our utility by spending more time with each other and our friends!
No comments:
Post a Comment