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 th...
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...
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 on... (read more)