Uop Team Week 5

Externalities

Douglas Price, Paul Pullins, Isabelle Rogers, Angenette Reed

ECO 365

May 25, 2014

Jason Foster

Externalities

Externalities are situations that arise by means of influences upon people, communities, companies and corporations and even nations that affect the outcomes whether it is positive or negative. Externalities in a positive form can be found in any benefit that a pharmaceutical company has produced in one of any medications it produces, its success in cures or life enhancements. The negative externalities may be found in the side effects or the contamination of any of the medications they have produced; either way there are always some forms of externalities (Zilberman, 2012).

Externalities of the Pharmaceutical Industry

An externality as defined by Colander (2010) is when someone, such as a person, or something, such as a firm, makes a decision without taking into consideration the effect it may have on a third party. Positive externalities occur when the consumption or production of a good benefits a third party or when the benefits for society are greater than personal benefits. Negative externalities occur when the cost to society is greater than the cost to consumers (Colander, 2010). Both positive and negative externalities can be observed in the pharmaceutical industry. Positive Externalities

Medications are used to treat a patient with an infectious disease. Yet, others benefit from the treatment as well because the patient is not spreading the disease to others. Immunizations protect an entire group or even society. “…if enough people are treated or are immune to a disease, others around them will not catch it and prevalence will be reduced,” (Pillman, p. 1, 2012).

Negative Externalities

Water pollution is a negative externality that occurs in the pharmaceutical industry. According to a research briefing for the Sustainability Accounting Standards Board, millions of pounds of pharmaceutical compounds...