The social cost of poverty is surely an externality. If you don't pay people enough to cover their healthcare, to give them the ability to provide a stable family environment or have a reasonable housing situation then the cost will have to be paid somewhere else in the system. And it probably will cost the economy more the further down the line it finally bubble up.
> The point of letting the market modulate supply and demand is that it encourages an economically optimal allocation of resources.
Only assuming a perfect market. Which is about as plausible a concept as a socialist paradise. The real world is messy and imperfect. People aren't rational actors. Laws are imperfect. Regulators are corrupt. Information doesn't flow everywhere equally. Monopolies and cartels exist.
>The social cost of poverty is surely an externality.
There may be some externalities associated by poverty, but the same could extend to taxing corporations more. You don't reduce poverty by moving private wealth around by government fiat anyway.
>Only assuming a perfect market.
Free markets are an ideal to strive toward. The unattainability of the ideal isn't a reason to abandon its pursuit. Economies work better when the ideal is pursued and artificial barriers to contracting and private property rights aren't hoisted on people via legislation.
But I digress, if you'd like to discuss this in more detail, please post a thread in a more appropriate forum.
The social cost of poverty is surely an externality. If you don't pay people enough to cover their healthcare, to give them the ability to provide a stable family environment or have a reasonable housing situation then the cost will have to be paid somewhere else in the system. And it probably will cost the economy more the further down the line it finally bubble up.
> The point of letting the market modulate supply and demand is that it encourages an economically optimal allocation of resources.
Only assuming a perfect market. Which is about as plausible a concept as a socialist paradise. The real world is messy and imperfect. People aren't rational actors. Laws are imperfect. Regulators are corrupt. Information doesn't flow everywhere equally. Monopolies and cartels exist.