An economic bad refers to a negative outcome or impact that results from business activity and consumption. This is in contrast to an economic good, which refers to a positive outcome or impact. Economic bads may arise as a consequence of producing goods, and it is important for economic systems to consider and account for both economic goods and bads. The following are illustrative examples of an economic bad.
Pollution such as air pollution. For example, a factory that produces $1 million in goods per month and $7 million in damages to quality of life due to air pollution.
Loss of Resources
Loss of resources such as poorly managed agriculture that results in soil erosion.
A food item that causes poor health and disease.
An economic process such as transport that results in noise pollution.
Risk such as a highly speculative investment product that constitutes a risk to the stability of a financial system.
Loss of privacy such as a company that loses confidential data about customers to a malicious entity.
Misinformation such as a promoter of an investment that spreads false rumors.
Destruction of Value
Incentives or systems that destroy value. For example, an executive who stands to make a great deal of money if a company is sold, even if the stock declines 90% before the sale occurs. An example of perverse incentives.
Quality of Life
Other impacts to quality of life such as loss of freedom, stress and fear. For example, a pollution emergency that restricts people’s freedom of movement as it’s dangerous to go outdoors.