What Is Social Cost?

Social cost refers to the total cost of each production sector in the whole society, and it can also refer to the average social cost of a certain product. The term social cost was first coined by the famous economist Pigou when analyzing externalities. Social cost is the sum of the private cost of product production and the extra cost brought to society by the externality of production. The purpose of sharing and compensating social costs is to promote social equity. Clarify the concept of average social cost to provide a basis for understanding the entire society and mastering the cost management level of the industry. Social cost can also be regarded as an opportunity cost, that is, other economic opportunities where the economic resources of a society must be given up for a certain purpose and which are most profitable.

Social cost

Social cost refers to the total cost of each production sector in the whole society, and it can also refer to the cost of a certain product.

The significance of social cost is that it can reflect the consumption level of the average labor consumption of each institution in the whole society. From a macro perspective, understand how much labor was spent and how many products were created in a certain period of time.

Calculation of the sector or society as a whole

Social cost of education

Education costs refer to direct and indirect education costs paid by students during their education at school. The main contributors to education costs in China are the government and individual consumers. Although government investment in basic education is increasing,

Overview

In the 30 years since reform and opening up, China has made great achievements in socialist economic construction, and the basic structure of a socialist market economic system has been formed. At the same time, we have paid a lot of social costs for the establishment of a market economy system, and we will continue to pay such costs in the future. Not only that, the further deepening of China's reform and opening up and the final establishment of a socialist market economic system also depend to some extent on whether we can correctly understand and effectively solve the problem of reform costs.

The inevitability of social costs in the process of economic transition

Economic transition means a fundamental change in the enterprise system, that is, a change from a traditional state-owned enterprise to a modern company with clear property rights, flexible mechanisms, independent operation, and self-financing. In this process, a large number of redundant employees and excessive social welfare burdens of the former state-owned enterprises must be separated from the enterprises; otherwise, the reformed enterprises will still not be able to obtain equal competition conditions and participate in market competition. Not only that, many companies that are not doing well, are insolvent, have long-term losses, and have no hope of turning around losses will go bankrupt according to law. However, the excessive welfare burden of state-owned enterprises must rely on a comprehensive social security and social assistance system. However, the social welfare system required by the market economy is completely different from the national welfare system in the era of the planned economy in China. It is also in the process of reform and formation and cannot be perfect. As a result, the reform of the social welfare system and the reform of the state-owned enterprise system are intertwined, and the social security issues of some members of society have become quite acute, which has seriously affected the interests of these members of society and caused them to resist the reform policies, resulting in greater damage. Economic transition costs.

Economic transition means breaking the egalitarian distribution mechanism in the era of the planned economy, and establishing an incentive mechanism and distribution system that is compatible with the market economy, so that people's income is consistent with their ability to motivate people to actively work and work. The distribution principle of the market economy is a negation of the egalitarian principle, which will inevitably result in differences in income among members of society. But if this difference is too large, or the formation of income differences is not caused by honest labor, but caused by factors such as power status, human policies, and even illegal crimes, then members of the society will have problems with unfair distribution and differences between the rich and the poor. Greater sensitivity will create negative factors that resist reform. If this problem is not resolved in a timely and proper manner, it will greatly affect the public's recognition and support of the transition process, and then form the transition cost.

Economic transition means a change in the way resources are allocated and the role of the state. The market economy requires that the market mechanism be the protagonist of resource allocation, and that economic entities decide their own production, investment, and consumption activities. Compared with the planned economy, the role of the state in the market economy has changed greatly, from a direct controller and monopolist of resources to an indirect participant and regulator of resource allocation. This change also means that many national institutions and their members will lose their previous powers and interests. In this process of power conversion and reconfiguration, abuse of power, such as the use of power for personal gain and the transaction of power and money, may also occur. Therefore, in the process of economic transition, how to minimize the resistance to the socialization and marketization of monopoly power and monopoly benefits, while taking into account social equity and social benefits, is also an important factor affecting the cost of economic transition.

Social costs of economic transition and its main manifestations

The problem of large-scale laid-off unemployed economic transition-type unemployment and the reform of state-owned enterprises are two sides of the same problem. Due to the overstaffing of traditional state-owned enterprises, many people will inevitably be separated from the enterprise during the process of bankruptcy, merger, and restructuring of the enterprise, resulting in mass unemployment and laid-off. When the unemployment scale reaches a certain level and there is no perfect social welfare system to alleviate the contradictions, the unemployment problem will cause social unrest and crisis, as happened in Russia and some Eastern European countries. In the process of economic transition, the problem of laid-off workers and unemployment has become more prominent with the deepening of state-owned enterprise reforms and the impact of foreign capital entry after China's entry into the WTO. At the same time, due to the low level of economic development and the incomplete social security system in China, it is still not possible to provide a generally high level of social security for the unemployed. This makes the employment problem a serious social problem in China, which is related to social stability and economic development.

Unfair distribution and the differentiation of the rich and the poor in society should acknowledge that the imbalance in the distribution of wealth and income accompanying the economic transition and the difference between the rich and the poor in society all contain reasonable elements. However, as far as the actual situation of the countries in economic transition is concerned, the imbalance in China's current income and wealth distribution has exceeded a reasonable range, making it a negative factor and adverse consequence of economic transition. This mainly refers to: the magnitude of imbalance in income distribution is too large, such as the Gini coefficient that measures income inequality reaches 40% in China; a considerable part of the difference between income and wealth does not rely on legal income but on illegal income or Illegal income in disguise; society lacks a mechanism to correct the imbalance in the distribution of wealth and income caused by economic activities, including the tax system, transfer payment system, social security system, etc.

Loss of State-owned Assets and Illegal Privatization During the reform of state-owned enterprises, due to the lack of social supervision and restrictions on property rights reform, the public selection process has been transformed into an unequal market transaction process, which has led some officials and state-owned enterprise leaders to use the reform to damage public welfare, illegal and illegal Embezzlement of state-owned assets, resulting in a large number of state-owned assets being illegally turned into private property of individuals in the name of property rights reform. In fact, the formation and distribution of the huge gap between the rich and the poor in society is largely inseparable from the loss of state-owned assets and illegal encroachment during the reform of state-owned enterprises. On the other hand, the survival, development, and social security of state-owned enterprise employees depend to a large extent on these state-owned assets that they previously created. The loss of state-owned enterprise assets has made a small number of people rich and most of them damaged.

Diversification of social interests and differences in group interests: The establishment of a market economic system and the diversification of interests inevitably lead to differences in the interests of social groups (groups). This is normal. However, if the differences and contradictions in the interests of different social groups are serious enough to endanger social stability or cause widespread social concern, it will in turn harm the entire social interest. In the process of economic transition, due to the different status and situation of different groups in sharing reform gains and bearing transition losses, people's views on reform and interest orientation will differ, and relations between social groups will become tense and uneasy. . At the same time, due to the existence of certain social corruption and the phenomenon of using power for personal gain, social values are diversified, and the trend of divergent interests among social groups has intensified.

Reduce the social costs of economic transition

To control the impact of the cost of economic transition within a certain limit, there are only two options: one is to definitely reduce the cost of reform, and the other is to increase the affordability of society. Let us first analyze how to reduce the cost of reform.

(1) Correctly handle the relationship between fairness and efficiency. Efficiency first and fairness are the basic principles of China's reform policy.

(2) Establish a sound social security system. With the establishment of the socialist market economic system, the economic functions of the government, especially the investment functions, have become weaker.

(3) Let the masses fully enjoy the fruits of reform and opening up. If the reform process of transitioning to a market economy benefits some people, but the cost of reform is mainly borne by another, then the cost-bearing capacity of the injured will be very fragile, and the society will clearly differentiate, forming a dual value orientation Dual social structure

(4) Let the public participate actively in the formulation and selection of reform policies. The reform process is closely related to the vital interests of each member of society, allowing the general public to participate in reform policy choices and participating in the redistribution of interest decisions, which will certainly improve the society's recognition of reform policies