Economists Need to Understand the True Cost of Goods

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This short article (via Manan Shukla) tells a simple but profound story told by an economist living in Chile. He lives in an area that has some of the best dairy products in the world and he was surprised to find that the butter he was offered in a restaurant came from overseas. The butter from overseas had a lower price than local butter because of government subsidies which overcame the cost of transport. The cost of transport to the environment, however, is not part of the cost structure that economists would consider relevant. Environmental damage is not internalized so it does not exist.