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Lunch with Pigou: Externalities and the “Hidden” Cost of Food

Published online by Cambridge University Press:  15 September 2016

Jayson L. Lusk*
Department of Agricultural Economics at Oklahoma State University and the Samuel Roberts Noble Distinguished Fellow at the Oklahoma Council of Public Affairs
Correspondence: Jayson LuskDepartment of Agricultural Economics411 Ag HallStillwater, OK 74078Phone
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Social critics have taken aim at modern production agriculture using a common theme: many food, health, and environmental problems are explained by corporate farms, agribusinesses, and fast-food restaurants failing to account for the full costs of their actions. How accurate is this diagnosis? How feasible is the assumption that these externalities are most effectively mitigated via Pigovian taxes and subsidies? Drawing on my experiences at a National Institute of Medicine meeting on the subject, I seek to clarify the definition and nature of externalities and discuss situations in which public policy is most and least effective in efficiently making “hidden” costs of food visible.

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Copyright © 2013 Northeastern Agricultural and Resource Economics Association 

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