Question

What are some of the factors that could make social user costs different from private user costs in the case of mineral extraction?

Answer 1

Private user costs are a part of the social user cost i.e. social user costs takes into account both the private user cost and the externalities caused due to the activity being carried out. Externalities can be of two types, positive externality and negative externality.

So, the factor that could make social user costs different from private user costs in the case of mineral extraction is the negative externalities that is being imposed on the society as a whole. The negative externalities include air pollution, noise pollution, destruction of the environment where the mineral extraction is being done and lack of public safety. Air pollution occurs because gases such as sulfur dioxide and particulate emissions are released into the atmosphere. Sulfur dioxide when released into the atmosphere reacts with atmospheric water vapour to form sulphuric acid and comes down to the surface of the earth in the form of acid rain. The acid rain harms agricultural lands and corrodes historic buildings. Noise pollution occurs when large machines and dynamites are used to break the ground to extract the minerals underground. Many plants and wildlife are destroyed in the area where the mineral extraction is done and hence it affects the environment severely. The public safety also becomes a cause for concern because the old mining sites become dangerous to people since there are dangers of the ground sinking down where extensive underground mining has been done.

Hence, due to these negative factors being imposed on the society, the social user costs is greater than the private user costs where the private user is only concerned with his/her profit from selling the minerals to the market.