Bad (economics)

An economic bad is the opposite of an economic good. A 'bad' is anything with a negative value to the consumer, or a negative price in the marketplace. Refuse is an example of a bad.

A bad is a physical object that lowers a consumer's level of happiness, or stated alternately, a bad is an object whose consumption or presence lowers the utility of the consumer.

With normal goods, a two-party transaction results in the exchange of money for some object, as when money is exchanged for a car. With a bad, however, both money and the object in question go the same direction, as when a household gives up both money and garbage to a waste collector being compensated to take the garbage. In this way, garbage has a negative price; the waste collector is receiving both garbage and money and thus is paying a negative amount for the garbage.

Goodness and badness are an inherently subjective declaration, however. As an example: two diners at a restaurant discover that the "secret ingredient" in the house specialty is peanuts. One of the diners is a peanut-lover, and the other is allergic to peanuts. In this case, peanuts are, in the same time and in the same place, both a good and a bad in economic terms.

Additionally, a good consumed by the same individual can turn into a bad over time, and vice versa; the nicotine from cigarettes may give a smoker a feeling of relieved anxiety and reduced stress. Continuing, long-term consumption of cigarettes, however, may have serious adverse effects on a smoker's health, thus turning the utility of cigarettes into the negative. On the other hand, some forms of medical treatment or side effects of medication may seem rather unpleasant to a patient at the time of treatment, but will greatly improve their health and well-being in the long run.

References

Varian, Hal R. (2006), Intermediate Microeconomics (London: W.W. Norton & Company)
Peter Smith (2012), "Bad Economics" (Melbourne: Connor Court Publishing)

References

See also