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Comment by chii | Hacker News Reader

> where a community bans running a business from a residence and accidentally wiped out a major tech company from being founded.

the benefits of the business goes to the private person running the business from their residence.

But the externalities falls to the community (or at least, shared by the community).

Therefore, a community wanting to ban a business from a residence is very valid imho.

However, if the business could either prove there are no externalities, or compensate for it in some way, then there should be room for negotiation, rather than a straight outright ban.

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I would suggest that in a lot of cases, e.g. "where does the local slaughterhouse go?" or "should we allow small, affordable apartments for poor people?", there are also significant positive externalities...except, if you live in the area, the benefits don't outweigh the costs. That's what gives NIMBYism its name: the proverbial NIMBY likes to buy a steak dinner on Friday night, provided the cows aren't slaughtered nor the workers housed in their backyard.

Therefore, a community wanting to ban a business from residence is the kind of problem that can only be dealt with from a higher level of government, which can distribute negative and positive externalities in a more-or-less even way. It is absolutely not "valid", on the assumption that valid means permissible, for a community to defect on its share of the negative externalities while still taking in the positive externalities from the rest of the country.

Yeah I’ve never seen an argument that credibly analyzed all positive and negative externalities.

There’s just a blind assumption that it’s net positive for 100% of the population within a certain area, without any solid basis whatsoever.

> "where does the local slaughterhouse go?" or "should we allow small, affordable apartments for poor people?"

Freudian

That's a deliberate combination of an "undesirable" business and its workers, not some accidental slip-up to be psychoanalysed by an Austrian pervert.

> the benefits of the business goes to the private person running the business from their residence.

Typically a business sells services enjoyed by the community. A grocery store shortens the time to buy food and so on.

> A grocery store shortens the time to buy food and so on.

a non-patron of the store still incurs the externalized cost of a store (such as increased traffic, noise, etc). A patron of said store has benefits which offsets those externalized costs, but not for the non-patrons.

>the benefits of the business goes to the private person

It's not 0 sum. Someone else, potentially from the community, also gets value in exchange.

And nobody has stated the obvious but taxes from that business go back to the community too.

that's why i call the cost an externality.

A business profiting off making goods/services for a community is good and all, but can still produce externalities, for which everyone, including those who _didnt_ participate in the business transactions, would pay.

Or benefit from. Externalities can be positive or negative. The median business has net positive externalities.

positive externalities are charities, or non-profits at least.

There are zero private businesses which generate positive externalities that they do not charge money for (and if they did, then it's no longer an externality). To do so would mean they leave money on the table! They can only shed negative externalities.

> To do so would mean they leave money on the table!

Generally it means that they can't capture the full value they add.

If I have a business installing domestic solar panels, I can capture the economic benefit to a homeowner of getting cheaper electricity, but not the broader impact of helping to decarbonise the grid.

(There might be a subsidy for this business where you live, but that's irrelevant: in principle a business like this can exist and be profitable without capturing all of the value it creates).

I’d suggest cafe seating as a positive externality. The people eating are paying for the food, and table. But passersby and neighbors are gaining eyes on the street, the prospective social interactions, etc. The foot traffic might also be enough for another small business to consider open, and thus begin maintaining the store front and street. These things have utility to people who are not paying to eat or drink at the cafe.

That's not at all how it works.

A trade takes place when both buyer and seller feels they gain something from the transaction. In general neither side captures all the surplus value, if they did the trade would not happen.

Yeah, that's not true.

> the benefits of the business goes to the private person running the business from their residence.

Throughout my life I have benefited from the fact that I live in a place with successful businesses and a strong economy.

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