Abstract
The purpose of this paper is to show that Karl
William Kappʼs theory of social costs is a part of the broader research field of social value theory and to clarify how he drew policy implications from the social value theory. Kapp argued that theories in mainstream economics related to ex-ternal diseconomies cannot be applied to phe-nomena like the occurrence of photochemical smog. This is because these phenomena are dis-continuous and nonlinear and cannot be fit into the framework of arithmetic, economic calcula-tions by firms. His theory of social value ex-plains such phenomena by using a model with dynamic interactions among multiple systems （physical, biological, and economic systems）and their subsystems. According to the theory, individual organisms and the economy exist in a holistic system, repeating metabolic processes and maintaining dynamic states of balance （or a disequilibrium steady state）. Dynamic states of balance can be sustained as long as the scale of pollution or natural resource depletion is small; however, if the scale exceeds the threshold, dy-namic states of balance no longer hold. For this reason, Kapp advocated the setting of minimum tolerance limits （Mindesttoleranzgrenzen） that would be necessary for the continued existence of individual organisms and the economy.
JEL classification numbers: B25, B31, Q51.
