Monday, May 26, 2008

True Cost

I was walking home the other day looking at posters pasted up on the fence around a building site. "I've no objection to flyposting in places like this..." I thought, " long as the people who do it pay the costs of clearing it up..."

Then I caught myself. Just how exactly do you go about doing that?

It's a commonplace view in economics these days, the doctrine of making people and organisations pay externalities, 'shadow prices' or 'true cost', or whatever you prefer to call them. The logic's basically like this. The market system works fine, except that people can get away without paying for a range of things. Including some very important things, like pollution. So what's needed is to bring those costs into the transaction - make companies pay £10 for every ton of carbon they emit, or £100,000 for every endangered animal they kill, and so-on. That pushes production and consumption away from bad things, and allows you to compare different bad things - it's worth killing one endangered animal if it saves 10,000 tons of carbon emissions.
Maybe it's not fully come into the world of politics, or everyday use - probably because those two are more practical - but it's fundamental in a lot of economics, and to quite a bit of political (especially environmental) activism.

Can you really put a price on everything like that, and make people pay it, though? It's a massive project, even supporters must agree.
The question's certainly not novel - it's pretty obvious, but other day it struck me just what this whole idea is really like; it's one of those great, and always slightly loopy, projects to bring everything under one philosophical system. In particular the enlightenment project to rationalise the world. In its way it's a much more encompassing system than traditional economics - that's happy to forget about all the extra bits and pieces and either to leave them to other fields or insist they're ignored.

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