Externalities, Perverse Incentives, and Willful Ignorance

It is difficult to get a man to understand something, when his salary depends upon his not understanding it!

Upton Sinclair

I claim no expertise or training in the study of economics. However, I do know a decent amount about how matter and energy flow through ecosystems, and I’m very curious when I see the ways in which matter and energy in human-controlled systems don’t seem to follow the same rules. I’m also quite concerned that the rules we’ve made up don’t accurately reflect the underlying ecological and social costs of various activities. Not only are we contributing to ongoing harms and setting ourselves up for some very unfortunate surprises, but we’re also feeding ourselves false information that distorts our ability to make good decisions.


Odum (1957), Trophic structure and productivity of Silver Springs, Florida

“Economics” and “ecology” both come from the same root word: the Greek oikos, meaning “house.” I’m worried that we’re fouling our own nest, that we’re cutting down the tree that supports our treehouse, because we don’t recognize it as part of our home. I’m talking about externalities, and specifically negative externalities: the burdens that economic activities push off onto third parties, and which are not counted in the way we assign values and costs. This information never makes it to the consumer in the form of the “price signal“—or, if it does, it’s often signaling in the wrong direction. Thanks to my training as an ecologist (not to mention a bit of ecological anthropology), I can tell you something depressing about nearly any consumer product you might be thinking about buying. Unfortunately, the nominally-less-depressing products (Cradle to Cradle Certified, fair-trade certified, LEED, FSC, MSC, etc.) are often significantly more expensive. To a certain extent, these companies have internalized their externalities, but instead of being rewarded for meeting this basic standard, they incur economic penalties relative to their competitors who throw their externalities to the wind. And the sea. Not to mention rivers, groundwater, topsoil, forests, tomcod, albatrosses, babies, low-income communities, and you. And, yes, people with money can choose to pay extra to display their ethics as a means of costly signaling—but that doesn’t make sense on a system-wide scale. Green consumerism is not going to solve fundamental distortions in the ways we measure value and blind spots in the information we use to decide what strategies work best to meet our needs. Incorporating accurate and comprehensive ecological and social costs into our current system is not trivial. There are significant technical challenges involved in measuring how different actions affect the health of ecosystems and communities, and predicting the outcomes of interventions in complex systems is never easy. The destabilization of our ecological support systems is one of the most pressing near-future existential risks facing our civilization. Where is the social and political will to address these hard questions about how we relate to our environment and each other? Look again at that quote from Upton Sinclair, at the top of the page.

Non-Zero-Sum Games

Hug O’ War, by Shel Silverstein

A zero-sum game is like a game of tug-of-war. The center of the rope starts off at zero, and if one side gains ground, the other side loses ground. Positive-sum situations, in contrast, invite cooperation to build value through the interaction. According to the Less Wrong folks, zero-sum bias is “arguably the major obstacle to a Pareto-efficient society.” Pareto efficiency is “a state of allocation of resources in which it is impossible to make any one individual better off without making at least one individual worse off” (source). (Did you know that Wiccans strive for Pareto efficiency? “An it harm none, do as ye will.”)

Gift Economy

This short film by Charles Eisenstein brings into sharp focus the ways in which our ideas about identity shape our economic frameworks and actions. It’s based on his book Sacred Economics, which you can read online.

So far, I’ve only experienced gift economies that draw from the excesses of our current growth economy, as opposed to being sustainable in themselves. For example, groups like Food Not Bombs glean discarded food from the bottom of the system and share it with all comers, and burners largely work within the system to save up the capital that fuels temporary blooms of pyrotechnics and social experimentation and gifting. Did you know that Burning Man works on a gift economy?

Even temporary gift-based interactions can be incredibly refreshing and reconnecting experiences. One of the most useful tools I’ve found for thinking about giving and receiving assistance gracefully is the idea of “experiencing needs as gifts.” Marshall Rosenberg, who developed the technique of Nonviolent Communication, has an excellent audio lecture on this topic, which can be bought here. (Many folks have also chosen to gift their copy to a variety of torrent sites, which brings up a whole new set of questions about dealing with post-scarcity economics!)


Post-Scarcity Anarchism, by Murray Bookchin (PDF)

(On my reading list!)

Short Fiction

Maneki Neko,” by Bruce Sterling

AI-facilitated gift economies! Fun, compelling story

Transition Movement

The Transition movement started in the UK in 2006 and has since grown branches in the United States and around the world. Their REconomy project is “a model for creating local, low-carbon economies that foster and support community resilience in the face of economic instability, resource scarcity, and climate change.”

agalmics (uh-GAL-miks), n. [Gr. “agalma”, “a pleasing gift”]
The study and practice of the production and allocation of non-scarce goods.