We help your business grow: Embracing externalities

Friday, March 8, 2019

Embracing externalities

The world is better because industrialism made it better.

The world is worse because industrialism made it worse.

When a factory makes something that people want, they buy it. When a competitor improves it, it gains in market share. When a third competitor becomes more efficient and lowers the price, even more is sold.

And so we have safe, clean, cheap food that can sustain us. We have antibiotics that can save a life. We have transportation systems that just a hundred years ago would have seemed like a fantasy.

The ratchet of industrialism is tied to the fast-moving cycle of the market, fulfilling needs and wants and making a profit.

That same system, though, is insulated from the damage it causes. When a factory makes a product but pollutes the river that flows by it, the factory doesn’t pay for the pollution unless required to. When a marketer seduces people with short-term delights that cause long-term health problems, the marketer doesn’t pay for it, the customer does. And when the weapons manufacturer produces ever more lethal weapons, it’s the person who stepped on the land mine who pays the price, not the person who made it or purchased it.

The opportunity is simple to describe but requires real effort to achieve: the community must enforce systems that build the external costs into the way that the industrialist does business. Faced with an incentive to decrease bycatch, waste or illness, the industrialist will do what industrialists always seek to do–make it work a little better, a little faster, a little more profitably.

Industrialism can’t solve every problem, but it can go a very long way in solving the problems that it created in the first place.

When facing a long-term, chronic challenge, we can look for a ratchet, a long-term positive cycle that helps us overcome that challenge.

Externalities aren’t external, and we shouldn’t treat them that way.