As an Education Partner and Board member of ISSP, I’ve been doing a deep dive into the ISSP-SA Study Guide. Even after years of being in the profession, I’m still finding the contents fascinating and enlightening.
One well-known concept that jumped out at me recently is externalities.
In the Study Guide you’ll find:
As noted by free-market economist Milton Friedman, “An externality is the effect of a transaction . . . on a third party who has not consented to or played any role in the carrying out of that transaction.”
Economists are in wide agreement that a fundamental flaw of market-based economies is that prices do not reflect externalities.
By not including externalities in prices, the economy effectively subsidizes less sustainable products and services–making them more competitive in the marketplace.
I’d like to say that this jumped out at me because I’ve been exploring the intersection of economics, empathy, and sustainable design. But to be honest, I think it’s because on most days this summer and fall, I’ve been subjected to the uniquely irritating sound of gas-powered leaf blowers. They are loud enough to require me to close all of my doors and windows to have a video meeting. They feel relentless and have been driving me crazy. I was reading the ISSP-SA Study Guide outside over the weekend, trying to enjoy the last of the beautiful weather before the fall rains set in when — guess what — the leaf blower barrage kicked in. It was then that I realized that I was the “third party who has not consented to or played any role in the carrying out of that transaction”.
The ISSP-SA Study Guide explains:
Prices are the universal language of an economy.
In the highly competitive global market economy, corporations must maximize externalizing of costs to compete on price. Former CEO and sustainability leader Ray C. Anderson described the corporation’s incentive as to “externalize any cost that its unwary or uncaring public will allow it to externalize.”
For me, this externality is just an irritation; however, it reflects the lack of empathy in our economy and, by extension, in our cultural norms. It reveals that the more we allow the economy to drive and define our sense of ourselves and our society, the harder it is for us to feel and express empathy. We seem to have allowed ourselves to become an “uncaring public”.
As the ISSP-SA Study Guide points out:
By not including externalities in prices, the economy effectively subsidizes less sustainable products and services–making them more competitive in the marketplace. For this reason, accounting for externalities is an imperative if society wants to achieve sustainability.
Economic forces encourage people to say, “I really don’t care, do you?” Well, I really do care — and I know you do, too. That’s why I believe that sustainability is possible.