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My book, The Illusion of Choice, is about  how the market economy is only partially a means for human choice to determine the course of things.  The system itself has its own inherent dynamic which, if not corrected by means of collective decisions made through government, will take a society in a direction chosen by the system, and not the people.  The market steers in certain directions because it sees and is responsive to some areas of value while it is blind to others.

There are several aspects of this.  One of these is what economists call "externalities".  These are impacts of market transactions on people or systems that are not party to those transactions.

Here i€™s a passage from the book which examines this problem.  It begins with the problem of ice on the roads in winter, and what solutions people choose for dealing with the problem.  The market gives out information through its pricing.  The market ideologues treat “market prices” as embodying great wisdom.  But the blind spots corrode that wisdom significantly.

Quoting:

€œ"Rock salt is quite effective in keeping both private driveways and public highways from icing up, The runoff of the salt, he explained, causes damage to underground cables, car bodies, bridges, and groundwater. The cost of these damages is twenty to forty times the price of the salt to the person or organization buying and using it. There is an alternative product to rock salt that produces no such damage from runoff. It is called CMA, and it costs a good deal more than the salt. It costs less, however, than the damages the salt inflicts. Yet, as Morris writes [in a Washington Post article], 'No highway department, homeowner or business would purchase large quantities of CMA today even if it were widely available, because the individual doesn't care about cost, only price.'"
Rock salt is an example, but (I continue):
€œ"How is rock salt different from a million other things we use and countless things we do except, perhaps, in degree? The cost of rock salt is many times higher than its price. But are not the costs of most things we consume in our economy higher than their prices? Everything that in production or use involves the consumption of carbon-based fuels is contributing to the greenhouse effect, which, according to present scientific consensus, threatens disruption of the global climate and possible world-wide famine within a human lifetime."€
The market ideologues, like Milton Friedman, know about the problem of externalities. But they don’t seem to recognize how significant are the implications of this problem for their overall rationale for putting our destiny into the hands of the market.
€œThose of the Milton Friedman school just don't seem to realize that these externalities are so pervasive that, like so much rock salt sprinkled liberally across the landscape, they rust out the iron-clad logic of the market ideology. As a result, many of their ideological assumptions become questionable.

     (1) If important costs and benefits are disregarded in market transactions, how meaningful are the values that the market assigns to the goods exchanged, and what happens to the market's claim of efficiency?

     (2) If nontransactors must suffer damages to which they have not consented, what happens to the claim that the market metes out justice? And, finally,

     (3) if each of us is the unwilling victim of countless transactions in which we have no say, how well does the market protect the liberty of any of us to choose our destiny?

In the context of "€œSwinging for the Fences,"€ and our exploration of systemic forces that must be controlled or overcome if we are able to create a future we would desire, the bottom line is this:  we use an economic system that, unless we correct for its defects, will drag us into a future in which those values that get attended to in transactions between buyers and sellers get magnified in importance, and those values that fall outside the concerns of the immediate parties to the transaction will be neglected.  

This leads to a society whose mix of wealth and poverty is warped and unbalanced, and suboptimal for human fulfillment.

*******
PREVIOUS ENTRIES IN THIS SERIES:

The Series Is Introduced with These Entries:

Swinging for the Fences: Please Join Me in this Bold New Effort  

Swinging for the Fences: The Fable of the Magnet

Thttp://www.nonesoblind.org/blog/?p=11161he Spirit Behind "Swing for the Fences" is the Same Spirit that was expressed in My Campaign Speech that Went Viral Through this Video

The First Round on the Magnets Consisted of These:

An Unwelcome Driver of Social Evolution: The Parable of the Tribes  

Swinging for the Fences: How the Market Economy Shapes Our Destiny  

Swinging for the Fences: Polarization as a Form of Cultural Breakdown  

Swinging for the Fences: The Transmission of Culture Through Time

Then There Were a Few Improvizational Offerings;

A Sick and Broken Spirit

Swinging for the Fences: Hunting for Very Big Game

Problems in the Religion Are Symptoms of Something Deeper

Second Round on the Four Magnets:

The Parable of the Tribes --Step One A Breakthrough Unprecedented in the History of Life

Swinging for the Fences: The Parable of the Tribes-- Step Two: The Circumstances from the Human Breakthrough Make the Struggle for Power Inevitable

Swinging for the Fences: The Parable of the Tribes--Step Three: Selection for the Ways of Power

Andy Schmookler, an award-winning author, political commentator, radio talk-show host, and teacher, was the Democratic nominee for Congress from Virginia's 6th District.  He is the author of various books including Fools Gold: The Fate of Values in a World of Goods .  

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Comment Preferences

  •  Is there a way to inform consumers about... (1+ / 0-)
    Recommended by:
    isabelle hayes

    ...externalities?

    Consumption "market transactions" account for more than 70% of the economy.

    If consumers could make better decisions with externality data things might change.

    Daily Kos an oasis of truth. Truth that leads to action.

    by Shockwave on Mon Apr 01, 2013 at 06:49:44 PM PDT

    •  price (1+ / 0-)
      Recommended by:
      Shockwave

      Price is supposed to communicate the necessary information.  That's what basic Economics 101 tries to teach, with supply/demand curves, etc.  The trouble is those blindspots in the market-- the externalities that are not part of the information given in the prices.

      The best way that I know of to deal with that problem is to supplement the market forces with collectively-decided taxes and subsidies to raise the prices of things that really "cost" the whole system more than the buyers and sellers are taking into account, and to lower the prices of things that really benefit the whole system more.

      One very good example is a carbon tax --which the United States has failed to enact-- to communicate to the consumers the "information" that spewing carbon dioxide into the atmosphere has costs that cannot safely be ignored.

      The result of such a tax would be to diminish the consumption of products that spew CO2 into the atmosphere.

      In Canada back in the 90s, if I recall correctly, an increase in the tax on cigarettes had a notable effect on how many teenagers took up smoking.

      Subsidies to, say, solar energy is another example of how a collective decision, made through government, can influence consumer choices-- in this instance inducing more people to heat their homes with solar energy instead of fossil fuels.

      •  Interesting, isn't it (0+ / 0-)

        how when the externalities can be expressed in terms of "sin", our system has no problem in levying punitive taxes to recapture external costs from buyers.  We see it coming in regards to the costs of obesity, which can be attributed to the medieval concept of Gluttony (without acknowledgement that in historical context, Gluttony and Greed were twinsBut when the "sin" is a cost to society as a whole via the market as a whole such as the road/salt example, with no moralistic component, the political and propaganda apparatus revolts at violation of Free Market ideology.

        This suggests that the idea of true economic efficiency remains beyond the average voters, to the advantage of those who arbitrage personal vs social costs.  Successful regulation of The Market (TM) requires retreat into the language/justification of religion and its attached morality in order to mobilize voting pressure.

        •  not only interesting, but significant (0+ / 0-)

          It is in the interests of much of the power in this society for moral issues to be seen by people just in terms of the character, or lack of it, and purity, or lack of it, of private individuals.  This focus --abortion, gay marriage, addiction, etc.-- can be used to distract people from the damage caused by systemic defects.

          The power, of course, goes to the power systems --and thus to those who run the power systems-- that have thos defects.  

          This phenomenon of focusing on individual defects rather than systemic problems applies to the issue of externalities, but also as the above examples indicate, to a whole lot more.  I've lived in rural Virginia for most of the past twenty years, and I've had a chance to see how this works to get people all up in arms about nickel-and-dime misdeeds, and blind to this misdeeds that happen on a larger scale.

          This problem is only partly about how power works to protect itself. Another very important component of this distorted sense of where the moral issues of our society lie is that thinking about issues at the human scale is something we've been doing, as a species, for tens or even hundreds of thousands of years.  We're naturally attuned to that level.  But thinking about the huge systems that have emerged with our civilization --international, political, economic, etc.-- does not come naturally. That kind of awareness tends to depend on levels of education and of intelligence that are not as widespread as the capacity to process gossip.

          The two factors --the intentional manipulations by the power systems, and the need to elevate and educate human awareness-- we've got the problem you describe, cynndara.

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