I write books about careers and have a non-Kos blog where I write about career-related issues. Because I wrote a book about green careers that's going to come out soon, I started to write a blog entry about why we need to shift to a green economy. But I couldn't complete the blog because I was going to end up saying, in effect, that the electorate is stupid, the political system is screwed up, or both. And that's not going to inform people about the world of work. Still, I couldn't let these thoughts go unexpressed, so below the fold you'll find what I wrote.
Today I’m going to discuss a concept from economics, but in a way that won’t bore you. The concept explains a lot about why and how we’re going to transition to a green (sustainable) economy. This transition, which may be delayed for a little while but is inevitable, is why I wrote Quick Green Jobs Guide: Six Steps to a Green Career, which comes out next month. In this blog I’m able to explain the concept in greater detail than the format of that book allows.
The concept is called externalities. If this term is unfamiliar to you, please don’t get scared off by its academic odor. By the end of this blog, it will make perfect sense to you.
Every time we buy a product or service, we pay a price for it. Usually, we assume that the price covers the costs of everything that went into making the product or service available to us. For example, take a gallon of gasoline, which currently costs around $2.45 in my community. For the sake of simplification, let’s temporarily set aside the taxes that are included in the price. The remainder of the price covers the costs of exploring for oil, getting the crude oil out of the ground, transporting the crude to a refinery, refining gasoline from the crude, transporting the gasoline to my local filling station, and pumping the gasoline into my fuel tank. (In New Jersey, where I live, you’re not allowed to pump your own gas, so the attendant’s salary is another cost.) We also should factor in the costs of advertising the product.
Now step back and consider the gasoline-related factors that I’m not paying for when I hand over my cash to the attendant. First of all, I can’t burn this gasoline without putting fumes into the atmosphere, but I’m pretty much shielded from paying the costs of those fumes. Global warming is one costly result of my use of gasoline. To be sure, when half of Florida is underwater fifty years from now, I won’t be the only person who will have created that expensive mess. Nevertheless, I will have contributed in a tiny way to the global warming that caused the flooding. So that’s one cost that I escape paying for with my $2.45.
Here’s the second cost that I escape, one that’s a lot more immediate: American military involvement in the Middle East. Consider just the most recent threat from that part of the world, Iran’s nuclear arms. Without an insatiable world demand for oil, the main exports from Iran might be pistachios and carpets--not enough to support development of nuclear weapons. My purchase of a few gallons of gas contributes in a tiny way to the enormous expenses our America’s maintenance of a balance of power among the oil-producing nations in the Middle East. Of the $2.45 I pay for the gallon of gas, only the tax component does anything to pay for these costs, and all the federal gasoline taxes that are collected each year are dwarfed by the full costs of our military involvement in the Middle East. Instead, the defense budget is mostly paid for by my income taxes.
Actually, the gasoline taxes are supposed to pay for the third cost that’s related to my purchase and that I mostly escape paying: maintenance of the highways and the costs when that’s not done. This includes expansion of the highways that’s necessary because I add to the volume of traffic. The reality is that the federal gasoline taxes, which have not been raised since 1997, are not providing enough revenue to keep our roads and bridges in good shape (or the funds are being directed elsewhere). So I’m not paying for the damage that bad pavement is doing to everybody’s shocks and tires or the lost time that everyone spends in traffic jams.
I’ve probably forgotten to include other hidden costs of my gasoline consumption. The recent oil spill in the Gulf may be one of them, although BP’s television commercials keep telling me that they’re going to "make this right."
Okay, now let’s stand back from all of these costs and look at what they have in common: They’re not included in the price of the gasoline. In other words, they are external to the price. And that’s why they’re called externalities.
They don’t have to stay that way. They could be built into the price of the gasoline. However, everyone says that doing so is politically impossible. For example, Congress seems unable to find support for a carbon tax or a cap-and-trade system that would require those who produce planet-warming gases to pay the true costs they are incurring. When the Iraq War was declared, no leaders in Congress proposed adding even one cent’s extra tax to the pump price of gasoline to pay for our involvement.
[This is where I gave up on this blog and decided not to post it on my work-related blog site. You can see where I’m going with this. It’s very appropriate for DailyKos, but not for my work-related blog, which people read to get ideas about the world of work.]