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Think ahead
You are at the grocery store, and you need tomatoes for tonight’s dinner. You see two different bins of tomatoes that look about the same and cost about the same amount. The first bin is labelled
Shipped from Brazil. Grown on former Amazon jungle land that was clear-cut in 2018. Harvested by dispossessed indigenous workers.Shipped to USA via air freight.
The second bin’s label says
Grown in USA. Grown on historically desert land made arable via irrigation. Harvested by undocumented migrant workers earning $.50 per bushel. Shipped via interstate diesel truck.
The third bin has no label.
Which bin would you choose your tomatoes from?
The lie at the heart of economics: Externalities are not external
Classical economics - the kind most of us were taught in school, or picked up along the way - is built on an assumption so bold, so sweeping and so damaging that it astonishes me that we accept it. But most of the time, when we’re thinking about economics, we don’t see that assumption at all. We see neat, balancing equations. Supply and demand interact, equals price. Which is what the system of economics was designed to make us see.
What we don’t see are the externalities - the consequences of the transaction that fall outside the equation. Externalities by definition don’t directly affect the buyer or the seller. Classical economics kicks those externalities out of the arena, out of the transaction that economic modelling is trying to understand, as though those externalities are being sent out into space, destined to gently float away. This is why you seldom hear the term - why I didn’t encounter it until graduate school.
But new and emerging technology, and the transparency it can foster, forces externalities back into the equation,
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