Private Costs and Public Goods

Concerning the relation of private costs to public goods, I see two issues here that need to be spelled out in greater detail.

First, everyone is likely well aware, the concept of private property is unknown in many, most or all traditional cultures. Land in the sense of a bordered parcel carved out of the larger whole of interdependent relationships in an ecosystem is bizarrely dysfunctional and confused, from this point of view. The public goods of watershed, air purification, fishery, wildlife, etc. services cannot in any way be disentangled from the way private costs are thoroughly absorbed into the cyclical dynamics of symbiotic give and take, investment and return. Profit is defined entirely in terms of value for life. Overuse and misuse that imbalances relationships has tangible consequences that negatively impact quality of life.

Western culture broadened the scope of activity in ways that made it possible to expand the relationships in play beyond the constraints of local circumstances. Private costs incurred in cycles of investment and return could be sunk over longer time periods and across wider geographic ranges. Negative local consequences were balanced against positive returns accumulated elsewhere. Overall returns were negative as the resource base was destroyed, but the accounting methods in use and cultural values in play ignored this in favor of a narrower definition of personal profit that reinforced the extractive processes.

This system could continue only as long as new resources could be identified and converted to profit. As private costs increased and returns decreased new accounting methods and cultural values emerged and focused on rebalancing ecosystem interdependencies. Unfortunately, culturally ingrained habits of thought and institutionalized patterns of incentives and rewards often result in counterproductive conceptualizations of the situation. Too often, the linear destruction of the resource base is assumed to be the defining characteristic of a functional economy, and it is further assumed that this system must somehow be juxtaposed alongside or made externally congruent with ecosystems’ paradigmatically different circular interdependencies.

This, to me, is the background to your question about private costs and public goods. As long as we conceive and enact our relationships with social value and environmental services in terms of an either-or dichotomy, we are lost. But is it really true that our only alternatives are to subject externalities to extractive processes or to constrain those processes so as to allow ecosystem dynamics a wider scope of free reign at the expense of humanity? Should we think only in terms of (a) letting the current form of capitalism run rampant, (b) scaling back human activity to some kind of utopian low-tech, low-impact integration with a nature religion, or (c) the currently dominant assumption of a tense compromise between these two options of destroying or preserving the resource base?

Why are so few people talking about reconceiving economies as ecosystems of interdependent relationships that encompass not just human institutions but nonhuman forms of life and ecologies as well? Why should not we strive for an economy in which value for life is conceived as authentic wealth and market institutions make monetized profits contingent on nurturing genuine productivity? Why should not negative impacts on public goods be translated into private costs borne by individuals, communities, and businesses? Why should not everyone have the means to impact via their own behaviors, and to track in their own accounts, the quality and quantity of the personal stocks of shares in public goods they own? Why cannot we create legal and regulatory supports for entrepreneurs to be rewarded for wide commercial sales of their innovations reducing human suffering, social discontent, and environmental degradation? Why should not individuals be able to invest in privately owned shares of public goods in ways that efficiently move capital resources to where they are most effectively employed in the name of creating authentic wealth? How else could we ever amass the magnitude of focused effort it is going to take to rebalance the climate, get plastic microparticles out of the oceans, eliminate human suffering, and remove the sources of social discontent?

I am sure it seems counterintuitive but this problem is akin to a Chinese finger puzzle. The harder we pull, the more tightly trapped we become. We have to relax into the problem to be released from it. In jujitsu fashion, we have to use the energy of what we oppose to advance toward our goals. The profit motive is destructive because we have not integrated the genuine wealth we say we value into our accounting, financial, and economic systems. If we really do value human, social, and environmental riches over mere monetary riches as much as we say we do, why have we invested so little effort in finding qualitatively meaningful and mathematically rigorous ways of communicating, sharing, storing, and growing that value? Why haven’t we codified the legal structures and enforcement bodies that would monitor adherence to new institutional norms? Why don’t we have standards for the common languages and currencies we need if we are to be able to efficiently exchange meaningful expressions of real value?

If we would measure and manage investments in individual stocks of intangible assets the way we do for tangible assets, we could orchestrate a different balance of power. Efficient markets for investments in human, social, and natural capital would quickly channel flows away from businesses destroying genuine wealth toward those growing it. So efficient markets are not themselves the primary problem. The problem is that three of the four forms of capital comprising the economy have not been brought to life in the form of transferable representations serving as common currencies for the exchange of value. Just as land was once universally regarded a public good but came to be a privately owned source of costs and profits, so, too, will today’s public goods also be transformed.

There is a huge difference in the contexts of these transformations that must not be overlooked. Land became a private commodity in isolation with no system of checks and balances to constrain it. The earth appeared to be a bottomless resource well available for the taking. Issues of intangible market externalities were relevant only to the extent they negatively affected profits. Compassion for collateral damage was regarded either as foolish or as marketing opportunities for ostentatious public displays of prepackaged concern.

The transformation of the broader array of public goods into some form of privately owned and managed property is taking place in a qualitatively different context. Taking the trouble to articulate our values in ways that make us accountable for them will lead to a decisive “put up or shut up” moment for humanity. If people are as innately greedy and selfish as some think, the availability of legally binding and monetarily profitable accounting, financial, and economic systems for investing in and producing enhanced social value will mean nothing, and monetary profits will continue to be extracted, illegally, and perhaps at higher rates, only from privately owned tangible assets in such high demand that no one could get along without them.

On the other hand, a global movement spanning well more than half a century has been consistently seeking to devise ways of addressing these problems. Hundreds of millions of individuals, thousands of organizations, and hundreds of countries have conferred, invested, discussed, agreed, planned, and created across billions of ideas and possibilities. The will to do what needs to be done seems to me to exist in abundance. Those who think otherwise seem reconciled to the destructive scaling back of human activity, which only puts on display their own inability to think past today’s cultural assumptions to new expansions of the ecologically sound aspects of institutions of the past.

I think that we can indeed imagine ecosystems of interdependent relationships in which people will do what needs to be done not because it is the right or good thing to do but because they can see how it works to enrich the value obtained in their lives, for their families and communities. The ecosystem has to do the work of multiplying value indirectly into the larger community as an effect of each individual’s decisions and behaviors. This is not and cannot be a matter of individual concerns or intentions. The institutions have to support what Hayek called the true individual: not the falsely isolated and selfish individual but the authentic person whose identity and roles are shaped via relations of trust in thousands of unknown others, mediated by every exchange of information or value.

What we need to do is amplify and multiply the number and nature of these relations of trust. These amplifications and multiplications have been in process for decades in education, health care, social services, environmental resource management, and other areas. Technical advances in the quality of the information created and managed in these fields is quietly accumulating into new relationships between teachers and students, clinicians and patients, researchers and practitioners, consumers and producers, the social and natural sciences, markets and externalities, etc. The information transforming these relationships builds trust by revealing the day-to-day consistency and reliability of what people say and do in classrooms, clinics, and offices over time and across situations. New information systems show where students, teachers, clinicians, patients, managers, etc. stand relative to where they were in the past, relative to their goals, and relative to everyone else. The information is actionable in previously unavailable ways, as it shows what comes next in one’s self-defined learning trajectory or improvement goal sequence.

Technical issues concerning information complexity are being addressed to prevent the kinds of failures plaguing efforts in the past. Most importantly, in the manner of the advances in resilience and lean thinking informing manufacturing in recent decades, one of the consequences of increased information quality and the enhanced levels of trust obtained in the caring arts and sciences is that those on the front lines are empowered to act creatively in new ways. There is no reason to think that the innovations and advances that can be expected in these contexts will be less impressive or valuable than we have witnessed in technological areas in recent years. It seems highly likely that the inflationary spirals characteristic of these fields will be reversed into deflationary economies akin to that of microelectronics, where lower costs and higher quality drive increased profits.

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To express all this from another point of view, as I’ve said many times before, we keep assuming that our modern Cartesian methods are the only ways of defining problems and solutions, but the actual truth of the matter is that these methods are themselves the problem. As long as we keep assuming that solutions to our problems depend on finding the political or financial will to take them on, we will continue to fail. If we instead harness the energy of the profit motive to focus efforts productively in the direction of integrated solutions, we will successfully achieve our goals on a scale far exceeding what anyone so far has projected as possible or likely.

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Leveling the playing field and setting up equal opportunities for entry into a game played with the goal of keeping the game going.

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