True-Cost-Pricing: Using Free-Market Forces To Save Our Life-Support System

by on August 4, 2011 · 1 comment

in Environment

By Jim Bell

The ecology of our planet is the foundation of everything we do, including what we do under the heading of economy. When we damage our planet’s life-support system through inappropriate economic activities, we undercut the potential for economic activities in the future.

For example, most of the food humans consume is grown in ways that deplete, poison or otherwise contaminate air, water and land alike. Organic agriculture causes much less life-support and human health damage than non-organic agriculture, but it’s still not completely sustainable.

Today, almost everything humans do causes life-support system harm. More precisely, it’s not so much about what we are doing, but about HOW we are doing it. The ways we support ourselves now depends on using up ever more non-renewable resources and using renewal resources in ways that make them difficult to renew. The result of this is over flowing landfills and evermore destruction of virgin land for raw materials to replace those buried in landfills.

“True-cost-pricing” is a free-market strategy aimed at integrating the principles of life-support sustainability with economically sound business practices. The basic idea is to include all the costs, cradle to cradle, of all products offered for sale in the common retail marketplace to pay for any damage those offerings cause from the procurement of raw materials, their refinement, product manufacture, product use, and their disposal.

Currently, the public, through taxes, health costs, property damage, etc. pays the health, environmental and social costs associated with health and ecologically damaging products. By paying these costs, the public is caught in the ironic position of actually subsidizing the very products and processes that are harming them and their life-support system.

Even worse, these subsidies retard the development of technologies that are more health and ecologically benign by artificially lowering the retail cost of ecological, health and socially damaging products, technologies, etc. With true-cost-pricing, these costs, would be included in the market price of all market offerings, In other words, the health and life-support-costs of product offerings would be determined by an independent body, (perhaps Consumer Report Magazine would be interested in this job) and these costs would be included in the retail price of every product being offered for sale. Of course, there would be no cost added to the cost of health and life-support benign products and services.

Including these costs up-front would cause the consumer price of health and life-support damaging products and services to rise, but even here we would save money over what we pay now because its always less expensive to avoid creating health and environmental problems than it is to cure sick people and heal damage to our common environment.

As technologies become more ecologically sophisticated there is no reason for commonly used products to be any more expensive to purchase than they are now. In fact, in spite of the subsidies supporting health and life-support damaging products, the market price of some “Green” product is already lower than harmful products they replace and they work better too.

But even if green products and technologies end up costing more at the point of purchase, under true-cost-pricing they would still be more cost effective to society. It’s less expensive to prevent ecological and social problems, than to fix them after they have been created.

An additional true-cost-pricing benefit would be the elimination of solid waste disposal. With true-cost-pricing everything sold in the marketplace would be designed to be reused, recycled or composted. When all costs are included, this is the most cost effective thing to do.

There is a general view that the free enterprise system is the antithesis of a healthy environment. With true-cost-pricing, however, free market forces can be powerful tools toward creating a secure life-support sustaining future.

This article is based on a concepts developed in detail in Chapter III of Achieving Eco-nomic Security On Spaceship Earth, published in 1995. The book is available free at www.jimbell.com, click on “Jim’s First Book” (on the left side of your screen.)

{ 1 comment… read it below or add one }

avatar RB August 4, 2011 at 9:44 am

So how does your true-cost-pricing model value a one year increase or decrease of human life? So when products cost more here, does your model consider the changes in supply and cost of goods in east Africa, Bangladesh, etc.?

Reply

Leave a Comment

Before clicking Submit, please complete this simple statement to help us weed out the bots... Thank you! *

Older Article:

Newer Article: