Funnels are great things. They make it possible to pour a liquid, or a heavy gas, into a container with a narrow neck. Like pouring oil into a bottle. I think more and more of inverted funnels – chimneys of smoke that, from a point source, such as a factory, release various gases from a narrow spout into the open environment; essentially from a concentrated source to a dispersed open container.
One could think the same thing in terms of plastics. Factories, which are the equivalent of the narrow-mouth bottle, produce concentrated plastics in the form of products that eventually end up as pieces of varying sizes in all corners of the world. Take this concept further, and we are talking about the externalities of economic productivity. They are, in other words, the impact on the wider environment (however defined) of the production, distribution and retailing of a product or service.
They of course include the greenhouse gas emissions associated with almost all of our production processes.
Until recently, the issuance of the substance was entirely “free”, or at no cost to the producer. The resulting impact has not been included in the “cost” of the final product. It’s because, well, you just pump the thing up in the air and then it’s gone, right? The logic was that “dilution is the solution to pollution” because the atmosphere (or the oceans for that matter) is so vast that spitting gas into it wouldn’t alter the balance. That is until the emissions are so large that they shift the balance and we feel the impact.
And it doesn’t stop at the atmosphere and the oceans. Our bodies are also ready recipients of various externalities that have been shown to cause life-threatening illnesses. Allergies, asbestosis, various cancers (including lung cancer), to name but a few, are the direct result of the fact that we stuff our bodies – voluntarily or not – with externalities.
Taking the impact of externalities a little further, one could think of the effects on the workforce (mental health, accidents at work) and on society at large in terms of opportunities, obligations and equity, for example.
For centuries, even millennia, externalities have been largely ignored, as a necessary consequence of production, or even explained away because they were uncomfortable or too costly.
To simplify but further refine the subject, our economies have developed thanks to externalities. We are at a tipping point where not only are we seeing a reversal, but where the next big business opportunities and business models are to reverse the process and make money by internalizing these externalities.
We inherited this externalized world, and now our survival depends on cleaning it up.
We could invent a new term – like reverse economy or internalized economy – to convey the need and the concept. It is already happening; carbon offset credits do just that, as they are essentially a financial reward for removing greenhouse gases from the atmosphere and locking them away, in an effort to reduce climate change.
This is where the funnel analogy comes in handy again.
Current technology uses large fans to extract and concentrate carbon dioxide from the air, then inject it into rocks, eliminating the substance forever. Likewise, startups have sprung up to address the mental health challenges we are experiencing. The same goes for plastic-free initiatives large and small: the microplastic-eating bacteria being engineered at universities around the world and the efforts of the non-profit organization Ocean Cleanup to tackle the Great Pacific Garbage Patch. Some reverse economy pioneers use the latest technologies. Crispr, the tool that enables genetic manipulation, is being used by Nobel laureate Jennifer Doudna to “enhance the natural ability of plants and soil microbes to capture and store carbon from the atmosphere.”
The intent of inversion economics is not new but faces the ongoing challenges of providing some kind of public good.
Public goods are products, activities or services that provide collective rather than individual benefits. Whereas much of traditional economics has been the opposite: conferring benefit, whether in the form of profit or product, to specific individuals or target groups. In the reverse economy, everyone stands to gain from reducing the load of greenhouse gases on the environment. In the reverse economy, everyone benefits from clean water and oceans. In the inverted economy, everyone enjoys positive mental health.
Alas, it is even more common to see funding go to products and services that provide immediate benefit, pleasure and profit to the customer. Many companies in the digital economy continue to create new externalities in the form of financial losses or mental health problems. But I am hopeful that the future transition from outsourced economies to internalized economies is imminent.
This will not happen without appropriate policy inputs, such as requirements to include externalities in product costs. So the next time we buy, consume, work or invest in anything, we have to ask ourselves which end of the funnel you are at – the narrow neck that only benefits you and the maker, or the broad edge which amplified and social benefit to.
The choice is ours and switching to the reverse economy could be as simple as that.
Posted: September 20, 2022, 4:00 AM