Externalities is a term I first heard in my undergraduate economics classes nearly 20 years ago, and its used to describe the parts of a system that are ignored by the users of that system. In the context of electricity generation, the water required for the boilers and for cooling were once considered an externality until water shortages illustrated to utilities that water mattered. Similarly, we’re seeing that the externalities of air pollution in the form of acid rain and now carbon emissions are being pulled into the economic model. We’re increasingly finding that there are no longer any externalities left, that water and land and even air matter and must be included in any complete accounting of the impacts of the our decisions. In many ways, the elimination of all externalities was a key component to Monday night’s Green Constitutional Congress, and panelists Jonathan Greenblatt and Majora Carter all touched on externalities affected the world.
For entrepreneur Jonathan Greenblatt, many of the externalities are embodied in the rise of the corporate social responsibility (CSR) movement. If you’re unfamiliar with CSR, the basic idea is that corporations have a responsibility to do more than maximize short term shareholder value and quarterly dividends. Instead, businesses also have a duty to be good corporate citizens with respect to their communities and the the environment. CSR states generally that businesses should work to the betterment of their employees and the communities, should minimize their negative impact on the world, and should publicize how well they’re doing on these issues as much as they publicize their quarterly earnings. Unfortunately, environmental stewardship and community involvement were considered externalities, and in fact are still considered such by many, if not most, major businesses around the world. Entire organizations exist for the express purpose of opposing the growing trend in business toward CSR, and in too many cases, CSR is a public relations ploy rather than a serious attempt to internalize the CSR externalities. Greenblatt, however, wants CSR to fade away into obscurity, not because it’s unimportant, but rather because every business in the world does all its business in a financially, environmentally, and socially responsible fashion.
Activist Majora Carter didn’t use the term “externality” in her monologue, but her entire reason for being an activist is related to the externalities of others. Carter is an activist in one of the most polluted areas of New York, the South Bronx, and has worked with a variety of green organizations (and founded Sustainable South Bronx) in order to improve poor communities that, through the supposed externalities of others, are subject to air, water, and ground pollution. One of Carter’s main points during the congress was that progress for the masses or the wealthy has always resulted in the sacrifice of something, or more likely someone, else. And in every case, those sacrifices – of the people in the S. Bronx who contend with the pollution of four power plants and thousands of trash trucks every day, of the people in Appalachia who are dealing with the resulting pollution from mountaintop removal coal mining – were considered externalities at some point. Or still are.
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