Sunday, April 25, 2010

Two Paths of Full Cost Accounting

If market based capitalism is to "succeed" in-so-far as it makes the world a more livable place for ourselves and other species (i.e. it is sustainable), then something like full cost accounting seems to be necessary. Capitalism is powerful at driving the "right" behavior given the right accounting / incentives.

There seem to be two ways of coming to this conclusion:

1) Pure pragmatism
As outlined in this Wired article "Betting on Climate Change" forward looking companies will make plans for dealing with climate change and the results of other externalized costs because, eventually, those things come back to become real costs (outlays). It doesn't matter why climate change occurred, responsible contingency planning requires dealing with it. If that means incurring costs now to avoid much larger costs later, so be it. That's good ROI.

2) Inspiration & appeal to our "better" nature
As put forward by Robert Kennedy at a speech in 1968 about Gross National Product:
"Too much and too long, we seem to have surrendered community excellence and community values in the mere accumulation of material things. Our gross national product ... if we should judge America by that - counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for those who break them. It counts the destruction of our redwoods and the loss of our natural wonder in chaotic sprawl. It counts napalm and the cost of a nuclear warhead, and armored cars for police who fight riots in our streets. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children.

"Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile. And it tells us everything about America except why we are proud that we are Americans.

It certainly makes me feel a bit prouder to be a member of the society that came up with the later reason for doing the "right" thing than it does to only be able to claim the former.