Addressing Meta-Externalities: Investments in Restoring Earth

The economy is not a stand-alone system, but is embedded in, and dependent on, the contexts of the natural world and the built environment, as well as human social systems – the latter including history, culture and ethics. There are well-known externalities in which economic activities have side-effects that are either harmful or beneficial to some part of the context, but that do not feed back into the economic system in such a way as to motivate economic actors to change their behavior. Beyond these direct externalities, and even less visible to current economic theory, are meta-externalities – unwanted side-effects of the whole economic system upon its physical and social contexts.  To give just one example: over the last half century markets have incorporated the idealized concept of “free markets” along with an ethic of individualism. These side effects of the market culture have degraded political culture by belittling the roles that need to be played by collective action. In many nations this has seriously weakened the ability of governments to produce public goods and services. 

Published in real-world economics review, issue no. 87