Cost Shifting

Today, global GDP is $80 trillion or so. However, all of the negative externalities or shifted costs (such as pollution) that are created in the process are not on the balance sheet. By bringing ethics and economics together, we can begin to account for externalities, and thereby we can create a more sustainable and equitable form of market economy.

Externalities describe the effects when someone does something that affects others who are unrelated to that transaction or behaviour. People in other places, in the present, as well as in the future, must pay the costs that we defer to them.

The result: Vast unfunded externalities are not on the balance sheet. All kinds of horrible effects have not been accounted for. Our system of economics encourages us to turn a blind eye to what must be paid by others – we privatize profits and socialise costs to the commons. We have, in a sense, cheated our way into a nice, comfortable life – for some of us, anyway – by not paying our dues.

For example, the legacy of Tetraethyllead and lead-based paint chips are still damaging the brains of inner-city children today, decades after we stopping using it. The behaviour has reformed (thank goodness), yet the pollution remains, and will stay there for generations to come.

Good governance is concerned with the management and accounting of externalities, but it’s generally done after the fact. Somebody creates a huge mess, and then an authority declares that the offender must pay a fine. This means that only the most gross effects tend to be noticed and policed, assuming that the authorities cannot be bought off.

We have mastered the art of producing things of terrific complexity at immense scale cheaply. However, the art of consuming in clean and fair ways are lagging behind. We must do better.

The confluence of Machine Intelligence, Machine Economics (e.g. distributed ledger technology), and the emerging domain of Machine Ethics, herald an opportunity to do so. These technologies together will finally enable us to calculate and predict externality effects in a way that is transparent and accountable.

We will, in the 2020s and 2030s, be able to start accounting for externalities in society for the very first time. We can include externalities within pricing mechanisms, to make people pay for them at the point of purchase, not after the fact. Therefore, products or services that don’t create so many externalities in the world, will, all things being equal, be a little bit cheaper. We can create economic incentives to be kinder to people and planet; we can enable people to profit from being kind. We can do this in a manner that champions the concerns of all political interests, and moves beyond polarized initiatives.

Let’s have a Moonshot goal to advance Automated Externality Accounting technology and coordination, to enable these technologies to be deployable by the year 2025, so that we can empower our global citizenry to achieve the Sustainable Development Goals by 2030.

The elements necessary to achieve this already exist; We simply need to integrate them. Let’s create an alliance of service providers each playing a role in this growing Automated Externality Accounting movement, for mutual strength and support, as we teach the world about this peaceful reformation of economic interdependence and cost allocation.

Thank you for introducing this, @NellWatson! I can see this theme going all the way through our design process, from subdomain to challenges to breakthroughs to prize ideas.

Indeed, you already mention several potential breakthroughs as well as a moonshot prize idea! Which sounds very promising. I would encourage you, and other members who share this vision, to move these ideas forward in our process in the next few months.

Right now, I’m just going to rename this topic to “Cost Shifting” in order to allow for a broad discussion and hopefully get as many votes for it as possible, so we can bring it to the vision workshop at the end of the month (probably the climate change one?).

Thank you, Nick. Much appreciated.

Yes, Climate see like the best fit.

This is noble idea Nell. Great idea.

@NellWatson, It is not only a good idea but majority of the other breakthroughs/ challenges are dependent on this. The food security, healthcare, to name few. Scientists/Economists are debating as the current situation has diverted the funding to largest vaccination drives.

Great idea, @NellWatson. For too long have we paid attention only to today’s economy, while ignoring the costs incurred by next generations.

Do you know if any initiatives of this sort exist in the present? We could surely learn from them how to scale up this idea.

Thank you very kindly, all of you.

I list some inititiaves in this general space at, Roey.

I noticed that The Capitals Coalition have released protocols on Natural and Human/Social Capital recently. These look promising, and I’m delighted to see that such work is being undertaken.

It might be interesting for an XPRIZE to explore how such protocols could be implemented within technology to begin to automate these processes (something that I believe is essential if such efforts are to make serious traction).

Imagine if one could use evidence gathered to prove the footprint shifted costs (or lack thereof) within supply chains and resulting products by porting such information in a secure manner. Such information could then be incorporated into true pricing mechanisms which include necessary offsets, thereby adding the crucial component that is missing from contemporary capitalism.

That’s fantastic, @NellWatson!

This seems like a great idea - it’s the logical and ethical thing to do, if we want a better world for everyone. This will, hopefully, also influence future innovations by encouraging innovators to consider potential ugly outcomes in advance and take proactive steps to prevent them, resulting in more good innovations.

For those that don’t know: The good, the bad and the ugly of innovation:

This is the beginning of a good idea. Let’s see how deep we can move the concept. How about the connection between an activity and total human cost or benefit? This requires a value system. Hmm, is there a connection to sensitivity analysis?