Private Profits, Public Losses

We have grown used to not paying the full cost for the goods and services that we consume. Partly this is because of the free goods and services that nature provides for us and partly this is because we have a system whereby losses are socialized but profits are privatized. The result is both over consumption and too much pollution.

Many of the goods and services that nature provides for free are simply not appreciated by most of us. For example, mangrove trees are known to mitigate the impact of storms and sea surges. Much of the damage caused by the tsunami of 2004 would have been lessened if the mangrove swamps had not been cut down. Instead, these were deemed to be of no economic value. Cutting them down and replacing them with hotels was thought to bring greater economic value to the region. Instead, these areas faced the full impact of the sea. A good article of the type of under appreciated services provided for free by nature can be found here. As this article points out, a new type of accounting is needed; one that takes into account the cost of the goods and services provided by nature. The problem is that the negative impact for an individual consumer is too diffuse. That is why the cost of pollution can be socialized.