In the April 1 Op-Ed by Thomas Friedman in the NY Times, a long-overdue proposition was put forward–the price we pay for things is not necessarily the ‘right’ price for the economy or for the planet. The examples given are timely and poignant. First, the insurance giant, AIG, didn’t price their risk insurance of now toxic assets high enough to have the capital they needed to pay on claims when their value tanked. Second, the price of ‘carbon’ isn’t high enough to include the long-term risks involved in climate change due to greenhouse gas emissions, so investors and consumers are not yet persuaded to seek alternatives. I agree with Friedman when he says “…we’re experiencing a simultaneous meltdown in the financial system and the climate system…because we have been mispricing risk in both arenas.”
I think we need to start discussing a ‘living price’ and how this pricing would be determined. The concept of a ‘living wage’ has gained attention in the past few years, particularly in urban areas where many employees of businesses cannot afford to live near their workplaces. Basically, a ‘living wage’ is calculated using averages in cost-of-living categories. This estimated ‘living wage’ then is used in contract negotiations with businesses and municipalities. While our normal ‘market-driven’ wage mechanisms are short-term and limited to numbers on paper, this pricing process for wage-earners includes long-term goals and quality-of-life issues.
The price of an item is usually one of the most important factors in our purchasing decisions….maybe not for the extremely wealthy, but certainly for the rest of us. On a daily basis, we make many consumer decisions that supply our needs and wants AND that shape the economic landscape, local and global. If we factored in the greenhouse gas emissions involved in all of our imported food, clothing and gadgets, we might make different consumer decisions. If we included the quality-of-life and pollution costs involved when huge numbers of wage-earners have to commute to and from work, we might be willing to consider a living wage for our firefighters, police officers, nurses and teachers.
Let’s face it. Our current ‘market-driven’ pricing system isn’t working for us. Subsidies, tax-breaks and a lack of long-term safeguards make many of our prices artificially low. We’ve been told that the ‘invisible hand’ of the free-wheeling market system will lead to the best public outcomes, but what we see is a system that totally inadequate in pricing anything for long-term sustainability or basic fairness. Isn’t it time we discussed what alternative systems might be available…and what kinds of criteria might be useful?