How many kids per litre?


Politicians, economists, and environmentalists talk about pricing externalities all the time. But what does this actually mean?

Pricing externalities means that if burning of fossil fuels is going to result in the loss of a species, we need to first establish the dollar value of that loss, then take this figure and spread it over all the fossil fuels we consume. This way, the cost is incorporated into the price of the product.

For example, as the climate in our north changes, freezing rains are locking lichen under sheets of ice. The caribou that survive off this food source normally brush snow aside to access it but, because of our actions, it slowly starves; desperately trying to stomp through ice to access food that is visible but no longer as accessible.[1] Wiping out a subspecies of caribou may cost you a 1/100th of a penny at the pump.

This is our best solution so far. We’re not making this up.

What is the value of a human life?

label-low_4But if we’re going to internalize costs, we need to ask: what is the dollar value of a human life? And how many people have to die of climate change-induced famine to raise the price of gasoline by one cent? Or how many fractions of a penny at the pump internalizes the reduction in quality of life for a child who has lost hope for her future?

The idea of internalizing costs by way of a carbon tax or cap-and-trade system is premised on a particular worldview that says humans are rational, self-interested, all-knowing wealth maximizers who respond to price signals like automatons. But is that what we are? Or are we complex, moral beings?

The warning label internalizes cost in a qualitative way.

The warning label captures and communicates cost in a qualitative way. It provides information to the marketplace and engages our humanity in a way that a 10-cent price increase never could. A simple sticker challenges much of our unspoken economic assumptions and asks the question: what it is to be human?

NEXT: Adam Smith revisited…

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  1. Mighty caribou herds dwindle, warming blamed: Climate change has changed feeding grounds, encouraged pests” Associated Press. 2009.

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