Completing the Market

“It is better to be crudely right than precisely wrong”.

-- Loren T. Neubauer

Most of the environmental problems that now plague us are the result of incomplete accounting for costs. Benefits are concentrated in the hands of a few, and most costs are uncounted and spread across Society and future generations. The brilliant British economist Arthur C. Pigou noted early in the last century that “the market” would fail unless it included all costs, but his message went unheeded. Today most markets and economic calculations are very incomplete and imperfect.

FUNDAMENTALS

TCA GLOSSARY OF ECON TERMS

True Cost of a Burger

True cost accounting reveals the
cheapest is not the lowest cost after all

Sustainable Management - Applying True Cost Accounting

The fundamental change from business and government as we know them today – to how we must know them in the future -- is the recognition that we must always consider environmental and social impacts with true cost accounting. The focus must change from short term profit (cash only) to long term appreciation of economic, social, and natural capital. This revolution will create many opportunities for entrepreneurs who create businesses, services, and products that enhance sustainability. It also offers many challenges for local, regional, state, national, and global governance.

Materialflow for company, True Cost Accounting

True Cost Accounting for Sustainable Materials

To understand the sustainability of materials we need to consider their life cycle. What impacts do they have at each stage of their life? What happens to them during a wildfire, flood or earthquake?

pitchfork farmer china, True Cost Accounting

Wood is stronger than steel per weight, this farmer shapes the pitchfork as the ash tree grows.

The collapse of Natural capital -

Grand Banks Cod Fishery

True Cost Accounting for Sustainable Resource Management

Resource use makes life possible. Resources include food, materials, energy, water, space, and time. True cost accounting can improve the use and management of water, forests, farms, rangeland, and fisheries. The goal of resource use should be to improve the quality of life, but instead, it is often to maximize short term profit for a distant corporation or greedy individual.

True cost accounting reveals the
cheapest is not the lowest cost after all.

The death of a sea

True Cost Accounting for Nature’s Services and Capital Assets

We all depend on Nature for our food, the air we breathe, and many of the materials that we use n our day to day lives. Historically most of these functions have been ignored in accounting. But the services and the structure of ecosystems have multiple values that may extend over decades or generations. If true costs are calculated and applied it will make many current management practices more sustainable.

True Cost and Valuing People

True cost accounting for people is challenging and involves measures of structure and function. Social costs and benefits include impacts on social capital (education, cohesion) and social services (volunteerism, cooperation). And similar to environmental accounting, much of the social system does not involve cash flow and is therefore not counted by conventional economics. Even in developed countries as much as half of all work is unpaid care for family or volunteering for the community. The shadow economy or black market in the US is estimated at10-15% of the measured economy. Counting the true cost is critical to improving security, equity, and satisfaction.