Green stuff

This was something i posted on an internal work blog, but I thought I'd share it with you folks as well. 

About companies going Green -- response to Baiju.

Economists love to talk about externalities, right? -- aka, letting some other entity pick up the tab for something. The other entity might be "the public" or "the government" or "the river" or "the atmosphere". If I light a campfire, the atmosphere takes away the toxic fumes for me, for free. And it hopefully processes them into safe breathable air as well, at some point. Excellent.

It's clearly economically rational to take advantage of externalities. It's better to pass costs than hold the bag. And sometimes absolutely no one is holding the bag. (Disposal of the Voyager spacecraft? The galaxy can handle it.)

But here's where it gets tricky: when one day you find the person holding the bag -- if there is such a person -- and you see them paying an unfair cost, it becomes a moral situation in the minds of many people. When acid rain is destroying forests and hurting peoples' health, people will want to step in to change the equation. And we do, and we did. (Slowly.) And then the moral balance is maybe restored. (There's even a good word for that: "justice".) Resume normal economics at this point.

We're at a funny time in history. New externalities are being identified. Some cost-passers (say, American corn farmers with their chemical fertilizers) are being suddenly matched with bag-holders. (Gulf coast shrimp farmers dealing with a dead zone the size of New Jersey where nothing can live -- look it up). But we are still in a limbo, waiting to see how this, and lots of other, formerly benign/unnoticed externality situations can be accounted for in the economic, legal, and regulatory infrastructure. This infrastructure will eventually let us turn what we deem to be unfair externality situations into more above-board kinds of economic transactions. (Tax the fertilizers--ban them--regulate their use--filter the river--compensate the shrimpers--whatever.)

In this limbo, companies don't yet NEED to start putting all their externalities on the books. It's not always clear that they can right now. When required to pay, they will surely pay. If all airlines raise ticket prices because of a new carbon tax that will help pay explicitly for the formerly free CO2 externality, Accenture will pay those prices.

But in the interim, without the new frameworks that will help us move from externalities toward a set of new "internalities", the public sees moral situations where it didn't see them before and it wants action. People have new information about a moral situation -- they want to exercise some ethical behavior. They want to restore "justice". The sense of fairness is something about people (and even many apes) that is so basic you can measure it in the lab. And it's a good thing!

So yeah, some companies are competing for attention in the public marketplace by trying to demonstrate that they will help individuals exercise their moral choice in the matter. Thus: "GREEN". Is this "PR" and "marketing"? To the extent that it's about relaying a message to the public, then it's public relations, sure. But public relations can be informative sometimes, and this might be one of those cases. Having this information might actually help some people make the choice they actually want to make, so there's a real value to that. To the extent that all of this Green stuff is not actually resolving the underlying externality situations, it's sort of a game, but it might be alleviating the problems a little bit while we are waiting for the real economic infrastructure to be built.

Is this marketplace arrangement shortening the externality-limbo, or prolonging it? It might be raising awareness; it might be assuaging guilt. I don't know how the scale tips on that one.

I do know that when companies do something that simply makes them more efficient, it's clearly in their self-interest, so they should have been doing it already, Green or no Green. (Companies have been using fluorescent light bulbs for decades.) When they do it, and then trumpet themselves in the marketplace about it, it's a little sickening. That's my only problem with our green data center initiative. But I think it these kinds of semantic abuses go with the territory. The public wants to see these messages (for what I think are the right reasons). Companies are going to bring them these messages (for any old reasons).

----

not posted at work:

Some of course will claim that we *only* need the marketplace in this -- or any -- situation.  In this case, I think that idea barely merits a serious rebuttal.  The entire situation IS the rebuttal.