Growing the economy in the future means talking about consequences today

At the core of our national consciousness is a shared belief that we achieve economic growth by meeting consumer demands in a market economy. What isn’t shared is a common frame of reference of whether external consequences must be included in this analysis. This is particularly true for technology.

Consider some current conversations about the application of technology and their related broader consequences. Does the broader impact of planted stories lessen Facebook’s utility to consumers? Should we be concerned with the environmental impact of consumers purchasing SUVs? Is the displacement of human labor for robotics justifiable if goods are provided at lower prices? In each case, the market provides commodities that consumers value. But in each instance, there are effects on society that go beyond the user’s own satisfaction.

Recently, I’ve been struck how politicized the discussion of whether we should even consider these effects has become. The mere willingness to ask questions that go beyond consumer satisfaction is now seen as a partisan act. How did we get to the point where an honest discussion of social considerations is seen as anti-capitalist or partisan?

I think that this split stems from how we talk about market efficiency. There are two prevailing views, both shaped by a few hundred years of economic and political thought.

The first view – admittedly somewhat oversimplified – is that simply should not consider social costs and benefits (what economists call externalities) when evaluating market efficiency. What matters for market efficiency in this view is consumer prices – the cheaper the product and service, the better. Because social consequences have traditionally been difficult or impossible to value in dollars and cents, they are not considered; they are irrelevant to this view of market efficiency. To the extent that social consequences are addressed at all, they are assumed to be the maximum social benefits possible in an unregulated free market. The reasoning is that if the social consequences of buying and using a commodity are high, consumers will stop by buying it.

The second view – also oversimplified – is that no discussion of market efficiency is complete without discussing and evaluating broader social consequences. In this view, the market and social consequences are intertwined, even if some of these consequences are not reflected in market prices or financial results. It is not the lowest consumer prices that is most important – it is the broader social benefit from economic activity.

The challenge we face is that these two contrary views of market efficiency leave us with no agreed framework to talk about consequences, and no consensus even on whether we should. One view thinks they are essential, and the other believes them irrelevant.

Unfortunately, neither viewpoint provides an ideological framework to continue to grow our economy. An honest look at many emerging technologies raise legitimate concerns that externalities may overwhelm their overall utility to our society. If people are unhealthy, unemployed or disengaged, they will not be able to spend money on products no matter how low the price. How do we balance this challenge?

I am an unabashed believer in free enterprise and capitalism. My concern, however, is that a blindered view of how the economy works will ultimately undermine our political system or inhibit our ability to use new technologies effectively. Being unwilling to address the consequences of how we apply technology and do businesses won’t make these consequences go away. Failing to acknowledge that consumers care about lower prices more than social consequences will not make them willing to pay more for products that might have more social utility. For example, studies have shown that consumers don’t “buy American” when cheaper alternatives are available.

Our continued failure to share a common view about market efficiency often leaves our international competitors in a better position. Our unwillingness to address consequences also creates resentment in the nation. This is true whether the person is a displaced worker or a motivated environmentalist.

We must understand that talking about whether we should talk about consequences, instead of actually talking about them, doesn’t just marginalize discussion and action. It also allows those who know that their business interests create social consequences to avoid difficult discussions.

Bringing consequences into any economic decision isn’t partisan. It’s sensible and necessary for a democracy.

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