The “Tragedy of the Economy”
The “tragedy of the economy” is that it contains as much value outside the economic systems as inside the economic systems.
Think of the “Economy” as all the value that ebbs and flows through society, and then think of the “Economic Systems” as what we use to account for and transact all that value.
Beyond the “Tragedy of the Commons”
The “open space” or difference between the Global Economy and Economic Systems are the externalities. Many of us were introduced to these elusive externalities via Garett Hardin’s “tragedy of the commons”. His story got many of the headlines and the blame for many of society’s environmental woes, but the “tragedy of the commons” is just one symptom of the “tragedy of the economy”.
Economists and their Free Lunch
Economists have found great comfort in the “tragedy of the commons”. Garett Hardin gave them the biggest economic “free lunch” story ever written. If half-a-dozen Swiss dairy farmers couldn’t figure out how not to degrade a pasture they shared, how could 1000s of corporate economists and policymakers on the global landscape figure out how not to overconsume those very valuable natural resources.
Externalities are a Business Plan
Externalities are a ~$50T business. If you don’t have to pay for part of your business costs, it naturally becomes part of your business plan. Chances are you will not incorporate negative externalities into your business model (because few to no one else is), or will you not be compensated for any positive externalities you generate (because few to no one will be willing to pay you).
The business plan of Externalities is to generate as many negative externalities that generate profits and limit as many positive externalities that generate costs.
This is the “invisible hand” of our existing economic systems. Economic martyrs that reduce their negative externalities and increase their positive externalities often perish.
Liquidation is not a good Long-Term Business Plan
A few decades ago, it became apparent that the Economic System is overconsuming the natural resources it needs to sustain and grow. The natural capitals or economic values associated with soil, water, air, and biodiversity were being “cashed in” or “liquidated”. This approach is economically rational, at least in the short term. And many entities seek short-term goals.
But beyond short-termism, it was recognized that Externalities are not a good long-term socio-economic plan.
Trying to Backfill a Deepening $50T Economic Hole
Economists, even neo-liberal economists, seem to favor the government addressing the shortcomings of their economic systems.
In the 1930s, the USDA initiated the Soil Conservation Service to begin backfilling this externality hole. In the 1970s, the EPA created several environmental laws to backfill externalities as the hole continued to grow.
By 2000, the limitations of government backfilling were recognized. NGOs, corporations, and then finance followed with their attempts to backfill the growing externalities holes. Each failing rather abruptly.
Despite these proven failures, the general consensus remains that it makes sense to backfill the growing economic externality hole.
The Futility of Backfilling a Growing Externality Hole
It is futile to expect government programs, eco-markets, corporate ESG, sustainability supply chains, and NGOs initiates to ever come close to filling an externality hole that grows with almost every single transaction.
Each transaction contributes to the hole, because each transaction is based on an economic model that contains externalities. It is like trying to balance your checking account by taking out a loan. Every time you spend, your principle goes down and your interest payment goes up.
Capitulation is Difficult, but Imminent
Capitulating that this is occurring is not only difficult, but it may be impossible if there is no place to go. Even if you hate playing Monopoly(r), and you are losing more money every single round, you are going to continue to play Monopoly unless someone brings another game board that you can play.
EcoCommerce is a new Game Board
The Monopoly Game Board, as our current economic system is an impressive ~$100T set-up that will certainly endure in some shape and form for some time into the future.
But its Achilles’ heel is that it is unable to account for about ~$50T in potential positive externalities. It is a system with institutions, policies, and norms to not account for these externalities. It is stuck with what is it.
And so, that is a lot of valuable empty real estate for a new developer to create a new Game Board. An EcoCommerce Game Board does not even have to directly compete with the Monopoly Game, at least initially. Kind of like the shrew moving into the spaces the cold-blooded dinosaurs were unable to occupy.
An Era of Economic System Templates
The thought of mass producing a thousand bibles prior to Guttenberg’s printing press was not fathomable. And the thought of not producing bibles after Guttenberg’s printing press was probably considered inappropriate.
And so, the thought of an economic system template to create economic systems to incorporate externalities may seem unfathomable. And if you could create such economic systems, is it even appropriate without getting permission?
EcoCommerce Economic System
EcoCommerce is a natural capital-based crypto-economic system designed to internalize the ~$50T of externalities of the other economic system. Its canonical unit is the NCU (natural capital unit) that supports each of the four domains in this economic system template.
As a natural capital-based economic system it cannot directly incorporate other social and human externalities, but it can indirectly support other economic systems that emerge from this template.
Internalizing Economic Externalities as a New Sector
Rather than backfilling the holes of the economic system, entities can create economic systems based on the unaccounted-for values.
A properly designed economic system enables existing programs, projects, etc. to plug into the domains and connect with other suppliers and demanders of the capital of interest. No economic system is encompassing enough to address all the values. A future with multiple capital-based economic systems may be as normal as a world with multiple geographical-based economic systems and currencies.
Author
Tim Gieseke has managed natural and other capitals during his four-decade career. This led him understanding the importance of natural capital to his livelihood, his communities, his nation, and the global society.
As a farmer for some of those four decades he is instilled with the wisdom that viable shortcuts don’t exist. It is all about emergence and the long game.
In 2011, the published EcoCommerce 101: Adding an ecological dimension to the economy that laid out the conundrum and the micro- and macro-EcoCommerce components that were needed to internalize environmental externalities.
In 2016, he introduced the NCU in Shared Governance for Sustainable Working Landscapes to organize the economic values identified in his first book.
His third book, Collaborative Environmental Governance Frameworks: A Practical Guide (2019) introduces a governance assessment and design model to create a framework for asymmetrical, dynamic, and often temporary governance forms needed to address the complexity of any economic system.
He is nearing the completion of a white paper that describes the EcoCommerce business ecosystem necessary to support an EcoCommerce Crypto-Economic System.
A growing group of individuals are supporting this effort in hopes that they can contribute to internalizing the most valuable economic externalities on Earth. If you are interested, please connect.
