The Story of Stuff & The Invisible Hand

After reading the epilogue of Annie Leonard's The Story of Stuff I noticed some resonating themes mentioned in the epilogue with concepts I have come across in various economics courses, as well as the video we watched in class the other day. I thought it would be interesting to delve a bit deeper into these resonating themes in order to possibly put a greater scope to the big picture in the economics in sustainability. The primary concepts I chose to further research included Adams Smith’s “The Invisible Hand” and “Externalities”.

Leonard mentions on pg. 245 that “Many economists still argue that the miraculous of the free market will adjust prices and influence supply and demand such that everything will stay in some ‘optimal’ balance”. Some free market economists believe that if all barriers to trade were eliminated such as government intervention, an economic force known as the invisible hand would automatically allocate all of the natural resources in the economy to its rightful place, or “optimal” balance, based on supply on demand. Although these optimal levels of supply, demand, prices and costs may be achieved by these completely free or “laissez faire” economic model, this model can lead to market failures or something known as an externality.

Leonard explains on pg. 245 that companies set “artificially” low prices in hopes of enticing customers to buy their products. It is important to note that Leonard chose to include to word “artificially” in her description of the low prices. This is because is not without fault that the companies can set these low prices. This is later described in that others in the linear lifeline of “stuff” others suffer in order for the consumer to enjoy that artificially low price. For example Leonard mentions an Amazonian tribe that suffers from the dwindling presence of fish in their rivers due to the warming of river waters due to pollution. Their lifestyle is being infringed because of large companies willingness to sacrifice environmental well being for a low price, this setting of a low price despite the disadvantage brought upon the Amazonian tribe is known in economics as an externality or a “market failure”.

Many modern externalities are concerning environmental issues such as the Amazonian tribe externality. When debating these issues between supporters of the free market economic model and supporters of government intervention, an economic factor that arises in the argument is does the immorality of the externality outweigh the potential benefits the efficiency of the free market economy offers the consumers of the non-negatively affected party?

Lester Brown’s article offers further information how are exponentially growing economy and population is leading to a growth in the externalities caused by economies. He assesses perhaps the most famous environmental externality in the emission of greenhouse gases into the atmosphere with the accelerated consumption of the earth’s fossil fuels. He also draws comparisons to today’s economy and Enron – a company who corruptly did not list all of its incurring costs and as a result went bankrupt. Lester challenges us in that we are not taking serious account of all of our costs as its seems we place the growth of the economy at a higher importance than the safety of our environment.