Junichi Semitsu’s call for “internalising” economics

I don’t like law professors, but Junichi Semitsu is the one that I would have no problem hugging. Okay, maybe that’s a little overstated – but if you read his speech given to Economics graduates at Berkeley, you might understand why. Even if you’re not one of those “green types” (in which case, how did you get here?!), Semitsu’s call for economists to really consider the real life consequences of their theories and models makes me squeal a little. The “externalities” that many economists sweep under the carpet, such as pollution, widespread job losses, and social phenomena such as violent crime. Of course, I’m not saying that economies or economists cause these externalities. What I do want to do though is commend Semitsu’s attempt to situate economics in the real world, in an engaging and honest way. This section made me geek squeal:

“Indeed, over the last two decades, the economy did get bigger — our national income per capita grew 28% — but the benefits were channeled to those with the highest incomes. In fact 3/4 of the growth went to the richest 1% of the country. So is it fair to brag about an expanding economy if only the Grey Poupon guys benefit?

This country doesn’t need an invisible hand right now — it needs a hand up. Millions of people are beginning to see Adam Smith’s invisible hand and all they see is a big fat middle finger.”

Semitsu’s call could be revolutionary, and it could simply be about slapping price tags on more intangible things. It’s revolutionary in that in effect, “internalising” economics entails a fundamentally different outlook on trade, a change from “for profit” to “for subsistence.”  Why? Because a market system that rewards trade for profit will reward businesses that will focus on two key areas: keeping dollar costs low, and prices as high as competition will allow. It is in this context that the rise of companies such as Nike can be understood, and even Walmart. If the ultimate aim is profit, then the logical ultimate strategy is to create a monopoly, which means that eventually, the freedom that free trade advocates like to tout becomes a freedom to make a choice between feeding your family and supporting the company that is making them sick.

On the other hand, Semitsu’s speech could entail a totally pro-free-market attitude, one in which causing pollution costs the polluter for example. However, this interpretation seems to me a little naive, considering the already HUGE lobby that is against carbon trading (and I don’t mean to discredit all lobbyists, because some of them are opposed to carbon trading because it creates what is known as “fictional commodities” – like labour and land). The lobbyists that are comprised mainly of industry are of course fulfilling their aim of maximising profit: that is, keeping costs low, which means not having to pay for ecological damage they or their suppliers cause, or indeed, making any profit at all. This last point is particularly salient in the debates about putting a price on pollution. First of all, is it “okay” to bury toxic waste in a community if you pay them (or more likely, one of the local politicians, to shut up about it)? National supporters seem to think along these lines, hell, Young Nat Nick Cross apparently thinks that anti-mining groups should just “buy” the areas that are under threat from mining. Apart from the fact that they already DO (through taxes), this attitude throws up a whole lot of impossibilities, like the valuation of human life, or biodiversity. Secondly there is irreversibility to consider, particularly when considering energy consumption given the rules of thermodynamics, or the extinction of species. Sadly, rich countries have already been dumping their waste in developing countries and paying them to do so, and despite all the critique of Japan’s attitude to whales, many species of fish have been fished to exhaustion.

Before you consider me another one of those frothing-at-the-mouth conspiracy theorists that has it in for big business, let me clarify a point that became clear to me in one of my classes a while back. I’m not necessarily painting a picture of the world where the CEOs and CFOs of big business gather in secret and draw up plans for world domination (well, maybe that), or a world in which their intention is to screw as many people over (see, probably not that). It’s just that they are systematically rewarded for disregarding suffering caused by their decisions, and very rarely adequately punished for it. What they are punished for is making decisions that do not increase their own profit. Now I’m not advocating the assassination of the mega-rich. They may be smart, born into a fortunate position, or even just a little less nice than the average person, but ultimately, they are still human beings. This is not to say that human beings inevitably value profit (and Polanyi makes this point, at great length, if you care to read up on him). What it is saying is that if you create a maze and put people through it, you can’t expect them to always break through the walls. If our current market system was a maze with a dilemma at each turn, then those who had to choose between the turn that saved a community from being sprayed with carcinogenic pesticides, and the turn that allowed them to buy a house for their family, would consistently find themselves at a dead end if they chose the former kind of option. Of course, I don’t want to discredit giving to charities while still owning a house. The point is that a system that is designed to do something will most likely create the thing it was designed to.

So er, that’s where I stand! Egh, this ended up being so much longer than I intended. Time to put some time into my other blog (a much prettier and less political food blog). Feel free to tear me to shreds…if you can…muahaha. I dare you. Go on. You know you want to. Extend that mind (mine or yours, decide).

Just in case you’re wondering, I found a snippet of Junichi’s speech cited in a journal article by Sabine O’Hara, although you can only access it for free if you’re a Uni student whose Uni library has access to the journal. Full reference:

O’Hara, S. (1998) Internalising Economics: sustainability between matter and meaning. International Journal of Social Economics 25(2/3/4): 175-195.

One last note. Junichi writes for Poplicks, a pop culture and politics blog. It’s quite American oriented, to the point where I got a little lost, so no permanent linkage in the links section to the right. Will certainly be following it though. And yes, I am aware that the talk is really old. Doesn’t stop it from being relevant, okay?

PPS: If you’re interested in any of this, do Arts Honours at UC (University of Canterbury) and take POLS403.

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