“I think all economists in the world agree on this. If you want to tackle this crisis, step one is to get prices right.” So says Richard Thaler, economist and Nobel laureate. In a recent interview with the Behavioral Scientist website he speaks out about climate and sustainability. Thaler: “If you make something for free, people consume too much of it. Think all-you-can-eat restaurants. Right now, emissions are free and people trade on them. So we have to get the prices right.”
His fellow economist Marike Stellinga put it very clearly in this newspaper two weeks ago: pollution must become expensive and green must become cheap.
Incorporating the social and environmental costs into the price of a product or service is nowadays called true pricing or true cost accounting. Many things we buy lead to costs that crop up later or elsewhere. Example: cheap chicken meat from factory farming leads to, among other things: damage to our environment through the use of cheap feed that requires pesticides; emissions of harmful gases that contribute to the climate problem; poor working conditions that create inequality; and deteriorating public health due to the use of antibiotics. But you won’t feel that in your wallet if you buy the meat offer of the week at the supermarket or have a pizza pollo delivered.
True pricing is a good idea, but still very complicated to implement
True pricing is about more than higher prices at the checkout. say that researchers from Wageningen University leading a project in this area. Until the end of 2022, they will work with government, companies and consumer organizations on a method to determine the real price of food products. They see three effects:
1) Real prices help consumers make more sustainable choices. Because products that are harmful to the environment or society will cost more;
2) Real prices ensure that production will be more sustainable. When companies see the true costs of their product and service, this leads to different choices. For example, to more sustainable purchasing and innovation;
3) Real prices help governments to promote sustainability. If the real costs of services and products are known, it is easier for administrators to set policy priorities.
True pricing is a good idea, but still very complicated to implement. I read a piece by Hans Stegeman, economist at Triodos Bank, in which he shows, among other things, how great the uncertainty is in the calculation of real prices. An example: the Netherlands Environmental Assessment Agency calculated a few years ago that the environmental damage we cause as Dutch people amounts to 31 billion euros per year – just over 1,800 euros per person. But the Planning Bureau indicates that it is fairer to say that the environmental damage moves somewhere between 16 and 49 billion and that we do not know exactly. If you calculate, this means that the damage per capita is somewhere between 900 and 2,800 euros. That’s a lot of bandwidth.
A lot still needs to happen before real prices determine our economy. The alternative is that in a few decades we will have problems that money can no longer solve.
Ben Tiggelaar writes weekly about personal leadership, work and management.
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