A Four-Year-Old Economist

My four-year-old daughter spent the afternoon at a local science museum the other day, exploring an exhibit on biodiversity. She returned home full of determination, found pencil and paper, and composed a letter. Now she distributes copies to friends and strangers alike. The letter begins:

From Jenna to the world.

Please stop making all this pollution. It's making all the animals sick and die. The fish can't live if the coral can't live and the polar bears can't live if the fish can't live ...

Approaching the problems of polar bears and coral reefs by writing a letter to the world makes sense if you think like a four-year-old. Surely, people would not knowingly live in ways that threaten polar bears or coral reefs. If people understood, things would change.

My grown-up mind wishes my daughter's theory of world-changing worked. But I've tried it enough times myself to know that, while asking people to act for the good of the future is essential, it is unlikely on its own to change the world.

So I've been trying to prepare my little girl for the possibility that her letter won't save the polar bears. We've begun to talk about the fact that people can know the polar bears are in danger and nevertheless feel unable to change course. "Sometimes people don't do what would be best for something far away or for the future because they feel trapped by something else more immediate, more close by."

This is a simple idea, but four-year olds aren't the only ones who suggest that the best way out of our environmental and social messes is for people to be more responsible to the future. Listen to these words, from speech President Bush delivered in early March.

"The whole design of free-market capitalism depends upon free people acting responsibly. Business people must answer not just to the demands of the market or self-interest, but to the demands of conscience. The bottom line of the balance sheet defines a business's goal, but not the sum of responsibilities of its leaders. Management should respect workers. A firm should be loyal to the community, mindful of the environment."

The President calls on people to be better -- more mindful of the environment, more respectful of workers. He is right, of course. We won't get anywhere if we don't expand the boundaries of what we feel responsible for. But, important as it is, a sense of social and environmental responsibility is not sufficient if economic decision-makers, from consumers to CEOs, don't have enough information to make choices informed by that sense of responsibility. And all the responsible feelings in the world aren't going to slow the climate change that threatens polar bears and coral reefs unless the economic actors who make choices out of a sense of what is best for the long term are able to thrive economically in the short term.

Consumers who don't know the social and environmental costs of the products they buy cannot act responsibly, no matter how much they might want to. Businesses struggling to survive in an age of consolidation have no choice but to put short-term profit ahead of long term environmental and social concerns. Survival in our current economic system is measured by a bottom line that takes no account of impacts on polar bears or coral reefs. As long as that is true, the most responsible CEOs in the world will be forced to make choices that place next quarter's profits ahead of the fifty year future of the polar bears. Doing otherwise risks going out of business or being replaced by a more profit oriented executive.

If we want a world that is livable for polar bears and coral reefs (and thus for people) we must re-design our economic policy so that polar bears, coral reefs, and everything else that we care about is brought into economic decision making. This will require incorporating the true cost of things into their prices. It will require paying people for the value added in the careful stewardship of natural resources. It will require getting the taxes, incentives, and rules adjusted so that our market system delivers the kind of return on investment people really want -- strong communities, beauty, vibrant ecosystems, healthy children.