Yann Moulier-Boutang has underscored the importance of grasping the paradoxical logic of externalities in contemporary capitalism. Traditionally defined externalities are the various impacts that a given transaction has on those who are not party to the transaction. Examples of this include such “negative” externalities as pollution and such “positive” externalities as the unintended cultural and social benefits of the formation of cities. In each case there are effects that are not paid for, not a part of anyone’s calculation. As Moulier Boutang presents it, “externalities are the representation of the outside of the economy acting on the economy.” One could push this a bit further to say that externalities are the way in which a neoliberal society imagines its constitutive conditions, they are everything that do not correspond to the strict calculation of cost for benefit. As such they represent the economy’s, or the market’s, attempt to represent its outside.I'd like to compare this critical account with a triumphalist account of the same thing: an interview with Paul Romer from reason. Here's a degustation:
The problem is that these externalities have become increasingly difficult to ignore. This is especially true with respect to the environment, as a negative externality, and the knowledge involved in the production process, as a positive externality. There is a historical argument here about the transformation of capital, and it should be viewed critically, perhaps even dialectically, to recognize the continuities that underlie the changes, the complex mix of the new and old that constitutes any conjunction. It seems bizarre to say that the “environment” and “intellectual labor” are in any way new, but at the same time there is a certain manner in which they have recently become unavoidable. Capital’s negative effects on the environment go back to the very beginning, but have recently become unavoidable due to the density of population and intensity of accumulation; in other words, there are no new colonies left to exploit. At the same time capital has always put to work the accumulated knowledge of society, but for a long time it was able to work with the knowledge hierarchies that it found ready made, the medieval system of the university, the feudal system of guilds, etc, but now it must rewrite knowledge in its own image.
reason: In terms of real per capita income, Americans today are seven times richer than they were in 1900. How did that happen?Three cheers for positive externalities!
Paul Romer: Many things contributed, but the essential one is technological change. What I mean by that is the discovery of better ways to do things. In most coffee shops these days, you'll find that the small, medium, and large coffee cups all use the same size lid now, whereas even five years ago they used to have different size lids for the different cups. That small change in the geometry of the cups means that somebody can save a little time in setting up the coffee shop, preparing the cups, getting your coffee, and getting out. Millions of little discoveries like that, combined with some very big discoveries, like the electric motor and antibiotics, have made the quality of life for people today dramatically higher than it was 100 years ago. The estimate you cite of a seven-fold increase in income--that's the kind of number you get from the official statistics, but the truth is that if you look at the actual change in the quality of life, it's larger than the number suggests. People who had today's average income in 1900 were not as well off as the average person today, because they didn't have access to cheap lattés or antibiotics or penicillin.
The understanding which most sharply distinguishes science from the market has to do with property rights. In the market, the fundamental institution is the notion of private ownership, that an individual owns a piece of land or a body of water or a barrel of oil and that individual has almost unlimited scope to decide how that resource should be used. In science we have a very different ethic. When somebody discovers something like the quadratic formula or the Pythagorean theorem, the convention in science is that he can't control that idea. He has to give it away. He publishes it. What's rewarded in science is dissemination of ideas. And the way we reward it is we give the most prestige and respect to those people who first publish an idea.Here is some notion that the positive externalities cannot be internalized without endangering the whole project. Romer gets even more explicit about it.
There are very good theoretical reasons for thinking that market and property rights are the ideal solution for dealing with things, but there are also strong theoretical reasons for thinking that in the realm of ideas, intellectual property rights are a double-edged sword. You want to rely on them to some extent to get their benefits, but you want to have a parallel, independent system and then exploit the tension that's created between the two.Thus, there must be a strong distinction made between things and ideas. For things, a system of absolute individual property rights is ideal. this means that there are no meaningful non-internalizable negative externalities of the sort environmentalists and neo-marxists are worried about. If every "thing" is given over to the market, that would solve our externalities problems. For ideas, however--the fruit of "intellectual labor"--there is an absolute need to maintain a realm of positive externalities, and to institutionalize this realm as the realm of scientific research, etc. So long as intellectual labor can be exploited in this manner, the negative externalities can always be managed and re-internalized.
It is hard to convey how amped up and optimistic both the interviewer and Romer are about all this, but I think it is worth noticing just how strange their rose-hued future is. They want us to get excited about the prospect of constant and ever-expanding intellectual labor for the sake of staving off ecological and resource-scarcity crises. Their optimism comes from their conviction that we will always succeed in doing so, or else recover from our failures to do so, or else be replaced by other societies that will succeed better than us in doing so.
Therefore, I'd like to propose a slogan for neo-liberalism, something Romer et al. could put on banners and posters: Maximize positive externalities for the sake of minimizing negative externalities!* Inspiring, no?
* Translation: We need more and more people spending more and more time and energy more and more frantically thinking up ingenious ways to save our asses!