If we think hard enough, we’ll realize that the reason for many of the world’s problems today is because prices do not reflect the costs to the environment incurred in the production of goods. The world is having a fresh water crisis because of our unbridled use of this “endangered” resource. Consider this: the production of “one desktop computer and 17-inch CRT monitor uses at least 240 kg of fossil fuels, 22 kg of chemicals and 1,500 kg of water – a total of 1.8 tonnes of materials. Do the current market prices of PCs reflect these costs? I don’t think so. Perhaps the cost incurred by the company in bringing water from the source to the production site and purifying it, but not the real cost of the water itself. The same is true with the other inputs. If environmental problems were not at their present state, this would be okay. However, in a world where natural resources are dwindling, this growing scarcity should be reflected by an increase in the price of the resources, and subsequently the price of goods. This is basic economics. And then there’s the rapid obsolescence of PC models. This creates a mounting garbage problem that is costly to deal with. Are these costs to the environment included in the PC price? Definitely not. These negative externalities or long-run costs to society are not taken into account. Who will bear these costs? We, the consumers, will pay for these in the form of fees (higher taxes to solve the problem), or the environment fighting back through one disaster after another. This is unfair to those who never used the products, usually the poor segments of society or poor countries, but who have to bear the environmental costs.

Obesity and the health problems it brings are putting a heavy burden on health care systems. The US has the highest obesity rates in the world, but obesity is also rising in Europe, China, Middle East, Latin America and elsewhere in the developing world. Why this trend? Food is cheap (at least in the developed world), and many of us are eating more than we really need. It takes 2,000 to 8,500 gallons of water to grow the grain to produce a pound of beef. How much would beef cost if we factored in the cost of the thousands of gallons of water spent in its production? So, if you’re glad that food is cheap in your part of the world, think again.

There are many more instances where product prices do not truly reflect their real cost of production. What it boils down to is, we are enjoying luxurious lifestyles at a high cost to the environment, consuming the earth’s resources like there’s no tomorrow. It’s not about whether we use a PC or a cell phone or not. It’s how often we discard an old one to buy the latest model. It’s not about whether you commute or drive your car to work. It’s not a question of being a vegetarian or carnivore. It’s about how much we’re consuming, and how much demand our consumption and lifestyles are putting on the world’s resources. How much is your lifestyle costing the earth? Find out by calculating your ecological footprint here.

Filed under: April 2007, Economics, Environment, In the news, March 2007 | You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.