The Hudson Institute discovers capitalism!
You have to have the person who’s writing the risk bearing the risk. That means a whole host of regulations. There’s no way around that.
– Irwin Seltzer, Director of the Center for Economic Policy Studies at the Hudson Institute
Cited in E.J. Dionne, Jr.’s column this morning: Capitalism’s Reality Check: The biggest political story of the year is economic: the collapse of free-market theory.
See also my related musings in New Bottom Line 15 years ago, in Actions and Consequences: Where the Free Market Lies:
A free market depends upon accurate information, and a tight coupling of actions & consequences. When either–or both–of these is lacking, as is the case with environmental management, the “free market” tells lies, and the economy suffers. The uncoupling of actions and consequences is pervasive in our society, and at the root of many of our business and social challenges.
This is of great consequence, I observed then, for sustainability strategy as well:
Where the market fails to reconcile itself to biological reality, government will likely try to level the market, both by monetizing externalities through taxes and fees (such as energy taxes and tradable pollution rights), and by ending market-skewing programs like subsidized forest and mineral leases.
Expect more of these changes in coming years. Companies can wait for them to be imposed from the outside, whether by government fiat or by competitive or consumer pressure. Or they can adopt tools now to line up their actions with the standards that will be expected of the “reasonable person” ten years from now.