Breaking News from the Future #1

July 4, 2025: In a move that shocked the world, citizens of Atlanta have decided to shrink the footprint of their city. They are returning 4% of their urban land to nature. This includes paved parking lots, malls, corporate offices and a number of residential areas.

Love Affair with Growth minus Externalities

Free market economics tells us that for the economy to grow, consumption has to grow and negative consumer sentiment leads to economic slowdowns and recessions. Keynesian economic theory has led to humans designing an incentive system in the capital markets and nations in general where growth, no matter what the cost in terms of externalities, is what companies and governments strive for.

As "developed nations" became a role model to budding economies, these economies inherited this love affair with growth, no matter what the cost, in terms of externalities.

Per capita CO2 emission of the US stands at 16.1 units. From 1980 to 2018, China went from 1.5 to 8.0 & India from 0.5 to 1.9 units. Is this sustainable?

Orphan Externalities

While free market economies keep chasing growth and hence consumption, the resultant externalities remain orphans.

• Cheaper products, for example, from Asia spurred decades of consumption growth in the US. The massive impact of this on the environment remained an orphan externality.
• Growth of consumption of electronic products created a massive externality in terms of post use management of these materials and their impact on the environment, but these externalities are not owned by anyone, not the companies and often not the government (aka taxpayer).
• The world's growing appetite for red meat, for example, is leading to supply chains expanding into the heart of the Amazon rain forest, a profound externality that no one is willing to take responsibility for.

A way out?

Companies and governments will have to quantify and own these externalities. Income Statements and Balance Sheets have to take into account the upstream and downstream externalities the business creates. Cities will have to optimise land user per capita. This will require reform to the accounting principles and governance systems of nations. More on this in another post...