Whole Cost

In an increasingly globalized world people are connected to each other in ways that are often unknown to each other. One of the main ways that people in developed countries and less developed countries are linked is through products. When a person in a developed country buys clothing, consumer electronics, or other items all the buyer sees is a purchase price. Missing, of course, is the entire chain of lineage that was effectuated in order to place that product within purchasing range and its enduring effects on the environment has been dispatched of. Often the price on the product obscures a sordid legacy that could include child labor, environmental abuse such as pesticides in ground water, air pollution or soil depletion, or aspects that are harder to quantify like migration of youth to the urban areas or loss of cultural heritage.

One of the basic uses of this pattern is understanding the "whole cost" of an object or a service that one is purchasing. Ultimately the intent of this pattern is identifying the whole cost of something and using the information (that a single price obscures) to promote broader public consciousness and ultimately improved social good. There are a great number of ways that the information can be used — and a great number of ways left to be discovered. Ideally the information behind the price tag will take on greater significance while the price tag itself can also be made to reflect the previously hidden information more accurately including, for example, labeling that tag to include additional information about contents or relevant environmental effects or labor practices.

Understanding the "whole cost is primarily a process of education that can be done individually (by people of virtually any age) or in more public ways through any number of ways. This "understanding" can be via a narrative or story or it can be more quantified, including, for example, information about who got paid how much for what at every step in the chain. One approach is using the origin of the product as an indicator; not buying a product, for example, if it were made by non-union, child, or slave labor or because it was produced by a repressive regime.

A more nuanced process with a distinctively quantitative feel is illustrated by the work done by the International Center for Technology Assessment in their "The Real Price of Oil" report (1998). In that report based on gasoline prices from a U.S. perspective, the authors reveal how ultimately deceptive the idea of the "price at the pump" actually is to the actual monetary cost expressed in a specific currency, dollars, for example. And while their approach, like other economically based approaches, ignores (or, at least, re-interprets) the human story, it goes a long way towards developing (and ultimately using) a unitary "price" as a meaningful attachment to a commodity or service that’s available for purchase. In the case of gasoline, the authors show how multiple government subsidies (huge tax breaks, direct support for research development and other business costs, and "protection subsidies" often of a military nature) and a multitude of "externalities" (problems as diverse as air pollution, automobile crashes, suburban sprawl and climate change that are "costs" which the oil industry is not going to address and are not reflected in any way by the price one pays "at the pump") result in a public price-tag for gasoline that distorts the real price by 5 to 15 times. The "free" television programming that occupy so much of the time of the U.S. citizenry shows another perversion of the ideas of price and costs. The shows of course are not "free" at all — at least not to the viewers (and non-viewers) who pay for the ads every time they purchase something that’s advertised on television.

A simple use of the information (at least in the gasoline case above) would be eliminate or otherwise lower the government subsidies — especially the ones that actually hurt the environment and lead to wars and other problems and let the price creep (leap?) up to the actual price (or at least closer to it). This at the least would test the citizenry’s commitment to the automobile in a fair comparison with competing approaches to transportation. A related approach is of course un-externalizing the externalities by bringing the costs back home to the companies that are making them possible. This can be done by imposing a "green tax" on the companies, which would be used to help try to reverse the damage caused by the company’s business practices. Unfortunately, as Peter Dorman explains “There is a general distrust of the effectiveness of government, a fear that green taxes will be more regressive than some of our current ones. The alternative is the creation of environmental trusts, which would collect the money on behalf of the beneficiaries, which could include current people, future people and natural entities. The trust would pay back some of the money directly (per capita rebates) and also finance ecological conversion. Vermont and Massachusetts are in the process of setting up a trust of this sort for carbon and New York and California are possibly going this route too.

The city of San Francisco recently showed another innovative use of the Whole Cost concept. In the spring of 2005, San Francisco became the first city in the U.S. to enact legislation requiring the city to consider the environmental and health implications when making purchases for the city. Since the city spends about $600 million every year on a multitude of purchases (including, for example, 87,000 fluorescent light tubes) this type of legislation could conceivably have some effect, especially since city officials are hoping that the "Environmentally Preferable Purchasing for Commodities Ordinance" will serve as model for other cities. The city is working with community groups, technical experts and other city staff to establish criteria. Debbie Raphael, the city's toxics reduction program manager, stated that "Traditionally, we have a list of specifications we use to decide which computer to buy," she said. "Those specifications do not include things like how much lead is in them? Can you recycle them? What is their energy use? What it does not mean is that cost and performance is ignored. We're expanding the universe of criteria" (Gordon, 2005).

A final use of the Whole Cost pattern is to consider the Whole Cost in more of a global "whole" way. Looking just in this the area of health reveals the importance of this approach. In a short article called "The Price of Life" by Glennerster, Kremer, and Williams (2005) point out that Africa "generates less than one half of one percent of sales by global pharmaceutical firms but accounts for nearly 25 percent of the world's disease burden." The lion's share of pharmaceutical research and development is for the health problems of rich countries. Sadly the economic equations of the world's corporations exclude the vast majority of world's population. Lacking money, the "whole costs" that are borne by them don't show up on anybody's balance sheet or business plan.