Thursday, September 21, 2017

Full Cost Pricing: A Key of Sustainability

Full Cost Pricing: A Key of Sustainability
Alison Zigler
As our population on Earth continues to grow, so does our demand for resources. However, these resources that humans continue to consume, such as oil, food and gas, all have severe effects on our environment. The search for solutions and trade-offs to our environmental problems has led to proposed social science principles of sustainability. One of these principles is full-cost pricing, which is a practice that includes the harmful environmental and health costs of producing and using goods in the market price. Many economists believe that our failure to include these harmful costs in the market price of goods and services is one of the major causes of environmental problems (Living in the Environment). Therefore, full-cost pricing should be instituted in the United States, the biggest consumer country, to give American consumers better information about their lifestyle choices. Will it be hard? Yes. But, it just might be a key to protecting our environment and paring down our ecological footprint.
Today, the market price that we pay for a product or service usually does not include the external cost, or the harmful, environmental, or social effect of producing and using an economic good. This results in many hidden costs. For example, the video, “The Hidden Costs of Hamburgers”, describes how the internal cost, or the direct cost paid by the producer and the buyer, does not account for the full price of producing a hamburger. The video explains that an item as simple as a hamburger has many hidden costs, such as land, food and water for raising the cows, the methane emissions, the pollution from transporting the beef and other necessities, and the greenhouse gases caused by raising beef. The infographic to the right shows how much resources are required to make just one hamburger. However, Americans eat three times more meat than other people across the globe without even realizing the full price of their food. If they did and cut out just one burger per week, it could would remove as much greenhouse pollution as taking their car off the road for 350 miles. In addition to the environmental impact, people may not also realize the external costs of medical bills. Studies show that eating too much red meat can lead to heart disease, high blood pressure and diabetes (The Hidden Cost of Hamburgers). If the full-cost price of hamburgers was included in the market price, people would be able to make more informed choices about what they are consuming. This also is true for many other consumer goods such as cars and electricity.
Full-cost pricing would reduce resource waste, pollution and environmental degradation. So why aren’t we using it? Well, first of all it’s very hard to estimate the total cost of products and if we could, market prices would increase, creating a lot of backlash and opposition from the public. In addition, many companies that provide these environmentally harmful products, such as the Koch brothers, can use their political and financial power to obtain government subsidies that help them avoid including the full cost of their products (Living in the Environment).
Despite the challenges and uproar that full-cost pricing would create, it needs to be established in the United States to reduce our environmental impact and inform consumers. Without it, we will remain trapped in detrimental hidden costs without even realizing it.
Works Cited
Miller, G. Tyler, and Scott Spoolman. Living in the Environment. Boston, MA, Cengage Learning, 2018.
Prevention, Rodale Inc., 2017, www.prevention.com/inspired-bites/2012/06/27/eat-meat-an-insightful-infographic/. Accessed 16 Sept. 2017.
theifilestv. YouTube, YouTube, 1 Aug. 2012, www.youtube.com/watch?v=ut3URdEzlKQ. Accessed 16 Sept. 2017






3 comments:

  1. Full-cost pricing is brought out in some areas of business already in our fairly free market where competition brings out the worst in companies. Also full-cost pricing would most likely greatly raise the prices of companies that cost consumers the least but often times the products created by these companies are difficult to be produced on a large scale, which is partly the reason why they are not ideal. Companies would also find ways to bypass making exclusive everything that their product would cost for instance as you said, earning government subsidies but also simply bending the truth, manipulating facts to seem more appealing to the consumer. Overall, full-cost pricing would be very beneficial but it is just infeasible. However, we are already taking some steps towards near it including organizations like the FDA which tests and communicates to us the quality and overall cost of food that we are putting into our body. While we may strive to get as close as we can to full-cost pricing, we will never truly reach it.

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    1. Another reason there can't truly be any sort of full-cost pricing is that there would have to be precise tracking on every single methane emission, and pollution, and even then the price couldn't be found because we would need to find the damage that the pollution exclusively caused to the environment, which is what the cost of pollution generally is.

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  2. I personally thought that this was very interesting. I would have never thought to look or research as deeply as you did into something like full cost pricing. I would have never been aware that the cows let out that much emission and that something like red meat could cause heart disease. So those things stated why don't we move to full cost pricing already to help our economy and our environment? Likely because of the government subsidies that you briefly mentioned at the end of your post. If a business can get money handed to them from the government why would they try and increase their prices and potentially drive their customers away to match the full cost pricing? They don't and that is the issue. The businesses receiving subsidies will not have the desire to raise their prices. Because of that often times they are not innovative and not trying to better their business to make a profit off of just what they have. Personally I think the biggest reason why full cost pricing is an issue is because the government hands out subsidies to different companies and businesses.

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