Tag Archives: externalities economics sociality policy

innovation’s social externalities

In business, the economic concept of “externalities” has tremendous salience. In short, an externality is a cost that a third party must bear due to the actions of others. For example, air pollution is considered an externality of manufacturing. In theory, as protectors of the public good, reasonable governments should regulate corporate externalities through imposed taxes. (In reality…) More and more, discussion of environment externalities is a core part of business.

Lately, I’ve been thinking a lot about another type of externalities: social externalities. In other words, effects on social life caused by policy, cultural, or business decisions. In many ways, social externalities are quite like environmental externalities – the effects are often latent. As such, the offending parties are long since gone and the solution is not to turn back to the clock but to find a new way to move forward.

Technology often creates unexpected social externalities. Take, for example, the air conditioner. Anyone who has witnessed a summer in the deep south can attest to the value of an air conditioner. In the last couple of years, I’ve heard lots of people talk about the environmental costs of air conditioning yet I almost never hear people talk about the social cost of air conditioning. It used to be too damn hot to sit around inside all day long so people used to sit on their stoop or anywhere where they might catch a breeze. They used to sit in social spaces. I remember summers on the east coast where those who couldn’t afford A/C spent hot summer days at the movie theater or any public place with A/C that they could find. Affordable A/C means a collapse of certain types of social community space.

Of course, policy can cause just as many social externalities as technology. Consider the implementation of compulsory high school in the U.S. and Europe. While we can certainly say now that schooling is a good thing (even if we devised schooling for imperial, colonial, and corporate purposes), we often fail to consider the externality of age segregation and what that has meant for so many aspects of civic and social life. We consciously devised a system that would stall growing up and now demonize children for not maturing. What a mess!

A different innovation to consider would be the automobile. Once again, we can talk about the environmental impact of modern day horses. When it comes to social externalities, we also have a decent understanding of how the automobile created suburbia. Yet, how would we think about evaluating the social costs of the invention of the automobile? There doesn’t seem to be any agreed-upon way to measure “social good” or “public happiness” or any of those other squishy community concepts (thus, the debate around “Bowling Alone”). Unless I’m mistaken, there don’t seem to be that many economists trying to work out ways of measuring social externalities (other than violence or other externalities that can then be regulated through law).

I’m concerned that our contemporary business narratives of progress often fail to reflect on the social externalities caused by innovations and organizational shifts. Of course, this is not about techno-determinism or fear mongering. We do that all too well. Propagandized mythical headlines like “Violent games make kids kill” are not what I’m talking about. I’m more interested in work like Mimi Ito and her colleagues’ studies on how youth’s lives are reorganized by the mobile phone and how not being easily accessible means being written out of social life. STS scholars and other academics are definitely researching how innovation and structure affect broader social life, but this work often fails to get out in the public. More problematically, it seems to me that business and the public think that progress is a one-directional path to the future and that we’re on that train. Why are we so invested in innovating anything that can be innovated, regardless of the consequences?

What would it take to get people to reflect on the social externalities of innovations and public policy? To consider history and reflect on what the costs might be of a particular innovation? Now that we’re curbing some of our “brilliant” ideas because we understand the economic externalities, might we reconsider some of the things we do for what the longterm social externalities might be? Of course, part of being young and innovative is to not think about externalities… I’m definitely getting old.