On The Allocation of Resources

Economics is about the distribution of resources.

The reason why you want people with more money to have access to more resources is because they’ve proven that they’re doing something people want. So capitalism is a very efficient distribution of resources, not only an incentive structure. But it fails to address exploitative power structures eroding individual’s demands, and, in fact works to create them.

Let us take climate change for example. What is causing it? It is easy to say American individualism is a source because people are not prioritizing the needs of the community. But neither “people” nor “the community” are well-defined. So let’s go to the source of the extraction, in places like the Niger Delta. Oil companies cause however many oil spills and pollution their unchecked activity calls for, damaging the surrounding environment beyond recognition. They certainly have not acted for the benefit of locals or fulfilled their demands.

So we need a new framework of the market which encompasses everyone’s demands. Democracies must be strengthened. People local to the extraction must have power over their resources, it is to be allocated based on local, not global demand. We must also the rules of the game, otherwise locals will simply be pressured to hand over control of resources. We commonly measure the success of firms using their indicators like GDP, revenue, profit, etc. none of which include social cost. There are other measures which have been proposed such as GPI (Genuine Progress Indicator) which include environmental and social factors like pollution, deforestation, and crime. By redefining our “currency,” we can incentivize corporations in different directions. Thus, it is possible to incentivize companies to pursue what the market demands while maintaining some social responsibility.