Adam Smith, revered by many as the founder of our economic system, would have loved my organization's idea of putting climate change warning labels on gas pump nozzles. In fact, were he alive today, I bet he'd contribute a sixpence to our crowdfund. Hear me out.
Smith argued in his Theory of Moral Sentiments that people are guided in their decision-making by an "impartial observer", a sort of "man within the breast"; something we might refer to more commonly today as a conscience. He wrote that our well-being is connected to the well-being of others:
How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it.
He concludes that this sense of empathy and interconnectedness is universal:
Of this kind is pity or compassion, the emotion we feel for the misery of others, when we either see it, or are made to conceive it in a very lively manner. That we often derive sorrow from the sorrows of others, is a matter of fact too obvious to require any instances to prove it; for this sentiment, like all the other original passions of human nature, is by no means confined to the virtuous or the humane, though they perhaps may feel it with the most exquisite sensibility. The greatest ruffian, the most hardened violator of the laws of society, is not altogether without it.
A friend once argued that this can't be true. As evidence, he observed that we flip past TV infomercials showing poverty and concluded that we don't care. The observation is accurate but I think the inference is wrong. I think we flip past these TV programs precisely because we do care; it's because these images make us so uncomfortable that we decide to change the channel. And I think this insight is critical to building a better world.
While Smith first introduces the concept of the "invisible hand" in Theory of Moral Sentiments, it is most known from its appearance in his subsequent work, The Wealth of Nations. But what is this "invisible hand" on which rests so much of our economic doctrine? In viewing Smith's works as a whole, it becomes clear that the "invisible hand" is our moral sense of right and wrong; that "man within the breast" that regulates the pursuit of one's own self-interest. As Adam Gopnik of The New Yorkerputs it: "one can't grasp the idea of the invisible hand without the balancing idea of the imaginary inner witness -- those moral judges are what let the invisible hand act."
Adam Smith wrote:
[B]y acting according to the dictates of our moral faculties, we necessarily pursue the most effectual means for promoting the happiness of mankind.
So, in order for markets to function as Smith intended, we must need feedback to engage our moral faculties. Unfortunately, much of our economy operates to disconnect us from the consequences of our decisions. How then can we act "according to the dictates of our moral faculties" to promote "the happiness of mankind" if we are deprived of moral information? This is where our climate change warning labels can help provide important information to the marketplace.
Joseph Stiglitz, Nobel Prize-winning economist once quipped "The reason that the invisible hand often seems invisible is that it is often not there." Our proposal reinvigorates the invisible hand by providing important moral feedback. Where pricing mechanisms like carbon taxes or cap-and-trade regimes seek to capture the harms of fossil fuels in a quantitative way, our idea captures and communicates these harms to the marketplace in a qualitative way, through the use of image and text. Interestingly, there is even some research to suggest that mechanisms that attempt to capture externalities via price can actually "switch off moral behaviour."
Ban Ki-moon, the Secretary General of the United Nations has called climate change the "moral challenge of our generation." If it truly is a moral challenge, why not treat it as such? Our dominant economic paradigm is premised on a worldview that we are self-interested, wealth-maximizing beings that respond like automatons to price signals. I think we're more than that. I think at our core we are moral, loving, empathetic beings that care for the well-being of others. Our labels engage this part of us and are ultimately more congruent with what we are as human beings. They're the simple stickers that actually challenge much of our most basic economic assumptions and ask the question, "What is it to be human?"
As Smith would put it, the labels make us "feel for the misery of others, when we either see it, or are made to conceive it in a very lively manner." In practical terms, I believe our idea has the potential to transform markets. If you think so too, please contribute a sixpence (adjusted for inflation) to our crowdfund to help pass our idea into law and get these labels on gas pumps all over the world.